Seeking sustainability

Plastics continue to gain market share in packaging applications. According to a market report titled “Plastic Packaging Market – Global Industry Analysis, Size, Share, Growth, Trends and Forecast 2014-2020” from Transparency Market Research, Albany, New York, USA, the global plastic packaging market was valued at US$259.65 billion in 2013 and is expected to reach US$370.25 billion by 2020, realizing a compound annual growth rate of 5.2% from 2014 through 2020.

According to the Transparency Market Research report, increasing demand for plastic packaging in the health care industry is expected to be one of the key factors driving the growth of this market, as is further expansion of the food and beverages market, which is the largest application of plastic packaging. Other factors influencing the growth of plastics packaging are consumer preferences for lightweight, durable and aesthetic packages.

However, Transparency Market Research reports, volatility in crude oil prices, which consequently affect the prices of chemicals produced downstream, is expected to hamper the plastic packaging market.

The recycled plastics industry presently is experiencing the effects of lower crude oil and natural gas prices. In the case of PET (polyethylene terephthalate), for example, the lower energy prices we’ve seen recently have led to declining virgin PET prices. At times, pricing for recycled PET (rPET) has reached parity with or exceeded that of its virgin counterpart.
 

Recycling economics

“Oil prices do not change the practical recyclability potential of any plastics and are just one of the financial influences on plastic reprocessing,” says Stuart Foster, CEO of RECOUP, the Peterborough, U.K.-based plastics recycling organisation that works across the supply chain to promote good practice and aid the sustainable development of plastics recycling in the United Kingdom. “Just as important are the capex and processing costs, specification of output, feedstock supply levels and quality and, as with any business, managing margins and costs to maintain activity.”

Foster says U.K. plastics recyclers will need to tighten their markets and better control their inventories in light of the lower virgin plastics prices. “There is a need to ensure that the current market situation does not damage the indigenous reprocessing industry beyond repair,” he says.

Oil prices should not be the only factor determining whether a plastics reprocessing business succeeds or fails, Foster continues, mentioning the need to support the industry during markets such as the one we are seeing presently.

Foster says an estimated £48 million in plastic packaging recovery note (PRN) funding has been raised in the United Kingdom in the past two years that could be used “more effectively and more transparently to support sustainable plastic recycling and also [to] protect the market when trading conditions become tighter, for example when oil prices are lower.” He refers to comments that

RECOUP made in May 2015 in response to the U.K. Department for Environment, Food and Rural Affair’s (DEFRA’s) consultation on PRO (Packaging Waste) Regulations 2007, PRO (Packaging Waste) Regulations (Northern Ireland) 2007 and call for evidence on the impact of new plastic flow figures and links with household waste recycling targets. (See the sidebar below for more information on the reforms to the U.K. government’s PRN system called for by plastics recycling industry organisations.)
 

Generational issues

While the economics associated with recycling plastics are currently in question, what is not is the growing volume of plastic scrap generated, whether in the form of packaging or end-of-life products.

“Global urbanisation combined with the increasing demand for cheap, durable materials has caused the volume of plastic arising in our waste streams to continue to grow year on year,” says Paul Mayhew, global sourcing manager for MBA Polymers, which is headquartered in Worksop, Nottinghamshire, U.K.

MBA Polymers recycles mixed plastics from end-of-life (EOL) vehicles and waste electrical and electronic equipment (WEEE).

Rakesh Surana of Antwerp, Belgium-based Gemini Corp. N.V., says the European Union generates 25 million tonnes of plastic waste annually, according to figures from the PlasticsEurope, with locations in Brussels, Frankfurt, London, Madrid, Milan and Paris.

However, only 6 million tonnes of this material are recycled annually, Surana says, with Europe recycling roughly 3 million tonnes, while the rest is recycled abroad. “The balance 19 million tonnes are converted into energy or landfilled.”

Foster says nine EU countries—Switzerland, Germany, Austria, Luxembourg, Belgium, Denmark, Sweden, Netherlands and Norway—have achieved minimal plastic packaging to landfill, recycling 30% to 40% of this material and sending the remainder through EfW (energy from waste) systems. He says this is largely a result of landfill bans that are already in place in these countries.

EU recycling targets focus on the segregation and collection of various plastics centered around household and domestic waste streams, Mayhew says. Packaging is a common target.

Foster says the U.K. has been ahead of the European plastic packaging recycling target of 22.5% for some time. “The official U.K. data show 640,000 tonnes recycled in 2012, 714,000 tonnes in 2013 and 842,000 tonnes in 20014, driven by U.K. packaging recycling and recovery targets placed on the producer supply chain,” he says, noting that 55% is estimated to be from plastic packaging sourced from households, while the rest is mostly film from commercial and industrial generators.

“By 2017, a 57% business target translates to an estimated 1.2 million tonnes of plastic packaging to be recycled, so there is still some way to go,” Foster adds.

The U.K. tends to be on the lower end of plastic recycling and landfill avoidance compared with other nations in the EU, Foster says.

He adds, “While striving to meet targets, it is fundamental to ensure that the collection and handling systems are affordable, sustainable and that the material provided to reprocessors is of an acceptable quality.”
 

Quality concerns

As demand and price for recycled plastics decline, quality grows increasingly important.

“The quality and consistency of plastics processed generally need to be improved and maintained,” Foster says. “Good quality materials remain in demand and have markets; it is always the materials of a lesser/inconsistent quality which are affected most.”

However, he continues, “It should be noted that the current market situation cannot be likened to the market issues of 2008, which were the result of a temporary reduction in export market activities and reduced overall demand for plastics.”

China’s Operation Green Fence initiative, which it enacted in 2013, has resulted in material recovery facilities (MRFs) throughout the world investing in their operations to produce higher quality secondary commodities, regardless of the materials’ final destination, Foster says. “It also did expose the need for further U.K. and European market development to prevent an overreliance on export in the future,” he adds.

“Whilst the market is subdued in the short term, it will make investment and infrastructure development more difficult to justify,” Foster continues. “But this will be key to achieving the longer-term goals and recycling targets.

“Work on those ‘harder-to-recycle’ plastics will also become increasingly important as the increasing recycling percentages become harder to attain,” he says.
 

Driving domestic demand

“European demand for scrap plastic has remained relatively consistent despite the drop in virgin prices experienced throughout the course of the year,” Mayhew says.

While he says demand has held up despite current market conditions, Mayhew believes government could play a role that leads to increased demand from domestic manufacturers and brand owners. “Governments are definitely having a positive impact on the amount of plastics being collected and made available in the market through policy and targets, but in my opinion far more needs to be done to drive the demand side of the equation.

“EU (European Union) governments should be helping to create incentives around the use of recycled plastics in end applications, which will in turn create more domestic demand for the plastic scrap being collected,” Mayhew adds.

Consumers in the EU appear to support such measures, Foster says. “A recent survey suggested that consumers would support laws giving bottle manufacturers a responsibility to include recycled content in plastic milk bottles, even if it resulted in an increase in price,” he continues.

Foster says a growing number of brands and manufacturers are promoting sustainability agendas that include recycled content in their products. “I expect some are having their resolve tested when the finance and sustainability policies provide different answers to the question: Should I use recycled content?” he says, adding that the financial drivers must exist for manufacturers to opt for recycled content.

“If the financial drivers for use of recyclate cannot push up demand, then alternative models or legislation may have to be considered if existing and planned plastic recycling targets are to be viable,” he says. “Otherwise, we create a no-win situation in which the supply chain will be asked to pay inflated producer responsibility costs through very high PRNs when future targets are missed and reprocessors not being able to sell their commodities to market at an appropriate value.”

Mayhew says plastic scrap demand in the EU likely will remain consistent going forward; however, he says depressed virgin polymer pricing could force more reprocessors out of business, as was the case with two large bottle-to-bottle recyclers. (Closed Loop Recycling and Eco Plastics both were sold in the last year after encountering financial difficulties related to market conditions.)

“I don’t see demand from China increasing during Q4 of 2015, which may offer greater opportunities for collaboration between plastics scrap producers and reprocessors within domestic markets,” Mayhew adds.
 

Looking abroad

Surana says Finnish company Poyri estimates that worldwide demand for recovered plastic will grow from 15 million tonnes in 2007 to 45 million tonnes in 2015. “We believe that this is more or less the right estimate as the current year volume is estimated to be between 40 million to 45 million tonnes,” he says.

Poyri estimates demand to reach 85 million tonnes in 2020, Surana adds.

The Confederation of British Industry’s China office estimates that China’s demand for recycled plastics could reach 29 million tonnes in 2015, 9 million metric tonnes of which are imported, he says.

“Overall the current demand scenario is weak due to the present state of the global economy,” Surana says. “We think this will continue to stabilize for the rest of the year and demand will pick up from the first quarter of next year.”

Mayhew says the Far East, particularly China, still drives demand for recycled plastics. He adds that this region has seen a drop in demand throughout the past three months in light of falling virgin material pricing.

Processing costs in the Far East often are lower than those in the EU, he says, allowing the export market to be more competitive on price. “One of the key challenges for European plastic reprocessors is to ensure sufficient supply of raw material when market conditions tend to favor the export market.”

Mayhew acknowledges the decline in demand from the Far East for lower quality plastics, as does Surana.

Mayhew says he does not view this as a bad development, necessarily. “Far too long EU companies have seen China as a dumping ground for the ‘other’ fraction which is not conveniently separated and treated as products.”

He continues, “With China’s door closing to these fractions, it will force both the waste management and reprocessing companies to come together and generate solutions to these more complex waste streams.”

Foster says plastics’ widespread popularity across a variety of applications and the materials’ unique characteristics, while strengths, also contribute to the barriers associated with finding practical and cost-effective recycling solutions. “However, by working in collaboration with the entire supply and recycling chain, many of these challenges can and will be overcome,” he says. “Plastic has the potential to be a truly sustainable and circular resource, and improved reuse and recycling will have crucial roles to play.”

Mayhew adds, “The industry as a whole still has a long way to go before a truly sustainable model can be established.”

The author is a managing editor with the Recycling Today Media Group and can be contacted at dtoto@gie.net.