More than halfway through 2021, recyclables remain a hot commodity. Prices for paper and most plastic curbside recyclables are at or near all time highs. After three years of record-setting lows, recyclers are enjoying this change.
Yet, people keep asking me if these prices will last. The answer, of course, is no. Recyclables are commodities. Fluctuating prices are second nature to commodities. However, barring the unexpected, recycling markets should stay strong for a while. After all, demand has swamped supply. Veteran scrap dealers like to say recyclables are bought, not sold. Today’s markets reflect that experience. Buyers want more than what is available.
Prices for used corrugated boxes are a good example. These boxes, known as “OCC” are primarily generated by large retail stores and other businesses that can be relied upon to supply significant quantities of high quality raw materials. Due to pandemic-induced business closures, those supplies are down. Residentially generated OCC is up due to the rise of e-commerce. However, you and I don’t do as well as businesses in providing high quantities of clean used boxes. As a result, mills are scrambling to find supplies. Residential mixed paper prices are rising because it can be used as a supplemental raw material in making boxes. Growing export markets are also competing with domestic mills for supplies.
Rising recycled plastic prices are driven by a variety of factors. Higher oil prices are playing a role so be thankful the next time you buy gas. Those prices are good for recycling. Another factor is the slow recovery of Texas petrochemical plants from the impact of the weather freeze earlier this year. Colored HDPE and PP also benefit from the strong construction market. While the explosion in HDPE prices has slowed down and PP prices have gone down a tad, they remain at record-setting levels.
The most important factor, however, is the recycled content goals made by consumer brands. Natural HDPE, in particular, is a very versatile material whose lack of color means it can be easily used to make non-food contact packages. This has spurred its record-shattering prices as brands work to increase their use of recycled content.
PET prices remain disappointing. Yes, they continue to improve. But not close to the record-setting pace for other packaging resins, even though beverage companies, which are big users of PET, have announced recycled content goals. Perhaps in this case, those targets are not having the impact of the goals for non-food contact products. For years, carpet, clothing and other companies making products out of plastic fiber have been the biggest end market for PET bottles. Their end products are more valuable than bottles which puts beverage companies at a price disadvantage.
This raises an obvious question. Is recycled content a big priority for the beverage companies? Instead of goals for 2025 and 2030, what are their goals for each intervening year? Do those companies make increased recycled content a big enough priority that meeting them is part of the CEO’s compensation package? Do their raw material buyers get bonuses for increasing the amount of recycled PET they buy, even if they pay more than they would for virgin PET resin? Just like teaching to the test, compensation packages set the tone for what executives focus on. I hope using more recycled content is a part of those packages.
As I noted above, high prices never last forever in commodity markets. What goes up sooner or later goes down and then back up again. That is the nature of recycling markets. Price swings are inevitable results of economic ups and downs. So
enjoy these markets. They should last for a while. But while you are enjoying them, give some thought to how to prepare for the next down cycle. Being prepared is always a good strategy.