As we head towards winter, US recyclers and waste haulers will be wondering if the recent fall in prices is going to continue.
Although not directly affected by the cut off of Russian fuel supplies as Europe, US businesses and consumers are likely to face higher charges for their fuel this year. According to the Financial Times, the US wholesale gas market is likely to be three times higher than the average over the last decade.
This means US consumers and businesses are facing higher energy costs and results in higher inflation in the economy.
Inflation means less purchasing power, and this is bound to impact on the price of recycled goods.
Another factor that will affect the market is the strength of the US dollar against other currencies. With the fears over inflation and energy prices in Europe, and weak economic data out of China, currency traders have piled into the safety of the dollar.
For those who export to destinations including India and South East Asia, this strong dollar makes US material more expensive.
However, investment in the US recycling sector has meant that there is much more demand from domestic sources, which has helped to fill the gap left by declining exports after China banned imports of plastic scrap in 2018 and recovered fibre in 2021. Following a ban, but then a small loosening, scrap metal exports to China remain much lower.
As reported by the Journal of Commerce Online, total US recyclables exports fell 4.7% in 2021, which was the fifth year-over-year decline in the past six years. Since 2015, US exports of recyclables have fallen by 24.8%.
However, that overall decline in 2021 was masked by a 9.4% decrease in waste paper exports (which represents around 60% of all US recyclable exports), while ferrous scrap exports actually increased by 57.2%, aluminum by 18.6% and copper by 27%.
But those that have exported in 2022 have faced port congestion, leading to US ports offering the highest detention and demurrage charges in the world – again adding to costs for US recyclable material exporters.
In the paper and cardboard sector, there have been quite a few announcements of new mills in the United States. Companies including Pratt Industries, Green Bay Packaging and Chinese firm Nine Dragons Paper have all invested in new mill capacity.
Indeed, the latest data from the American Forest & Paper Association shows that US paper and paperboard mills had record production in 2021.
The American Chemistry Council has also shown that investment in US plastic recycling capacity has increased following China’s restrictions and then ban on plastic imports. From July 2017 to January 2022, 81 new projects have been announced with a cumulative value of $8.8 billion investment.
Over the long term, the US recycling market looks to be in a healthy state, with domestic demand likely to power growth for paper and plastics at least. Scrap metal growth is likely to be around 5% per year mostly using existing infrastructure, but with some additional investment in new capacity.
But what is the outlook likely to be for the rest of 2022?
Volatility has been the pattern for scrap metal markets over recent years, and there is no reason to think this is going to change.
In the US, prices in 2022 for copper wire have reached a high of approximately $9,600 per metric tonne in March, a low of around $5,800 in July and at the time of writing at the start of September is trading close to $6,600.
Looking ahead, the rest of the year seems gloomy. Economic data out of China, which continues to be the key world buyer of metals, has been poor. The manufacturing PMI for August fell back into negative growth territory for example.
European demand for metals is expected to be weak as consumers restrict spending over fears of higher energy bills. That would also suggest that Turkish buyers are less likely to want US material.
CRU head of multi commodity analysis Peter Ghilchik told the Financial Times: “Demand destruction is happening on the consumer side, so it’s filtering through to the metals markets.”
Additionally, a strengthening US dollar (reaching a 20-year high against a basket of currencies) has made industrial prime and scrap metals more expensive as these tend to be traded in this currency.
However, there is also a view that metal prices may have reached a low. Peter Ghilchik added: “It looks likes prices have hit or are near to a cyclical low and in general commodity prices should remain supported by supply concerns and other factors.”
This was also supported recently by Sims Group chief executive Alistair Field. He predicts that markets will be volatile but said that average prices would be higher than in the previous few years: “The lows will be higher than previous years,” he added.
Recycled paper and cardboard
Markets have been different depending on which region of the world you are based in.
The United States and Asia has seen relative stability this year, but European markets have seen record prices.
But the value of OCC in the United States has been more stable at $130 maximum and $110 minimum. This is because the US market does not trade much with Europe, so its domestic mills, South East Asian, Indian and Central and South American mills tend to be its main buyers. These markets did not have the same demand levels as seen in Europe in late Spring and early Summer so the markets did not reach the same highs.
But since June/July, global markets have seen prices for paper grades easing down.
For the rest of the year, much will depend on the impact of energy prices. Mills can be quite energy intensive, and while many will have alternatives such as combined heat and power plants in place often from renewable sources, many will be facing very higher energy prices.
There is also a possibility that weak consumer spending will mean less buying of products surrounded by cardboard packaging.
Most market participants expect the market to fall even further as 2022 goes on.
But there are others who are optimistic that low availability of material, plus competition from tissue mills for cardboard grades (with less office paper and newspaper and magazine grades available), that demand for fibre will continue to mean good price availability.
In the US market, with less energy cost pressures, a focus on export markets in India, South East Asia and some to Central and South America, plus more domestic capacity would suggest that paper and cardboard prices may ease back but not by a huge amount over the coming months.
Prices have come off in all global plastics markets, but remain historically high with the exception of US PET bottles that have returned to more normal levels after seeing highs earlier in 2022.
Most in the market are pessimistic though. Oil prices are coming off making virgin plastics cheaper, and there is pushback from manufacturers that they cannot keep paying such a high premium for recycled plastic content.
Weaker consumer spending will also put pressure on this market, as will the impact of increased investment in capacity to produce more recycled feedstock.
It is likely that US markets will continue to see strong prices for the remainder of the year when compared to historic averages, but they are likely to come down as demand suffers as a result of inflation.
But the longer-term picture remains positive for the plastic recycling sector. While there has been a recent boom, it is a market where there will be increasing and continued demand for recycled plastics, even if this ends up being at lower pricing levels than seen this year. But those lower pricing levels should end up being at new higher averages than seen in the past.
Download the AMCS Platform for Recycling brochure below to learn more about how AMCS solutions can help your recycling business increase profits and efficiency.
The Paper and Plastics Recycling Conference is taking place on October 19th and 20th in Chicago. Come and visit AMCS at Booth 2. Contact us to book a pre-book a meeting.
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