INSIGHT: Widespread plastics recycling challenges mean targets will be difficult to achieve

LONDON (ICIS)–The real pinch point for plastics recycling is the availability of plastic waste of the right quality in the right place at the right price.

Widely different collection systems are the greatest barrier to change on a national basis in some countries as well as internationally.

It is surprising, perhaps, to hear that PET (polyethylene terephthalate) recycling rates in China are very high compared to those in more developed economies. That, however, is down to manual sorting and the ready availability of relatively clean PET waste.

The same is certainly not the case in western Europe, where one might expect there to be the capacity to push PET recycling rates higher. Collection differences and difficulties mean that there is considerable amount of idle production capacity that can use waste polymer.

One of the reasons for this is contamination of waste stream. It is often the case that the more enthusiastic concerned citizens are to recycle, the more mixed waste enters the recycling stream. Bales of waste plastics are contaminated and their value reduced, making effective recycling even more difficult.

In the UK, for instance, because of the widespread sale of milk in  polyethylene bottles, the bottles themselves are a good source of materials for recycling back to food-grade polymer. Contamination from other plastics, such as polypropylene (PP)  – which is used to make screw tops for the milk bottles – makes the waste plastic bale and the polymer from the recycling process less valuable.

In many cases, a change in packaging design will be necessary to promote more effective recycling and simply the first steps towards a circular plastics economy.

This is where the major food and beverage producers and retailers come in. It is extremely difficult today to see the wood from the trees – to have a clear vision of what packaging for sometimes well-known consumer products will look like in a few years’ time.

Contributions from players along the entire supply chain will be needed if the recycling targets being set now by national governments and the EU are to be anywhere near met. The ICIS recycled PET (R-PET) report, and a recycled PE report, which is to be launched this week, highlight the many challenges in the supply chain and how weak pricing bears down so heavily on these increasingly important markets.

The challenges for the world’s polymer producers are widespread. For some, inter-material competition will have a severe impact on virgin polymer sales. Might these companies be expected to become much more closely involved with the practicalities of recycling as well as technical solutions to the recycling problem? That would mean research and development investment possibly alongside investment in the supply chain in attempts to avoid severe margin corrosion.

For the more easily recyclable plastics, it will be a question of product design changes impacting product markets. A great deal of research and scenario building is required to better understand the implications of shifts in consumer markets and in consumer trends and how they might affect virgin polymer demand and demand growth.

The ICIS base case currently is “evolutionary” not “revolutionary” showing how recycled material will take a growing share of reduced consumption growth for polyethylene and polypropylene globally. In the mid-term we see a more significant impact on packaging and single use product markets, as might be expected.

Source: ICIS

A worst-case scenario for linear low density polyethylene (LLDPE) demand growth over the 2018 to 2030 period, for instance, can look very bleak,

Analysis from consultants Accenture, based on ICIS supply and demand data as a base case, has suggested that the circular economy could have major impacts on plastics volumes by 2040 and could cut currently projected petrochemicals demand growth by about one half to 1.5% a year. That would be equivalent to 275m tonnes/year of lost conventional capacity.

We have to get there first, of course.

The challenges for the recycled PE business in Europe as an example are significant. They include the lack of available food-grade material, the opaqueness of the market due to multiple input streams and qualities, the development of a two-tier market, and the oversupply of low density polyethylene (LDPE) post-consumer bales since the introduction of the plastic waste ban in China.

The only source for food-grade pellets in Europe is the UK and this is only for high density polyethylene (HDPE). The UK is able to produce food-grade volumes because of its natural post-consumer bale material which is sourced from used plastic milk bottles as I have mentioned.

But across most of the rest of Europe, milk bottles are made from polyethylene terephthalate (PET). This gives the UK a readily available separated stream of post-consumer material from food-contact applications. European legislation for food-grade contact approval stipulates that recycled input waste must be sourced from at least 98% former food contact packaging for recycling back into food-grade pellets.

With no comparative pre-separated post-consumer collection stream in mainland Europe, it is not possible to meet these targets.

Market sources continue to see a shift away from virgin PE packaging to other plastics such as PET because of the lack of food-grade R-PE.

Demand from the packaging sector is increasing because of shifting consumer attitudes to plastics which have seen a raft of pledges from brand owners to include minimum content levels of recycled material in their packaging.

Other applications, though, such as garden furniture and construction, predominantly buy for economic reasons.

This is leading to the creation of a two-tier market between those that are buying because of sustainability targets (typically for packaging applications) and those that are buying on cost-basis, mirroring developments in other recycled markets such as R-PET.

Also, in the UK, post-consumer HDPE bales remain in short supply because of the high value of Packaging Recovery Notes (PRNs) and Packaging Export Recovery Notes (PERNs).

Prices for PRN/PERNs have reached above £185/tonne in recent weeks, and a minority of players said that in some cases values have even exceeded this.

PRNs are a UK specific scheme whereby accredited reprocessors sell PRNs on a per tonne basis to packaging producers and compliance schemes as proof that material has been recovered and recycled. PERNs are similar to PRNs, except that they are granted per tonne of waste exported from the country.

The high price of PERNs is encouraging the export of mixed-plastic waste as collectors can gain significant monetary value without sorting or cleaning waste.

LDPE post-consumer bales, meanwhile, have been structurally oversupplied across Europe since the introduction of the plastic waste import ban in China at the start of 2018. Despite mixed-plastic waste being diverted to other countries in Asia, the market remains long.

The lowest quality post-consumer bales are being sold at a loss with the cost of incineration serving as a cap to how negative values can extend across much of Europe.

In countries where incineration of plastic waste is banned, such as Germany, no such cap exists.

Amendments to the Basel legislation on 10 May which mandate approval from the government of the country plastic waste is being exported to are expected to result in higher volumes of post-consumer material remaining domestically, which could lengthen the market further.

ICIS is launching a new Europe Recycled Polyethylene (R-PE) price report on 23 May covering post-consumer HDPE and LDPE bales and R-HDPE and R-LDPE pellets. On 24 May, it is launching a Europe Recycled PET (R-PET) analytics service covering our forward view of post-consumer PET bale, RPET flake and pellet markets, as well as market impact analysis of brand, regulatory and supply/demand developments.

To subscribe to the new reports please contact clientsuccess@icis.com

Additional reporting by Mark Victory

By Nigel Davis