Price Co-Movement Between Virgin PP and Recycled PP

Price Co-Movement Between Virgin PP and Recycled PP

The replacement of virgin and recycled PP materials is a normalized problem. Most of the downstream application fields of recycled PP were same with those of virgin PP, such as plastic weaving field. Therein, the blending ratio of new materials and recycled materials is slightly different depending on the size of the company and the customer's different requirements. According to SCI, the blending ratio has been adjusted in 2018, and the content of recycled PP materials has declined. The medium-to-large scale enterprises add 15%-25% recycled PP materials to produce PP downstream products, while some small-scale enterprises add 45%-50% recycled PP materials. The main reason for downstream enterprises to mix recycled materials into virgin materials was that prices of recycled PP were cheap.

The price spread between virgin and recycled PP resources was the key factor affecting the blending ratio. The spread is normally within the range of RMB 1,200-1,800.mt. Once the spread is below RMB 1,200/mt, the sales of recycled PP resources will meet resistance. As can be seen from the above chart, the spread from January to August 2018 maintained within the range of RMB 600-1,200/mt, which severely curbed the sales of recycled resources. Moreover, supply shortage occurred more often due to the stricter environmental protection inspects.

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