US recycled PET markets struggle with depressed market conditions

Depressed demand and increased stocks have dropped recycled polyethylene terephthalate prices across the US, further pressuring thin margins.

USWC surplus supply

According to Platts data, prices for post-consumer PET bottle bales started dropping in early May, after a period of elevated bale prices due to tight supply and strong export demand.

The price drop followed Evergreen's announcement on Feb. 5 that it will close its sort and wash department in Riverside, California.

According to a market source, Evergreen was purchasing around 130 loads of premium bales and about 10 loads of curbside bales each month, translating to roughly 2,080-2,340 mt and 160-180 mt, respectively, based on Platts methodology from S&P Global Energy.

As supply increased, bale prices continued to soften and demand for domestic and export bales dropped further.

Export demand for material going to Mexico eased as bale prices in Mexico started to drop and supply levels rose in the region. Additionally, Malaysia's Federal Government Gazette published a notice on April 29 with new customs rules for plastic waste, which took effect July 1 and rose uncertainties for the export market and increased supply.

Despite bale prices dropping, recyclers margins remain pressured as demand for recycled plastics remains low and cost-effective imported clear flake price remains competitive, limiting buying appetite for domestic material.

Price disparity between imported and domestic recycled PET has been an underlying trend for the US recycled PET market. Platts last assessed clear flake prices at 53 cents/lb FOB Los Angeles on July 18, while CFR clear flake prices from Southeast Asia were calculated on July 21 at 44.18 cents/lb CFR USWC, according to Platts data.

The collective influence of these factors has disrupted current market dynamics and seasonality. Recycled PET clear flakes and food-grade pellet prices tend to rise ahead and during the summer, as end-consumer buying of plastic bottles and food packaging increases, increasing demand for recycled PET.

"It's summer, we should be sold out, maxing out lines," a seller said. "But warehouses are full and people are cutting shifts."

Midwest, Southeast oversupply

The lack of buying appetite for downstream recycled PET has also impacted the Midwest and Southeast markets, contributing to a rise in supply. Furthermore, the seasonal arrival of post-consumer material is adding to the increased availability in the market.

Some key brand-owners and packaging companies, including Coca-Cola and PepsiCo, adjusted its sustainability and environmental targets, often adjusting their post-consumer resin usage. According to market participants, this setback has impacted demand for recycled plastics along with low end-consumer demand due to macroeconomic headwinds and competitively priced import material.

Along with lower demand for recycled plastics, Mexico-based Alpek announced May 30 it will cease operations at its Cedar Creek facility in Fayetteville, North Carolina, by July 31.

The site, acquired by Alpek in 2001, has an installed capacity of 170,000 mt/year of PET resin and approximately 35,000 mt/year of recycled PET flake production.

With the rise in supply, market participants noted that it became increasingly difficult to complete recycled PET sales, as inventory levels remained elevated.

"One of our suppliers has around 100 loads on the floor, unable to sell," a source said.

Platts, part of S&P Global Energy, last assessed post-consumer PET curbside bales at 8.5 cents/lb FOB Chicago July 11, marking the first time prices have fallen to single digits since Sept. 27, 2023, according to Platts data. Southeast bales were assessed at 9 cents/lb EXW Southeast July 17, marking the first time prices have fallen to single digits since Platts started assessing them on Feb. 2, 2024.

Several market participants have echoed low buying appetite, resulting in an impact on post-consumer PET sales.

Moreover, some market sources have indicated that the recent decline in bale prices has not been fully reflected in the prices of clear flake and pellets, disrupting typical market dynamics. However, downstream markets are currently experiencing very weak demand levels.

Looking ahead, bearish market expectations throughout the US recycled PET value chain for the rest of the year prevailed among participants. Pessimistic outlooks continue to flood the market, as demand recovery for recycled plastics appears to be distant, sources have said.