[Supply, Demand, and Cost Analysis of Recycled PE] Market Edges Lower, Processing Margins Remain Under Pressure

This week, the recycled PE market showed a narrow and weak consolidation trend. Supported by rigid feedstock costs, declining spot prices of virgin linear PE, and sluggish demand from the downstream packaging and agricultural film sectors during the traditional off-season, industry processing margins continued to be squeezed. Overall, all product categories remained in a weak supply-demand balance.

Raw material prices: In the East China market, the weekly average price of first-grade washed stretch film raw material is 4,120 yuan/ton, down 60 yuan/ton month-on-month; low-density HDPE hollow crushed raw material is 3,850 yuan/ton, down 50 yuan/ton month-on-month; the mainstream price of domestic transparent recycled LDPE pellets is 6,230 yuan/ton, and recycled HDPE pellets are 5,910 yuan/ton, with a weekly decline of 50-80 yuan/ton. In North and East China, the supply of waste PE packaging film and old agricultural film at packing stations is abundant; fixed costs for manual sorting and short-distance transportation provide rigid support, and recyclers are concentrating on pressing prices down for raw materials, limiting the downward space for raw material prices.

Cost of Routes and Processing Profit: The industry standard processing cost for one ton of recycled PE crushing and granulation is 730-775 RMB/ton (including sorting, water and electricity, material loss, and environmental operation and maintenance). This week, the decline in raw material prices is smaller than that of finished pellets, leading to an average processing fee narrowing to 115-155 RMB/ton. Most small and scattered processing plants are breaking even, while some local workshops are experiencing slight losses; large-scale recycling parks are relying on long-term contracts for raw material prices, maintaining a thin profit margin of 120-160 RMB/ton.

Start-up, maintenance, and supply: The average operating rate of the national recycled PE pellet industry is 40.0%, unchanged from last week. There was no concentrated maintenance in large provincial recycling parks during the week; only three small, unqualified washing workshops in Hebei and Tianjin in North China reduced their output by 20%-30% due to negative profit margins. The Tarim Petrochemical HDPE unit has been under regular short-term maintenance since July 5, but the inventory of mainstream domestic refined PE sources is ample, providing no significant positive support for recycled PE. The Huangpu Port in South China received 8,200 tons of recycled PE pellets, an increase of 600 tons week-on-week, with low-end imported mixed materials supplementing the regional market supply.

Inventory and price spread transmission: Finished goods inventories at recycled pellet producers stand at 7–9 days, within a neutral and reasonable range for the industry, while traders have no willingness to proactively build stocks. Mainstream spot LLDPE offers in East China are RMB 8,650/mt. The price spread between recycled transparent LDPE pellets and virgin material is RMB 2,420/mt, narrowing by RMB 70/mt from the previous period, indicating a slight weakening of the substitution advantage of recycled material. Downstream product manufacturers are making only sporadic small-volume purchases based on rigid demand, with no concentrated restocking. The cost benefits from lower upstream scrap material prices cannot be transmitted to downstream finished-product producers, resulting in obstructed price spread transmission.

Market outlook logic: In the short term, the supply of waste PE scrap remains ample, while the off-season for downstream agricultural film and packaging continues. Recycled PE spot prices are unlikely to see a trend-driven rebound, and industry processing margins are likely to remain under pressure.

(The data in this article are compiled from publicly available information and are for market reference only, and do not constitute any investment or trading advice.)