European recycled PET clear flake climbs against seasonal norms

Clear flake premiums in Europe have risen over the course of the week despite seasonal pricing trends dictating appetite and when pricing for recycled PET would normally decline as winter approaches.

Unusual winter demand

Demand for recycled clear flake in Europe as winter approaches has increased, conversely to tradition, with market participants highlighting the higher cost of virgin PET material, as well as more sheet producers entering the market, as the key driver for increased consumption. Despite the increase in demand, overarching consumption levels in Europe across 2023 remain below desired levels, in a year that has seen overall lackluster appetite for bottled goods.

Virgin PET priuces in Europe in recent months have trended higher, despite a lack of demand from end-consumers, as producers are forced to pass on the rising costs of feedstocks such as paraxylene and crude oil.

Market participants are expecting relatively stable demand moving further into winter, with some highlighting a possible uptick in consumption as end consumers look to shop ahead of Christmas.

Normal price trends

Traditionally, recycled PET clear flake demand peaks during the spring, as producers of bottles look to stock up on material, and produce bottles ahead of the main end-consumer buying season in the summer.

After the higher demand spring and summer seasons, demand for recycled PET clear flakes normally drops sharply in winter, as consumption of bottles declines as Europe moves into the colder months, and companies destock heading into the new year.

Abnormal summer

The summer of 2023 also saw pricing trends outside of the norm, with demand falling sharply during those months. Sources said this was mainly due to poor end-consumer demand, with 2023 seeing gloomy economies, alongside a hangover from a boom year in 2022, when consumption of recycled PET grew so rapidly that prices spiked to unstainable levels.

Due to the high recycled PET prices, European consumers of material swapped to virgin PET instead of recycled material, as it was vastly cheaper to do so, saving companies' bottom lines in a worsening economic environment.

Market participants are hopeful of a more normal demand season in 2024, with consumers expected to enter the market for recycled material in spring, ahead of summer. The looming prospect of the 2025 single use plastic directive is also expected to help stimulate some appetite for recycled material, as big players prepare for the introduction of a mandatory 25% recycled content in PET bottles in Europe.

Recycled polymer

In contrast to the uptrend in clear flake R-PET, adjacent recycled polyolefin markets have seen generally muted to flat pricing conditions so far in the fourth quarter, driven by weak demand from key construction, packaging and durables sectors alongside a continuing focus on cost competitive virgin material from most consumers.

This trend is particularly clear in the recycled polypropylene market, with rising production costs limiting recyclers' ability to meet buyer price expectations and preventing wholesale transactional activity in the sector.

"Poor demand and a lot of choice sums up the sector," a R-PP distributor said. "People don't need to buy, and with virgin pricing competitive it's not worth the hassle for buyers to buy variable quality material."

The weak fundamentals have resulted in generally illiquid pricing in the sector, with both black and natural R-PP spot pricing dropping by Eur20/mt and Eur10/mt, respectively, since the end of the third quarter to Eur750/mt and Eur1,610/mt DDP NWE.

The European recycled HDPE market has seen similar recent trends, with weak demand for spot material seen across the sector in line with typical seasonal trends in early winter. Players have been heard diverting their focus from spot material due to "a high focus on negotiating all contracts for 2024," according to a R-HDPE converter.

Platts, part of S&P Global Commodity Insights, assessed R-HDPE natural pellets at Eur1,710/mt FD NWE Nov. 8, stable on the day and up Eur10/mt since the end of the third quarter.