Pet to decline?

PET scrap began 2006 by dipping slightly in price, though the decline was not cause for alarm among those who deal in the grade.

However, the forecast for PET scrap could prove to be less appealing as 2006 advances, if the material tracks one forecaster's view of virgin PET markets.

According to a report in Purchasing Magazine, virgin PET pricing is likely to slide in 2006 before stabilizing "far below the recent peak because of decreased prices and expanding supply for key raw materials."

The magazine says the spot price for bottle-grade virgin PET increased 18 cents per pound to 95 cents following hurricanes Katrina and Rita, helping to boost the yearly average price for the material to 85 cents per pound in 2005 compared to 69 cents per pound in 2004. Most feedstock producers, however, are back online, and pricing has returned to the levels seen before the hurricanes hit the Gulf Coast region.

Jeffry Zekauskaus, an analyst at J.P. Morgan securities tells Purchasing Magazine that the first quarter spot price for virgin PET could decline by 7 cents. He adds that the supply growth that is anticipated in the next two years is expected to surpass the growth in demand as food container and sheet wrapping applications move toward using more polypropylene and polystyrene to escape the volatile PET market.

While a Texas-based plastics reclaimer says that recycled PET did experience a drop in pricing at the start of the year, it was "not as big as we were anticipating" at two or three cents per pound. He reports bales of natural PET selling in the area of 18 cents per pound in early early January, while natural regrind was selling in the range of 30 to 32 cents per pound.

A midwest broker of PET bottle scrap says he saw reclaimed PET pricing decline a penny in January, adding that pricing had been fairly level for the previous six months. The decline in reclaimed PET pricing, he says, was related to the decline in prime pricing that occurred.

"Demand is still there domestically," the Midwest broker says of reclaimed PET. "Demand is always going to be there, it is just a matter of the pricing. If it is really high, that doesn't produce any more bottles. There is a certain amount of tonnage out there; it's just a question of what they are going to pay for it."

Industrial grade resins have not shown much movement in pricing. The Texas-based reclaimer says that prices for these grades have held steady for the last three or four months. "They are high, but they have not been going up as they were mid or early last year," he says. "I don't expect that to change in the first quarter."

He continues, "It's a suppliers' market. There is not enough post-industrial scrap out there."

(Additional news about plastics recycling markets is available online at www.RecyclingToday.com.)