A big differential has emerged between US and Asia-Pacific prices for rHDPE BM natural pellets with US Food and Drug Administration (FDA) approval, but various factors are delaying any uptick in demand for trans-Pacific exports out of Asia.
US prices for rHDPE BM natural with FDA approval have risen swiftly since summer 2024, with solid demand and diminishing feedstock supply creating tightness in the waste market that has spread through the supply chain.
Prices in other regions have been largely flat over the same period, leaving the US market at a large premium. The gap between the ex-works US Midwest and fob China prices is over $2,000/t — far above the differential necessary to cover logistics and duties on sales from China or other Asia-Pacific countries to the US. But despite this wide arbitrage, Asia-Pacific recyclers have not reported any major rise in demand for their products from US converters.
Buy local
US buyers' apparent reluctance to look overseas — despite lower prices — might be explained by a combination of factors.
Firstly, in the high-end packaging applications that FDA-approved rHDPE BM typically serves — including food, but also cosmetics and personal care — switching between suppliers and materials can be a lengthy procedure involving sampling and obtaining various approvals. Although nine recyclers in northeast and southeast Asia have received letters of no objection from the US FDA to produce rHDPE for different food packaging applications, there is generally more variance — or at least, buyers perceive more variance — in recyclates than in virgin polymers, meaning approving new suppliers is a slower process.
Volatility in the US rHDPE BM natural market is also likely to be a concern. Demand and prices have previously shown a tendency to fall sharply when premiums to virgin HDPE reach levels that are unacceptable for buyers. The last such crash came between May and August 2023, when the price of rHDPE natural pellets fell by nearly 50pc. Concern about a sudden price drop is likely to be making buyers cautious about import lead times, a trader told Argus. And many buyers are likely to be keen to maintain their relationships with local suppliers rather than working with importers that they worry could step away from the US market if a price crash makes other regions more attractive.
These complications and risks seem, for now, to be preventing the rise in US prices from lifting demand for exports from other regions.
