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Expected short-term market prices for recycled plastics may remain weak and stagnant

Word：[Big][Middle][Small] 2024/6/20 Viewed：

As the loose policies on the real estate market in late May have weakened their impact on the market, the market for recycled plastics is gradually returning to fundamentals, and demand in the off-season is weakening, making it difficult to see an upward trend in the future. However, at the beginning of the month, the European Central Bank lowered interest rates for the first time in five years, and there were positive expectations for international crude oil prices in June, with strong cost support, which may reduce the decline in new material prices caused by demand side bearish sentiment. As a partial substitute, due to the small decline in new materials and the current high price difference between new and old materials, the low price advantage of high-quality recycled materials is stable. Therefore, the quotes from holders may mostly be stable. Overall, the current weather is characterized by drought in the north and flooding in the south, and downstream demand may further weaken. However, the high cost of new materials, difficulty in reducing raw material costs, and reduced supply still provide support for the price of recycled materials. In the short term long short game, the price of recycled plastics may remain weak and stagnant, and the overall downward trend is limited.

From a macro perspective: At the beginning of the month, the European Central Bank lowered interest rates for the first time in five years, coupled with concerns about summer supply, international crude oil is expected to experience an upward trend, and the cost of new materials is expected to increase. However, the IEA's reduction in crude oil demand, weak gasoline demand in the United States, the Federal Reserve's seventh suspension of interest rate hikes, and cooling expectations of rate cuts have to some extent put pressure on oil prices. Overall, it is difficult to create a strong bullish outlook on the macro level.

From a demand perspective: Since the beginning of this year, the demand in the downstream mainstream field of recycled plastics has not been as expected, and it is difficult for recycled manufacturers to increase their shipments. Overall transactions continue to be mainly based on rigid demand. Therefore, during the same period of wide price increases for new materials, it is difficult for recycled materials to keep up with the increase. Holders have a low willingness to raise prices to promote sales. At present, it is the off-season in June, with more high temperatures and rainy weather in summer, which limits the stability of downstream factory operations and may be further lowered based on maintenance workers.

From a cost perspective, due to the low operating rate of terminal manufacturers, limited waste plastic production and recyclable resources, most packaging stations do not face inventory pressure, and their quotations are often high. However, the pressure on the shipment of recycled particles has increased, which has forced cost side price reduction operations. However, due to the lack of support from upstream raw materials (i.e. waste plastics), there is limited space for holders to offer and negotiate, and there is still some support for cost facing the price of recycled materials.

According to the above analysis, there are positive factors on the macro level, but the boost is limited, and the negative factors from the demand side are still the key factors affecting the market situation at present. The weakening of demand and the short-term or weak operation of new material prices make it difficult to form a strong boost for recycled materials. Regenerative enterprises may continue to operate at low loads, with moderate inventory pressure and some support for prices. Based on the analysis of multiple factors such as new materials, costs, and supply, it is expected that the prices in the recycled plastic market may remain weak and stagnant in the short term, with a high probability of a downward trend due to demand drag, but the decline is limited.

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