Iran conflict sparks plastics market volatility
The recent escalation of conflict between the US and Iran has significant implications for the global plastic recycling industry, according to Henk Alssema, president of the plastics division at BIR. The renewed fighting has led to a reversal of the substantial fall in crude oil prices, causing virgin polymer prices to climb again.
Manufacturers may turn to secondary plastics as virgin polymer prices climb. However, the situation is complex, with softening demand and reduced production levels during the holiday season.
The holiday season has prompted plastics processors to reduce production levels.
Buyers are maintaining significant inventories as a precaution against potential supply disruptions. Trading activity has slowed, and competitively priced imported materials continue to exert pressure on the European market.
Strong demand over the past few months has helped recyclers during the traditionally slower summer period.
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The conflict in the Middle East could have massive repercussions for the recovered plastic sector. Alssema notes that the current market uncertainty is driven by this conflict.
If inventories continue to decline throughout August and industrial activity resumes as expected after the summer break, demand could recover during September.
For Max Craipeau, a fellow division board member, the Middle East conflict highlights the diagnosis: the plastic recycling crisis is driven not by imported recycled material but by the oversupply of virgin resin. This oversupply is the result of abundant fossil feedstock and years of aggressive petrochemical expansion, particularly in China.
The annual capacity of Europe’s virgin PET industry is 2.6 million tonnes, compared to China’s PET output of some 17.5 million tonnes. This overcapacity sets the global price floor for virgin PET, HDPE, and PP, making it challenging for recyclates to compete on price alone.
Craipeau argues that higher targets for recycled content in new plastic products are necessary. He points to India’s move towards 40% recycled content for PET food packaging and Nigeria’s framework reaching 50% by 2030 as examples of more ambitious targets.
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In the context of the geopolitical situation, Craipeau concludes that at rational virgin prices, recycling operates sustainably; against structural overcapacity, it cannot compete on price alone.
With the increase in virgin polymer prices, manufacturers may turn to secondary plastics as a more cost-effective option.
The industry’s ability to compete with virgin materials will depend on the direction of the Iran conflict.
The current situation highlights the need for a more sustainable approach to plastic production and consumption. Craipeau suggests higher targets for recycled content in new plastic products could help address the issue of oversupply and promote a more circular economy.
