Eye on the markets: Plastic fantastic?
An interview with Chris Hanlon, Commercial Manager of Biffa Polymers, looking at the current state of the plastics market
What is the general state of the plastic market in the UK at the moment?
The plastics market is challenging at the moment, with many independent, smaller businesses falling victim to the fluctuating price of oil, which has been the main culprit of instability in the market.
Such instability causes the price of recycled polymers to drop, leaving virgin polymers as a more attractive option to buyers. It has been noted that the UK plastic bottles recycling market has had difficulty in achieving commercial viability for recycled high density polyethylene (rHDPE), partly due to the impact of fluctuating oil prices – something which we as plastic bottle recyclers are all too aware of.
At Biffa Polymers, which has remained profitable, though, we are investing in a new line at our Redcar Plant to increase production and grow the business further.
How much is plastic for recycling and recycled plastic currently worth, and how does that compare to historic figures?
It’s quite difficult to place even a ballpark value on this as the recycled plastics market has a number of variables that can affect how it is valued.
The value of certain types of plastic can also depend on the polymer type used and there are actually around 15-20 very different plastics that all vary in terms of grade, colour and, most importantly, price. Demand for plastics can change dramatically too, which can greatly affect value, usually in line with the changing price of oil.
What factors are significant in the state of the plastic market?
While the price of oil is the most significant, the state of the economy is also a key factor, particularly when it comes to the manufacturing sector. A surge in UK manufacturing generally means higher demand for plastics packaging, which can boost profits significantly.
The way firms buy plastic has changed compared to four or five years ago. These days, businesses only buy what they think they will use because they are generally more risk adverse, whereas prior to this, they would buy in bulk to get a good deal.
Having new technology and facilities in place is vital to increasing extra efficiencies when processing large quantities of plastic, driving an increase in processing capacity and output.
How much is the fall in the price of oil affecting recycling companies? And what was the impact of the closure of Closed Loop?
People in our industry know how hard it is to profitably operate a recycling process in any climate, but, unless you are completely focused on minimising yield loss and ensuring your feedstock is of the best quality, then you are facing an uphill battle no matter what the oil price is. In addition to this, and of equal importance, is looking after your equipment by carrying out planned preventative maintenance programmes and not running at full speed until it fails.
The recent news that a major recycling facility for the plastics sector, Euro Closed Loop, has gone into administration after being reincarnated last year, is a sign of the instability being experienced by some in the wider plastics recycling industry. [In July, however, it was announced that at least part of the mothballed Closed Loop facility would be coming back online, after it was acquired by Veolia – Ed.]
Despite such well-documented instability experienced elsewhere in the plastics recycling industry, a fragile oil price should not be feared by those businesses that invest in their future.
What is the role of export in the plastic market, and what do you think it should be?
Price and exchange rates are central to the profitability of plastic exports. Plastic exports are better when the pound is weaker.
In plastics, we are always competing against a global market, which has its challenges – particularly with packaging recovery notes (PRNs). There are well-documented inequalities between the PRN and packaging export recovery note (PERN) system, which looks set to stay in place, despite industry lobbying.
Export remains a viable option for those wishing to maximise the value of their commodities, and UK-based recyclers must innovate to compete with this inequality.