California wildfires have minimal impact on recycled PET markets

The California wildfires that started Jan. 7 outside of Los Angeles had only a minor impact on collection rates and recycling operations in Southern California and prices for post-consumer bales were up talked at 25 cents/b Jan. 24, up 1 cent/b from Platts Jan. 7 assessments, amid word of higher export demand and tighter supply.

The clear flake market has been steady over the same time at 54.5 cents/lb FOB Los Angeles, according to S&P Global Commodity Insights.

The wildfires had minimal impact on recycling operations as power outages were brief enough not to affect recycled PET production, several sources said.

"We had power issues derived from strong wind flow, we shut production for 24 hours," a California-based recycler said. "However, we are back running lines with minimal impacts."

Collection rates have also been reported as mainly unaffected so far, particularly since neighborhoods like Pacific Palisades and Pasadena generally have low collection rates, sources said.

"However, assistance sent to those neighborhoods could potentially boost collection rates in the area, as water bottles are often provided to support families who have lost their homes or have been evacuated," a source said.

Demand in Mexico continues to influence Southern California prices

Despite minimal impacts to recycling operations and collection rates, US West Coast recycled PET prices continue to experience disparity between domestic supply and demand dynamics, as external factors remain influential on domestic pricing.

"Mexican recycling operations expansion continues to be the norm for Southern California bale prices," a source said.

The arbitrage for post-consumer bottle PET bales between the USWC and Mexico remains open, as Mexican participants continue to actively seek competitively priced feedstock bales, placing pressure on the US recycling infrastructure to increase collection rates to meet both domestic and export needs, as well as potential future legislative and voluntary recycled content goals.

Post-consumer bottle bales in Mexico are of higher quality compared to US bales, as the Mexican bales have a higher PET post-consumer bottle content and command higher prices. As a result, Mexican bales also lead to a higher production yield when processing them into PET flakes.

However, lower quality bales from the US West Coast continue to compete with bales from Mexico. Some Mexican buyers still choose to source bales from the US West Coast because the price is nearly 20 cents/lb higher in Mexico.

Platts last assessed post-consumer PET premium bales at Mexican Peso 19.5/kg (44.2 cents/lb) ex-works Central Mexico Jan. 24.

While prices have been stable in the downstream recycled PET clear flake market, demand in the US West Coast remains subdued, as sluggish end-consumer demand and the presence of cost-competitive imported material place reduced buying interest for local product.

Platts is part of S&P Global Commodity Insights.