SEA polyethylene recyclers struggle amid low US scrap supply, import regulations

Polyethylene recycling efforts in the US have continued to grow, supported by legislation, key investments, and industry initiatives. But as demand for recycled material across the country builds, Southeast Asia -- a key export destination for polyethylene scrap bales -- faces dire challenges in acquiring affordable, high-quality feedstock to produce recycled resin.

"There's more and more recycling sites opening in the US. When they plan and set up the site, they have to accumulate [scrap] for stocking to run their tests and for usage. There's much less scrap to export to Southeast Asia," said a trader.

As US companies ramp up efforts to meet sustainability commitments, the demand for recycled materials has soared, particularly for high-density polyethylene natural. Natural HDPE is widely used to make consumer goods, with prices reflecting the tightening supply.

Post-consumer HDPE natural bales in the US have nearly doubled in spot pricing this year. According to Platts data, prices began at 31 cents/lb ($683.43/mt) FOB Chicago and have shot up to 63 cents/lb ($1,388.91/mt), driven by competition among US buyers to secure limited feedstock.

Conversely, Asia has not seen any significant growth in recycled HDPE natural resins this year due to lackluster demand and preference for virgin materials.

The growing domestic consumption of recycled material in the US is significantly reducing the availability of feedstock for export, creating challenges for recyclers in Southeast Asia, as the region is a major importer of scrap material from the US, the UK and Europe.

"In Southeast Asia, scrap collected in most countries are limited or of lower quality while European countries and other developed countries like the US tend to generate more plastic scraps because of more plastic consumption," said one source.

A second trader added that, with the uptick of domestic demand in the US, what is left for export is generally secondary scrap material, usually not of such high quality or else requiring more sorting. Sources said that higher quality scrap material, such as A grade PE film scrap, is generally kept within the US for domestic consumption.

LDPE exports

Asia is a critical export market for US recycled LDPE bales, which is used to create products such as plastic bags, film wraps, and agricultural films in Asia. According to sources, this is changing as new LDPE processors start up and the use of recycled LDPE continues to grow in the US.

"I used to export grade A and B bales a while back, but now I sell it domestically," a recycler said.

Several exporters reported shipping less material to Asia compared to the past, with the primary driver being rising domestic demand for recycled material.

"Over time, especially within the last year, less material has been exported and is instead consumed in the US," a distributor said.

Additionally, according to an exporter, it is difficult to compete with US buyers, which are willing to pay more for recycled material.

"Domestic pricing is better than exporting," the same recycler added.

Although US consumption of recycled LDPE bales has slowed due to seasonal demand decreases -- primarily tied to the fall and winter slowdown in its use for decks and plastic lumber -- sources said they do not expect a significant easing in supply.

"The market will pick up again in February and supply is expected to continue tightening," said a trader.

Tightening regulations

Apart from limited feedstock from the US, many Southeast Asia recyclers also face challenges obtaining scrap from other countries due to regulations limiting the import of waste materials.

"Scrap plastic recyclables are becoming increasingly difficult to buy and sell. In two of the most prominent recycling countries, Vietnam and Thailand, renewal of import permits for scrap and plastic waste is now limited to factories that are vertically integrated, handling the full process from import to pelletizing and manufacturing of products," said a trader.

Agreeing, a producer in Thailand said that the country does not allow import of plastic scrap, with only a few holding licenses and for limited volumes.

The Indonesian government had also announced in October this year that it plans to implement a policy banning the import of plastic waste starting in 2025.

With tightening bale supply and stricter regulations, sources say that the outlook for recyclers in Southeast Asia seems bleak. Demand for recycled pellets has also been lukewarm due to preference for virgin materials as recycled ones tend to be mechanically and chemically inferior.

In comparison, demand for recycled material in the US is expected to continue growing and as the country continues to prioritize domestic consumption, Southeast Asia may continue to face increasing challenges in securing affordable, high-quality scrap.