US Market Update & Focus on Scrap Exports to Asia

US Market Update & Focus on Scrap Exports

to Asia

Kathy Hall & Xavier CroninPetroChem Wire

June 20, 2014

www.petrochemwire.com

About PetroChem Wire• Formed in 2007 in response to growing liquidity in the spot

ethylene monomer market.

• PCW publishes daily spot prices for NGLs, monomers and polymers, connecting the supply chain from energy down to manufacturing.

• In 2010, PCW began publishing the Repro-Regrind Report at the request of companies in those markets.

• PCW prices are used by the NYMEX and ICE as benchmark for monomer & polymer futures contracts.


Polyethylene Snapshot

The US and Asia continue to be able to ship to South America.

Jan Feb Mar Apr May June$0.60

$0.65

$0.70

$0.75

$0.80

$0.85

N Am (FOB) S Am (CFR) Europe (CFR) Asia (FOB)


Polypropylene Snapshot

North America is still not a competitive PP market.


$0.65

$0.70

$0.75

$0.80

$0.85N Am (FOB) S Am (CFR) Europe (CFR) Asia (FOB)


Asia is still clearly the bargain market.

Polystyrene Snapshot


$0.70

$0.80

$0.90

$1.00

$1.10

$1.20

N Am Europe Asia


When PE supply was tight, less repro was available

Prime vs Repro PE

Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14$0.40

$0.45

$0.50

$0.55

$0.60

$0.65

$0.70

$0.75

HDPE BM Prime HDPE Frac Melt Black


Price declines in Prime have not increased Repro supply

Prime vs Repro PP

Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14$0.40$0.45$0.50$0.55$0.60$0.65$0.70$0.75$0.80$0.85

HoPP Prime HoPP Repro Black


Prime vs Repro PS

Prices in Prime have largely led Repro trends

Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14$0.20$0.30$0.40$0.50$0.60$0.70$0.80$0.90$1.00$1.10

GPPS Black GPPS Prime


Recycled Resins Have Complex Fundamentals

Prime grade markets = simple fundamentals• Supply/Demand• Cost• Global arbitrage

Recycled grade markets also depend on• Post-Consumer supply (and legislation)• Retail demand for increased recycled content• Scrap market supply & pricing trends


• For decades, US scrap resins sellers have relied upon China as a destination to send excess scrap supply.

• In 2012, China began changing its attitude about receiving the world’s trash.

Recycled Resins and Scrap Exports


China’s Green Fence Policy

• October 2012: China’s Ministry of Environmental Protection, the National Development & Reform Commission and the Ministry of Commerce charged with “regulation of scrap plastics recycling pollution prevention.”

China’s Response: Reject the World’s Trash

• China’s Department of the Environment, the General Administration of Customs, and the State Quality Inspection Administration started working together to cut down on illegal solid waste --including scrap plastics--coming into the country.

Source: China Scrap Plastics Association, Plastics Recycling Update, February 2013.


Laborer takes a nap, at a recycling center in Jiaxing, Zhejiang province, China, November 6, 2011. (Reuters)

2011: A Common Sight in China


PET 30%HDPE 30%HIPS 10%PS 10%LDPE 5%Other 15%

Comingled Bale Common Makeup


Five Plastic-Scrap Categories for U.S. Export:PE, PS, PVC, PET, ‘Other’ = MRP/Co-Mingled Bales

US exports of ‘other’ scrap plastic to China is #1 volume of the categories:

2012: 526,898 tons2013: 396,385 tons (down 24.8 %)January-April 2014: 110,941 tons (down 18.8% Y-o-Y)

US export of PE scrap to China is a close #2:2012: 400,171 tons2013: 362,210 tons (down 9.5%)January-April 2014: 119,865 tons (down 5.3% Y-o-Y)

Source: USA Trade Online (Foreign Trade Division of U.S.Census Bureau), US Commerce Department


US Polystyrene Scrap Exports to China 2012-2014

2012: 13,079 tons2013: 13,418 tons

up 2.5%

January-April 2013: 4,489 tonsJanuary-April 2014: 4,358 tons

down 2.9%



US PVC Scrap Exports to China 2012-2014

2012: 151,717 tons2013: 157,057 tons

up 3.4%


up 86%



2012: 228,437 tons2013: 196,295 tons

down 14%


up 53%

Virgin PET from China is commonly exported to the US West Coast

US PET Scrap Exports to China 2012-2014


Finding Alternative Markets for US Scrap Bales

THAILANDMALAYSIAVIETNAM


THAILAND

‘Other’ US Plastic Scrap Exports to Thailand

• 2012: 101 tons• 2013: 743 tons, up 634%

• January-April 2013: 2 kg (0 tons)• January-April 2014: 1,124 tons



MALAYSIA

2012: 9,183 tons2013: 15,066 tons, up 64%

January-April 2013: 4,566 tonsJanuary-April 2014: 4,364 tons, down 4.4%

‘Other’ US Plastic Scrap Exports to Malaysia



VIETNAM

2012: 7,853 tons2013: 7,561 tons, down 3.7%

January-April 2013: 1,512 tonsJanuary-April 2014: 3,089 tons, up 104%

‘Other’ US Plastic Scrap Plastic to Vietnam



The Fence’s Future

• Will days of cash for bales return?• Inspections of bales now a way of life—before

shipment from the US and on arrival in China.• Every bale has its price— are US sellers willing

to take at a few cents per pound for export rather than pay for incineration or landfilling?


US Plastic Scrap Supply is Rising

• Commingled Bales• Mixed Rigid Plastic (MRP), several grades• E-Scrap—computers, cell phones, etc.• ABS • PP Super Sacks • Scrap PET is now the world’s most widely recycled

plastic

Other Options: Pay to dispose or sell to Waste-to-Energy plants


CHINA EXPANDS EFFORTS TO AIR, WATER

MARCH 2014:• China declares 'war' on smog and pollution.

• The central government plans to implement a clean water action plan, strengthen the protection of drinking water sources, prevent and control water pollution in key river basins and carry out land restoration.


What Does This Mean for US Markets?

STAY TUNED!


Questions?

Thank you!

Documents

US Market Update & Focus on Scrap Exports to Asia