European R-PET market needs more clarification on Italian virgin plastics tax

LONDON (ICIS)–Players in the European recycled polyethylene terephthalate (R-PET) market want more clarification from the Italian government on the implementation of a €450/tonne tax on virgin plastic, sources said this week.

The legislation, set to come into effect on 1st July 2020, imposes a tax of €0.45/kg on virgin plastic but exempts recycled and bio-based plastic.

Reacting to the news this week, participants said they want more clarification on how the tax will be rolled out before forecasting its impact on the R-PET market.

“We have to wait and see in detail what it’s [the legislation] going to be” a R-PET buyer in southern Europe said on Tuesday.

Of greater concern, however, is the potential harm the tax will do to public’s perception of plastic – adding yet more legislation to plastics use – which could impact on consumption in Italy and beyond.

“More dangerous than the increase in price for our customers, is the approach – plastic being public enemy No 1 in the world,” the buyer said, adding that if the tax intensifies the perception that using plastic is bad – in the worst case scenario – it could lead to the closure of plastics manufacturers.

In terms of the impact on R-PET demand, sources said that if the legislation goes ahead, it is likely to lead to increased demand for recycled plastics.

“The [R-PET] market is waiting for someone to shed clarity [on the tax]. Demand for R-PET will be great, but availability not good”, a trader said. It singled out food-grade pellets, in particular, which have to meet the European Food Safety Authority’s (EFSA) requirements in order to be used in food packaging.

One current EFSA requirement includes the stipulation that 95% of waste used in food-grade material must have originated from a food-contact application. Throughout the continent, this has traditionally been a limiting factor in the expansion of mechanically recycled food-grade capacity.

Even if the finer details of the legislation are not immediately apparent, participants will be following developments closely to determine its exact impact on supply, demand and, ultimately, prices.