What's causing the plastics industry to falter right now
The plastics industry is currently struggling with two major problems: international trade is impaired by traffic jams at ports and a lack of truck drivers, and at the same time the purchase prices for high-quality plastics have risen significantly. Martin Klostermann, CEO of the SUND Group, explains the reasons for this.
The Corona pandemic has left its mark on international logistics. A worldwide industry that grew strongly through globalisation and just-in-time production now has the problem that closed borders, overcrowded ports and a lack of truck drivers are bringing the whole system to a standstill. In Europe alone, it is estimated that there is a shortage of about 400,000 drivers. Goods are therefore not transported on time, which lengthens the traffic jams in front of the ports.
"What we are currently seeing in logistics are short- to medium-term effects of lockdowns and other measures to contain Corona. But these congestions are only temporary; in the long term, the system will level out again," Martin Klostermann assures us.
New products and regenerates from recycled plastic
The situation is different in the plastics market, however, as the CEO of the SUND Group explains: "In the plastics sector we also have the problem that we have supply bottlenecks for virgin material and regenerates. As a result, prices for both have risen."
The plastics industry relies on smooth supply chains for virgin material and low-cost regenerates made from recycled plastic. The SUND Group relies on regrind wherever possible. "The supply chains and costs of the two groups of raw materials, 1a goods and regrind, are interdependent: if 1A goods become scarce and the price rises by a certain amount, players in the market more often turn to more often turn to high-quality regrind to substitute virgin material," explains Klostermann. This leads to a higher demand for regrind. A decline in virgin material, however, ensures that there is not enough plastic in circulation to be reused. Regenerate thus also becomes scarce and its price rises. The resulting increase in the prices of 1A goods and regenerates ultimately even leads to industries that supply plastic for recycling using their products several times, such as films for covering agricultural land. Similar to paper, plastic cannot be recycled indefinitely and requires a certain quality: materials that are used multiple times - and thus are actually sustainable - ultimately provide fewer opportunities for recycling, which results in a further shortage of regenerates.