The Producer Price Index for Plastic Material and Resin Manufacturing provides a baseline for comparing export volumes to a price sensitive destination such as China.
Focus on Plastics:
Because China imports scrap plastics at such an enormous volume, the price fluctuations can be more easily tracked. When this data is charted along with Henry Hub prices for natural gas, the indexed convergence and divergence often associates with export volume fluctuations.
The relative index changes create more volume fluctuations. When production prices drop relative to feedstock prices, it appears that Chinese demand for U.S. scrap plastics also increased. However, the extent of that demand is likely due to other market forces. Some of those shifts, like a significant policy change to an economy, may alter the dynamic. However, the 2014 numbers are quite telling in that the general trend of increasing production prices relative to feedstock pricing mostly affected PE scrap demand but energy prices created shifts in PVC demand as well.
The anticipated implementation of the Chinese import ban appears to be one of many factors that have been creating turmoil in the scrap plastics markets. However, as the largest consumer of scrap plastics, China closing its ports forces market players to look for alternative markets and also to better understand what other market forces were affecting the bottom line.
Mixed plastics in this chart will typically mean 1-7 or 3-7 bales. The container data has not been cross-referenced to determine whether more polymer specific bales were exported under this category to get around import license quotas. The volume spike in 2015 appears to have been an anomaly that was averaged down later in the year. The 2014 and 2016 export volume curves were similar with overall volumes being lower in 2016. The first half of 2017 did not trend in a similar fashion but Q3 demand appeared to be tracking similarly.
While the table shows that China has an increased demand for mixed U.S. scrap plastics on their year-to-date figures, the previous chart shows that most of that occurred in the first two months of the year. Spain may have a remarkably high demand spike but, with a lower initial capacity, the steadier growth seen from Southeast Asia and Mexico are more indicative of good market fundamentals for future growth.
2016 may have been a market correction year for PET plastics but the continuing trend in this polymer category has been decreased demand following the Lunar New Year. India is an added player for PET plastics in this table as compared to the previous table on Mixed Plastics.
Last but not least, here’s recent annual and the year-to-date trends in U.S. PVC scrap shipments to China and other destinations of interest: