US, Mexico recycled PET markets struggle with distant recovery expectations

Depressed demand and increased stocks continue to challenge recycled polyethylene terephthalate markets in the US and Mexico, while market players push market recovery expectations.

On the US West Coast, 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.

"Maybe we will see some restocking in December," a pelletizer said.

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, according to Platts data. Platts is part of S&P Global Energy.

As supply increased, bale prices continued to soften, and demand for domestic and export bales dropped further. Despite bale prices dropping, recyclers' margins remain pressured as demand for recycled plastics remains low and cost-effective imported clear flake and virgin resin prices remain competitive, limiting buyers' appetite for domestic material.

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

Several market participants have echoed low buying appetite due to low end-consumer demand, resulting in an impact on post-consumer PET sales. Supply-and-demand dynamics of recycled PET are closely tied to end consumer demand. A decline in consumer demand typically results in a decrease demand for PET packaging.

Softer soda, bottled water sales cut Mexico demand

Looking ahead, market participants expect lower prices for recycled PET in Mexico, as demand continues to drop. Mexican demand for post-consumer and recycled PET has remained subdued going into the latter half of the year, as soda and bottled water sales are falling short of expectations.

The recent drop in demand follows a period of unbalanced market dynamics in Mexico, where supply was tight and demand high.

However, sources said macro-economic uncertainty, the spread between virgin and recycled PET and recent heavy rainfall across the region have dampened demand for recycled PET packaging applications, impacting sales. Inflation and economic uncertainties have been impacting purchasing power, making end-consumers shift their focus to essential goods.

Downstream, demand for domestic clear flakes remains depressed, as the competition with imported recycled and virgin material continues to impact margins for recyclers.