INSIGHT: California mandate seeks to develop market for recycled plastic

Paula Leardini


HOUSTON (ICIS)–California has become the first US state to mandate a minimum recycled content in plastic beverage containers. The main objective of the new law is to develop the local market for recycled resins and to create value in the entire recycling chain.

Starting in 2022, manufacturers are required to include an annual average of 15% of post-consumer recycled plastic (PCR) in beverage containers. By 2025 the mandate is set to increase to 25% and by 2030 to 50%.

Beverage manufacturers that violate those requirements will have to pay an annual administrative penalty of 20 cents/lb of PCR they fail to reach. The amount will be deposited in the Recycling Enhancement Penalty Account and used to support recycling infrastructure, collection, and processing of plastic beverage containers in the state.

Polyethylene terephthalate (PET) and high-density polyethylene (HDPE) together represent 97% of the US bottle market and consequently those will be the main resins affected by the new mandate.

According to the National Association for PET Container Resources (NAPCOR), out of the total recycled PET resins produced in the US from post-consumer bottle waste in 2018, only 25% was used to produce new bottles. The remaining 75% was consumed in other end-markets such as fibre, sheet, and strapping.

Similarly, only 37% of US recycled HDPE resins from PCR bottles was converted into new bottles in 2018. Other common applications are pipe, lumber/ decking, lawn/garden, automotive, and film/ sheet, as stated by the American Chemistry Council (ACC) and the Association of Plastic Recyclers (APR).

The mandate’s bottle-to-bottle focus may increase sourcing competition among the recycled end-markets. Therefore, there may be a potential switch from fibre, sheet, pipe, among other end-markets, to bottle, which is typically more valuable. In addition, it may also encourage supply developments, especially of food-grade resins.

Food grade R-PET (recycled PET) pricing in the US market has evolved to a premium position in the past 12-15 months, as shown by the chart.

Reaching near $300/tonne above virgin PET resin on the West Coast, such is the demand for food grade material by major beverage brands with pledges to reach levels of 25-50% R-PET content in their bottles by 2030.

With demand outstripping supply, the bottle-to-bottle market has become a high value application. This legislation will now drive the demand for recycled content from all producers.

Regarding supply, the collection rate of PET bottles in California was 74% in 2019 while the US average was 29%. Likewise, 68% of HDPE bottles was collected in California in the same year versus 30% in the entire country.

California and only nine other states in the US have bottle bill programmes to encourage container recycling.

“There is a substantial supply of bales in California given the higher than average collection rates but the competition for this supply from bottlers and converters will potentially see other markets pushed out and in need of alternative recycled feedstocks,” said Helen McGeough, ICIS Senior Analyst Plastic Recycling.

“The focus on the bottle market is mirrored across other regions and legislators need to be mindful of the impact this has on the overall industry.

“This mandate should increase recycled polymer usage in one market segment but could be to the detriment of others, an unintended consequence of such action.”

This is the first law of its kind in the Americas. Further PCR requirements are expected to emerge in other states as well as for other plastic packaging besides bottles in order to develop and create value in the US recycling chain.

Insight by Paula Leardini


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