The US recycled PET market has begun to open up again, following significant disruptions at the height of the coronavirus pandemic that led to nine out of ten bottle bill states forgoing their recycling commitments. At its height, recyclers in California were reporting as much as a 70% drop in Grade A post-consumer PET bottle bale supply and many material recovery facilities (MRFs) across the west coast and mid-west region were either shutting shop or reducing production significantly.
Exacerbating this situation was a bearish virgin PET market. Virgin prices plummeted to $857/mt (around 39 cents/lb) on April 29, the lowest level seen since S&P Global Platts started assessing the product in February 2006 and nearly 42% below year-ago levels. This led many PET consumers to turn their backs on the recycled market.
With such low virgin PET prices and concerns over supply availability of recycled PET, many large food and beverage packaging manufacturers entered into six to 12-month contractual agreements with virgin resin producers. “Supply is only a small part of the equation – with the decline in oil prices, virgin prices have had an unprecedented cost advantage in this market,” said Darrel Collier, executive director of the National Association for PET Container Resources. “From time to time virgin prices do drop below R-PET prices, but now we’re talking a 20-cents/lb type of difference. I’ve never seen that kind of delta before.”
As supply constraints in the R-PET market began to ease, this only exacerbated the dire situation. In late May and early June, both shelter-in-place orders and the retail enforcement suspensions began to lift and the recycling sector saw a huge flood of deposit bottles as residents returned their hoarded recyclables. Therefore, as supply returned to, and even outpaced, pre-pandemic levels, demand for feedstock bales had significantly decreased as cheap virgin resin displaced clean flake.
And by July, with recycled volumes returning to the market and local processors unable to absorb the influx, prices for deposit PET bottle bales had dropped to a record-low of 9 cents/lb, nearly 53% from highs seen in late April, Platts data showed. Consumers, still eyeing cost-ssaving measures, continued to opt for virgin resin.
Recyclers are fearful that continued deterioration of prices will render their trade completely uneconomical. “This is an extremely bad situation as the cost of processing is far greater than the value,” said a source. “The current regulations do not allow CalRecycle [California’s Department of Resources Recycling and Recovery] to make up the difference. This means recyclers and processors are going negative on a CRV Grade (PET) that they are forced to buy back from the public.”