Brazil's R-PET flake-to-virgin spread turns negative, prompts recyclers to raise June rates

After a prolonged period of low operational rates among polyethylene terephthalate recyclers in Brazil, market participants anticipate an uptick in June rates due to higher feedstock supply, lower costs and reduced appeal of the virgin resin alternative.

Platts, part of S&P Global Commodity Insights, last assessed post-consumer PET clear bottle bales (95/5) at Real 3.80/kg DDP Sao Paulo on May 28, down Real 60 cents/kg from May 2.

"We'll return to full operational rates in June to take advantage of lower feedstock prices and reduce our average cost," a major recycler said.

In recent months, major R-PET buyers have been opting for cheaper virgin resin, resulting in most recyclers receiving minimal bottle input, with some temporarily ceasing operations.

Meanwhile, R-PET resin inventory levels among recyclers have remained high due to weak downstream demand, market participants said.

"I was offered R-PET flakes at very attractive prices, but I lacked the inventory space to store them," a second recycler said.

Flake-to-virgin spread turns negative

A main turning point, according to market sources, is the cost attractiveness of R-PET flakes following the recent price declines.

Platts last assessed R-PET clear flakes at Real 6.90/kg DDP Sao Paulo on May 29, down Real 60 cents/kg from May 2.

Brazil's virgin PET, priced based on Asian prices plus freight, has concurrently experienced a surge in its references since the US-China 90-day tariff pause that took effect on May 14, especially as Platts NE Asia to East Coast South America container rate assessment doubled.

As a result, Platts' data indicates that hot-washed R-PET flakes, with a PVC content below 100 ppm, are again trading at a discount to virgin resin, which was not observed since September 2024.

A packaging maker, noting that some customers had recently chosen to increase virgin resin usage to cut costs, shared that the company has now resumed full operations with R-PET.

Price trend shift could be seen in July

Despite a notable improvement in market sentiment regarding June demand, feedback suggests that the month will likely still experience price reductions.

"My flake suppliers have lowered prices again for June, but now with smaller reductions," a second packaging maker noted.

Likewise, many market participants shared expectations that the current price downtrend could reverse in July-August.

Consequently, several sources said that market values could reach a bright spot, offering attractive prices for scrap sellers and feedstock costs that allow R-PET resin to trade competitively with virgin resin.

"PET [scrap] at current prices is not bad," a scrap dealer said, despite the recent price decline.

If the market experiences greater declines, sources warned that the reduced appeal for scrap collectors could significantly hinder the entire recycling chain.