What does 2022 look like for the global recycling and waste market?
When it comes to the prices of recycled paper and scrap metal, the answer is certainly volatility. For plastics, it is a different picture.
As can be seen in the chart below, prices for US copper wire (in US dollars) and UK dry bright wire (in pounds sterling), have been volatile over the last decade.
In the US, copper wire prices have fluctuated between a low of $3,800 per metric tonne in 2020, and a recent high of $9,600 per metric tonne in March 2022.
For the UK, August 2016 brought a last decade low of £2,800, but prices were at £6,850 per tonne in March 2022.
Like other commodities, most notably oil and gas, the price of primary metals has jumped dramatically after slumping when the Covid pandemic struck. But the recovery since then, seen globally, has led to strong demand for metals in sectors such as construction, telecoms infrastructure and manufacturing.
In an interview recently with the Reuters news agency, Chilean mining group Antofagasta chief executive Ivan Arriagada said that the energy transition, especially with the move to electric cars (they use much more copper wire than internal combustion engine vehicles), meant the primary market looked strong.
“"In the short term, in the next 12 months, the important thing is that we have a market with solid fundamentals," Arriagada said.
"There is a context of relative tightness due to supply chain conditions, inflation, and all that means we expect prices to remain at levels that they have been at recently, which are decent prices."
But high prices have also been seen with other metal grades such as aluminum, brass, lead, and ferrous metals.
Volatility has also been a pattern in the recovered fiber market. As can be seen in the chart below, US and UK markets were stable up to the middle of 2016.
But at that point, China began its Green Fence programme that led to greater inspection, before its National Sword programme introduced even tighter contamination limits in 2018. At the end of 2020, China banned import of all paper and cardboard for recycling grades.
Since the middle of 2016, there has been a great deal of volatility in the market after China outlined its intentions.
Although Chinese paper and cardboard groups have opened mills in South-East Asia to continue importing from US, Europe, Japan, and others, they have also faced competition from more domestic US mills, new European mills, plus buying from destinations such as India and Turkey.
Like with metals, the Covid pandemic led to a slump (the market was already heading downwards prior to it) but prices recovered strongly. In the UK and Europe, prices are hitting record levels due to strong demand for fiber.
Covid also helped strengthen ongoing trends. The Centre for Retail Research estimates that the online retail market in 11 European countries grew 3.91% more than would have been expected due to more online shopping during Covid lockdowns.
In the UK, online sales represented 28.9% of the retail market in 2021 compared to 19.2% in 2019. While in the Netherlands, it was 23.9% in 2021 from 15.3% in 2019. In Germany, online sales grew to 21.9% of the retail market in 2021 compared to 14.2% in 2019.
With the online retail market requiring more cardboard packaging, demand has grown sharply.
What are the factors that will affect the market in 2022 and particularly scrap metal?
This is a tricky question to answer. The world is in a difficult place, and this will have an impact on the global recycling and waste market.
While some European nations and the United States are re-opening their economies following the Covid pandemic, others such as China are finding they are still having to implement lockdowns.
When you add the Russian invasion of Ukraine, this is bound to affect the market.
For example, Russia supplies 20% of the world’s wheat and Ukraine 10%. With sanctions imposed on Russia, and Ukraine fighting a war, the price of basics such as bread, pasta and cereals are increasing.
Europe also depends on Russia for 40% of its gas, and Russia is Europe’s largest partner for supplying oil. Again, sanctions are likely to disrupt this.
Anybody who has filled up their car recently, or seen rising food and energy prices, will know that inflation is rising rapidly. According to the World Bank, global inflation is likely to rise from 2% to 6% this year. This will impact on the spare cash in people’s pockets and their ability to spend.
In normal times, higher costs of oil for transporting goods, higher food prices and weaker consumer spending would suggest a weaker economic outlook and lower prices for recyclate.
But recent prices for metals and paper grades have not shown that. This is because there has not been enough supply to match demand. At some point, there will be a rebalancing of supply and demand, but the question is when. It could be this year, or it could be at another point in the future.
In the metal market, Russia controls 10% of the global copper reserves, and is a major producer of nickel and platinum.
Ukraine exports 80% of its steel production, and is also a major supplier of iron ore and alumina.
But in the paper sector, Russian pulp exports were worth $1.3 billion in 2021, which was up 19% on 2017. Without this pulp, there could be stronger demand for recovered fiber.
Yet recent indicators suggest that some of the steam is coming out of the paper and cardboard market. It appears mills that were desperate for material, are realizing that there are strong headwinds to be faced.
Prices may settle a little lower than they are now but could easily fall to long-term averages (meaning prices would fall by about 50 to 60% from where they were in March 2022). If they were to fall this much, would this represent a crash in the minds of global traders? What would happen if prices fell below average and as low as February/March 2020? How much impact this has on the market will be dependent on the mindset of traders that have got used to high prices over the last couple of years.
For metals, Chinese demand will affect the market, as will primary production from mines. If China manages to avoid mass lockdowns again, then this could help prop up demand.
Many consumers are also contemplating a switch to an electric vehicle, wanting to avoid the high (and getting higher) operating costs at the pumps. Even though electricity prices are rising, EVs (Electric Vehicles) increasingly look like a more economically and environmentally sustainable option, and that is proving attractive to car buyers.
As such, demand for copper, aluminum (for premium car bodywork) and ferrous metals could remain strong.
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What about plastics?
With oil and gas prices hitting elevated levels, plastics prices have responded in the same way.
In UK and Europe, measures are being introduced to encourage more use of recycled content, and this has driven even higher prices as manufacturers seek sources of recycled polymers.
Indeed, the UK is seeing price levels for PET (Polyethylene terephthalate) bottles, HDPE (high density polyethylene) bottles and LDPE film that have never been seen before.
Certainly, in the UK, the introduction of a Plastic Packaging Tax from 1 April 2022, has also increased demand for recycled polymer content. Under this tax, any plastic packaging must contain 30% recycled content, or face a £200 per tonne tax.
The European Union has taken a slightly different approach to encourage Member States to use more recycled content. From 1 January 2021, a levy of 80 cents is applied to the weight of plastic packaging waste that is not recycled.
Some countries such as Spain and Italy plan to introduce a tax similar to that in the UK, while Belgium and Germany are likely to place this fee on producers as part of Extended Producer Responsibility fees.
For this market, the structural changes are creating good demand for recycled polymers, and for the time being, it would seem high prices are here to stay. Of course, that cannot be guaranteed forever, and falling oil and gas prices could help ease plastic prices down.
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Changes to infrastructure
Just four years ago, there were two markets – domestic and China.
But China effectively banning plastics, metals, and paper (some metals are now permitted again), changed the fundamentals of the markets.
Some infrastructure development has popped up to replace it, and buyers in India and Turkey have taken advantage of the opportunity.
But we are also seeing a trend towards onshoring. New paper mills are opening in the US and Europe.
There is also a trend towards converting newsprint mills to corrugated cardboard, with Turkey’s Eren doing that at the Shotton mill in UK it bought from UPM. China’s Nine Dragons Paper is also converting a line used to produce magazine and catalogue paper into kraft paper and containerboard production at its mill in Biron, Wisconsin, US.
Onshoring seems to be occurring in the scrap metal sector too. Consolidated Scrap Resources executive vice president and chief financial officer Ben Abrams told Recycling Today that while globalisation will continue, there is strong incentive to re-domesticate a great deal of production.
He said: “I think that this idea of globalisation that we had, sort of, in the last two decades will continue. The middle class in the world will continue to rise, but at the same time there are going to be increased advantages to doing things in the US.
“The US still has the biggest reservoir of scrap raw materials. When the dollar eventually gets weaker, which it invariably will, other countries benefit from that. They will be able to invest and continue to buy scrap from the United States and make products in their plants, too.
“I do not think you are getting rid of globalisation, but I do think there will be government incentives to [locate] plants here. I think there will be a big infrastructure package that forces materials to be American made, and that will be more incentive both on the ferrous and non-ferrous side to produce material here.”
Indeed, a recent article in Recycling Today suggested $59.5 billion has been invested in steel facilities in the United States alone in the last two decades.
For plastics, there are a great deal of trends that will affect infrastructure. The new Basel Convention rules means that many plastics grades cannot be traded globally without prior notification, unless between OECD member countries.
In Europe and US, this has effectively westernised the market. Little material now goes to Asia as a result, especially from Europe, which is tending to trade among itself, and to a degree Turkey.
Longer-term, there is likely to be competing demand to sell recycled polymers between existing mechanical recyclers, and new chemical (sometimes called advanced) recyclers.
Oil companies such as SABIC, Shell, Total and others have partnered with chemical recycling companies to pioneer this technology that can convert low grade polymers into virgin-like material. Manufacturers such as PepsiCo and Unilever have committed to sourcing chemically recycled polymers for use in their packaging.
What will the rest of the year look like?
The honest answer is that it is difficult to know. There are so many competing factors, and it will depend which ones have the strongest influence on making market prices move.
What we do know is that prices for fuel, energy and other commodities are high. Businesses must therefore plan to operate as efficiently as possible by investing in digital solutions such as the AMCS Platform. Download the AMCS Platform brochure below to learn how we can help your business become more efficient and profitable.
Paul Sanderson is the co-founder of Recycling Insights – a data science service for the recycling industry. He also operates the news services REB Market Intelligence, which was founded in 2012. From 2004 to 2012, he was editor of MRW – the UK’s oldest recycling publication.
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