Waste & Resources Action Programme

We disentangle the complex web of influences on recovered plastics prices in the context of a clear analytical framework, consistent with the best and most recent advances in the literature in this area. And we go on to develop a range of future scenarios setting out the central prospects and key risks for recovered plastics prices in the UK over the coming few years. We outline our central forecast, and assess three scenarios around that: a global recession; even stronger growth in China; and an increase in the supply of recovered plastics in the UK.

There are many different types of recovered plastics, the market for each of which has its idiosyncrasies. In this paper, we focus on two plastic types: PET and HDPE.  Even within those categories, there is a spectrum of prices across the different stages of the supply chain. Our choice of the price indicators that we assess in this paper has been guided by the availability of data: we choose those recovered plastics prices for which we can find the longest consistent time series, the better to facilitate our econometric analysis.

Our analysis suggests the following structure for the global plastics market:

1. Virgin plastics are global commodities. Their prices are driven by costs of production – related to costs of raw materials which depend in turn on crude oil, and on labour costs. Shifts in demand for virgin plastics can drive the price up or down in the short term, but in the end that will result in a change in the capacity of the plastics industry, so that all producers end up making ‘normal’ profits.
2. Recovered plastics prices are pegged to virgin plastics prices in the long run, reflecting the immaturity of this market. As the market matures and deepens, we would expect recovered plastics prices to be increasingly driven by the costs of production, like their virgin counterparts. But that transition could take years or even decades to complete, and will depend on the regulatory regime relating to waste plastic in a number of different countries. For now, recovered plastic prices go with virgin prices in the long run; with short-term movements arising from shifts in demand, changes in regulation and supply, and changes in the weather.
3. The prospects for recovered plastics prices in the UK therefore depend upon:

• The outlook for crude oil prices, and their impact on virgin prices
• The outlook for the Chinese economy, and the growth of its industries that make intensive use of plastics in their production process
• The outlook for the regulation of the waste plastic industry in the UK

• Download: Assessing the global determinants of recovered plastics prices.pdf (239KB)
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