By John Richardson

IF YOU had conducted a snap survey of horse and cart manufacturers during New York’s Easter Parade in 1900, I am sure that hardly any of them would have foreseen that 12 years later their businesses would have all but disappeared.

Photos show that during the Easter Parade in 2011 automobiles had almost entirely replaced horses and carts, thereby solving the No1 problem that had faced New York and every other major city: Disposing of horse manure.

If you today conducted a similar survey amongst PE producers what would be the result? How many producers expect that in 12 years’ time, production via crude oil and natural gas will have collapsed as a result of the rise of recycled production?

This would actually be the best outcome. If PE producers make a major push into recycled polymers as raw materials demand will be protected.

The alternative is that PE producers fail to make an insufficient shift into recycling. The general public might then push the legislators, the brand owners and the retailers to use other materials that replace PE in its biggest end-use market – single-use packaging. These materials include aluminium and paper where global recycling rates are already at 50% – far higher than in PE.

Virgin PE production: The case against the next horse and cart

It is easy to come up with numerous reasons why it might be economically and technically impossible to boost recycling of PE anywhere close to the 50% levels of aluminium and paper.

Right now, for example, the scrap PE value chain in Europe is very under-developed. The suppliers of scrap PE are unable to provide the quantity and quality of raw material to enable big growth in recycling.

Then there is the good, the bad and the ugly argument over end-use applications. Some PE single-use applications are undoubtedly so good that their net environmental benefit might outweigh the negative footprint of PE finding its way into the world’s rivers and oceans.

Take LLDPE for food packaging as one example. Methane emissions from rotting food are the third biggest source of global methane emissions behind China and the US. If the barrier properties of LLDPE cannot be replicated by say aluminium then it could make sense on a net environmental basis to continue using LLDPE.

PE companies can come out fighting and make cases like this to preserve their licenses to produce. Educate the public, and thereby the lawmakers, the brand owners and the retailers and it could be possible to protect and grow market share in some end-use applications.

Or PE producers might be right to be sceptical about the durability of the public backlash against plastic waste. Michael Skapinker in this FT article considers whether the concerns over plastic rubbish will fade away. He cites the example of the only brief consumer pushback against buying cheap clothing online following the horrific Rana Plaza factory fire in Bangladesh in 2013 that claimed 1,200 lives.

The case for the horse and cart

But it would hardly be ethical for PE producers to take the cynical approach of assuming that public pressure will go away and that they can carry on with business as usual.

We are conducting an experiment with our environment the results of which are entirely unknown. What if we reach a tipping point where marine life starts dying out at a very rapid and un-reversible rate because of plastic pollution? There is also the potential toxicity of micro plastics in the food chain.

And I am of the firm belief that public opinion will not let up on the plastic waste crisis for two reasons:

  1. The anger in the West over plastic rubbish is very deep and very broad-based and has major legislative momentum behind it, including most notably last year’s EU Plastics Strategy.
  2. In the developing world, the environmental damage being caused by single-use plastics is being taken very seriously by governments. China is for instance leading the way through its heavy restrictions on imports of scrap plastic and its plans to set up a modern recycling industry.

Under my preferred scenario of a collapse in virgin PE production, I am assuming that the PE industry will build on initiatives such as The Alliance to End Plastic Waste.  Under the initiative, petchems and other companies last week pledged to donate $1 billion (880 million euros) to “minimise and manage plastic waste and promote solutions for used plastics”.

I also believe that the strength and durability of public opinion over pollution in general is nothing short of an existential threat to the petchems business that will prompt the right responses. These broader concerns include premature deaths from air pollution and climate change.

Impact on Europe – a case study

The chart at the beginning of this blog post shows our base case for European PE virgin resin production in the 12 years from 2019 until 2030 versus my guesstimate as to a downside. Or perhaps this is better described as an upside, as this alternative outcome would mean production processes adapting to avoid major demand destruction.

Our base case is business as usual. It assumes that recycled production as a percentage of total production rises from 7% to just 12%. My alternative outlook sees a jump from 7% to 40%. This would mean that by 2030, virgin production would total just 8.5m tonnes as opposed to 14m tonnes under our base case. Cumulatively over the 12 years, virgin PE production would be 32m tonnes lower.

If my alternative outcome is anywhere close to being right, only the most efficient crackers would be able to operate in any region – whether this is through improving the efficiency of existing crackers or scrap and build. Building new crackers to meet new demand would become harder to justify.

Efficiency would not just be measured in terms of today’s determinants of costs per tonne of production. Environmental measures such as net negative C02 emissions would also have to be built into cost models because of more legislation. This makes the new BASF cracker project in India, where it plans to source all of its electricity from renewable power generation, very interesting.

Recycling also represents a vast new area of wealth creation of PE producers through new production processes and through the re-design of end-use applications that would make PE easier to recycle.


India's pollution crisis threatens chemicals industry approach to growth


By John Richardson THE ten most polluted cities in the world are all in Northern...

Learn more

Trade war fears return as US LLDPE becomes more exposed to China


By John Richardson THE ground has shifted under our feet once again. Just as it ...

Learn more
More posts
Little prospects of genuine US and China deal leave US petrochemicals exports very vulnerable

As always, this blog post expresses my own personal views and these are not the views of ICIS. Thank...

The new China and the rise of the Millennials transform the petrochemicals business model

By John Richardson ANYONE who has anything to do with the petrochemicals industry or anything to do ...

Global manufacturing slowdown: Turn to China’s polypropylene market for your explanation

By John Richardson THEY SADLY still don’t get it. All the clamour yesterday was about declinin...

China PE overstocking rises to more than 1m tonnes as exporters continue to flood the market

By John Richardson CHINA is heading for another good year of PE demand growth with estimates from se...

If Strait of Hormuz closed down: Effect on petrochemicals exports

By John Richardson NEITHER SIDE seems to want a war but at febrile times like this miscalculations c...

US petrochemicals export exposure grows at the wrong time in history

As always, the views in this blog post are my own and do not reflect the views of ICIS. Thank you By...

Further collapse in China auto sales underlines radical change in petrochemicals business model

By John Richardson HAVE FEEDSTOCK will build has been the route to success for many years in the pet...

European petrochemical markets keeping calm and carrying on in light of Saudi attacks

Here is a guest post from my very good ICIS colleague, Matt Tudball, our head of European Markets, w...


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more