paula leardini emily friedman icis
Photo by DeAnne Toto

Aligning PCR supply with demand

“Exponential growth” in supply will be needed to meet recycled-content targets.

March 11, 2022

The supply of postconsumer recycled resins typically used in packaging is insufficient to meet projected 2025 demand, which is being driven by legislative mandates and voluntary brand commitments, particularly for food-contact applications, according to the analysis provided by representatives from Independent Commodity Intelligence Services (ICIS), with U.S. offices in Houston. Paula Leardini, senior analyst for plastics recycling at ICIS, and Emily Friedman, the company’s recycled plastic senior market editor, spoke during the Plastics Recycling Conference, which was hosted by Resource Recycling and the Association of Plastic Recyclers on March 7-9 outside of Washington.

The current picture

Leardini said 48 million metric tons of mechanical recycling capacity were available globally in 2021 across more than 2,500 locations. She added that the average capacity at these locations was 20,000 metric tons per year, which is dwarfed by production volumes at petrochemical facilities.   

Recycled polyethylene terephthalate (PET) and high-density polyethylene (HDPE) have approximately 40 percent of the global market, with the bulk of production occurring in the Asia Pacific region, followed by Europe and North America. Much of the PET recycled in Asia and North America is used in the fiber market, while sheet applications predominate in Europe, Leardini said. 

However, in North America (the U.S. and Canada), the bottle market overtook the fiber market for the first time in 2020, according to data from NAPCOR (National Association for PET Container Resources). Leardini said that in 2017, only 25 percent of PET bottles collected for recycling went to the bottle market. In 2020, that number grew to 41 percent. 

In North America as well as globally, demand for postconsumer resin (PCR) in premium applications is growing, she said, though a lack of investment is slowing down the entire value chain.

Food-grade PCR accounts for only 10 percent of global recycling capacity, with North America leading in this area. Roughly 20 percent of the region’s total PCR output is food-grade material, Leardini said.

The U.S. had the capacity to produce 6.6 million metric tons of recycled PET, HDPE and polypropylene (PP) in 2021 across roughly 270 mechanical recycling plants, she said, with most production being of recycled HDPE. PCR production is concentrated in the Northeast, given its high population density and because the West Coast traditionally exported its plastic scrap. Recycling’s estimated share of the overall U.S. polymer market totaled 12 percent in 2020. While HDPE is the most recycled plastic in the U.S., virgin material accounts for 90 percent of the overall HDPE market, Leardini added.   

The emergence of chemical recycling

In the chemical recycling space, the U.S., which is leading globally in this area, had 1 million tons of capacity in 2021, with 15 percent of these plants operating at commercial scale. Leardini said this technology can complement mechanical recycling, particularly because of its ability to use feedstock fractions that are not recycled mechanically presently and because its outputs are nearly identical to virgin materials, circumventing the food-grade issues that mechanical recycling can face.

“We really want mechanical and chemical to co-exist, and I think the industry is still figuring out how that works,” Friedman said. “But just from a business perspective, chemical recyclers need a material at a much lower cost than what the mechanical recycler can take. And, so, I think there's been a real struggle in the chemical recycling world that they're having trouble finding that stock that is processable. … So, they're really struggling to find that low-cost but still usable material.”

Friedman added that she’d heard that chemical recycling companies are partnering with mechanical recycling companies to take their waste. “So, whatever the mechanical recycler couldn't use in their process, they're giving that and passing that on to chemical recyclers.”

While Leardini said 5 million tons of chemical recycling capacity are expected to come online in the next three to five years in the U.S., not all these outputs will remain in the plastic value chain necessarily. “But, if we need more recycled volume into the market, we would need chemical recycling to complement mechanical.”

The supply situation

Friedman said consumer demand is the primary driver behind the brand commitments that are increasing demand for PCR.

“We've all felt and seen the consumer awareness for the environmental impacts of plastic really ramp up in the last few years,” she said. “The recycled plastics industry, at least in the U.S., was largely built off of using it as a cost-sensitive substitution. It was the cheaper material compared to virgin.”

While many grades still follow this model, Friedman said, PCR demand for the resins used to produce consumer packaging are being influenced by brand commitments that are tied to the Ellen MacArthur Foundation’s New Plastics Economy. This generally includes using 25 percent PCR and ensuring all plastic packaging is recyclable, reusable, biodegradable or compostable by 2025.

Friedman said “exponential growth” in PCR supply will be needed in the next three years to achieve these commitments. “And while PET may have a solid base in terms of supply right now to match the growth needed, polyethylene and polypropylene, specifically, are where we’re going to have to target a lot of that growth.”

To achieve 15 percent PCR in packaging by 2025, Friedman said 145 reprocessing facilities would need to be added in the next three years. To achieve 30 percent PCR by 2030, a 46 percent compounded annual growth rate will be needed. “This is just really astronomical the amount of material that we're going to need, again to meet just 15 and 30 percent.”

Output will have to double by 2025 and again by 2030 to reach these targets, she added.

“But what's really tying this up, and I think we all agree, is the supply side of things—you know the feedstock into this market.”

PET and HDPE bottles would need to achieve a collection rate of more than 75 percent to reach 50 percent recycled content by 2030. However, collection rates have remained stagnant or decreased slightly in recent years in the upper twenties to 30 percent, Friedman added.

While 10 U.S. states have bottle bills, she said many of these laws need modernization, including a higher deposit to incentivize recycling.

Under the high-demand, low-supply conditions of the last year, PET, HDPE and PP prices have seen record highs, which have led to false claims of using PCR, decreases in bale quality and backsliding with virgin substitution, Friedman said.

“We've made all this progress to get here; we have all the attention on us right now,” she continued. “But because supply's been so difficult to secure, or it's at such a high cost, I have heard of many people going back to virgin saying, ‘Okay, we have time down the line.’ But do we really?

“Hopefully, these numbers have given you a real feel for the investment needed in order to reach that demand, again, from a capacity standpoint for mechanical recycling. But collection is equally a part of that,” Friedman added.