Impact of recycling on the Western Europe and the United States polymers industry
As plastic consumption continues to grow, an increasing amount is discarded every year and waste management is now an increasing concern. Indeed, the durability of plastic materials creates significant issues with landfill not being a viable option due to the extremely long lifetimes of plastics as well as the potential leaching of additives and other chemicals that can contaminate soil and water.
Recycling is viewed as a viable method of managing plastic waste and, historically, part of this waste has been exported from western countries to Asia with the rest being either recycled locally, incinerated or even landfilled. However, Asian countries are becoming more aware of the impacts of plastic waste on the environment and health and no longer want to be regarded as the dumping ground for richer economies. China has followed this up by banning the import of plastic waste with more than 0.5 percent contamination from January 2018, and other Asian countries may follow suit.
In the backdrop, there has been a rise in consumer education and activism, which has resulted in rising expectations by the public on the behaviour of the companies that provide the products that consumers buy. This has resulted in manufacturers, brands and channel partners (e.g. distributors and retailers) collaborating to develop guides, groups and joint projects that target improvements in the recycling value chain to develop a more self-sufficient circular economy.
Despite the intentions and movements towards a circular economy, there are structural differences between the United States and Western Europe that result in a divergence of recycling rates and use of recycled plastic materials for the conversion of packaging and durable goods. These, in turn, will have different long-term effects on the dynamics of polymer markets.
Nexant expects good demand growth for most virgin polymers in the United States over the forecast period due to low substitution by recyclate. Consumption of recycled PET, PE, polypropylene and PVC is expected to reach 3.9 million tons by 2025 compared to 35.6 million tons of virgin resin, which implies an average penetration of only ten percent.
Compared to Western Europe, which is able to achieve higher recycling rates and penetration of recyclate, it is evident that there are several factors that are inhibiting the recycling activities in the United States:
- A lack of legislative leadership at the Federal level that does not trickle down to local authorities.
- Low virgin resin prices, which are likely to be kept relatively low due to increased supply from additional investment in plant capacities following the shale gas phenomenon.
- Low recycler margins, which do not encourage investment in materials recovery facility (MRF) capacity.
However, it is hoped that recycling in the United States can supported by:
- A strong grassroots movement with growing consumer awareness and concerns about environmental issues, such as ocean waste.
- The efforts of companies and brands who want to appeal to their customers’ concerns by boosting their green credentials.
Nexant expects modest demand growth for most virgin polymers in Western Europe over the forecast period due to partial substitution by recycled materials. Consumption of recycled PET, PE, polypropylene and PVC is expected to reach 8.5 million tons by 2025, which is lower than the ten million tons coveted by the EU, and then 14 million tons by 2035.
Around 78 percent of the EU plastic waste is expected to be recycled by 2035, which is far below the EU target rate of 100 percent. Headwinds towards this target include the technical constraint that polymers can only be recycled up to eight times before their performance is significantly impacted, littering remains an issue despite educational programs and as well as several other leakages in the value chain.
There are several factors that have recently benefitted, and will continue to benefit, the recycling sector in Western Europe:
- More stringent EU regulations and increasing extended producer reliability (EPR) fees that will improve packaging recyclability and collection rates as well as progressively reduce landfill practices over the next decade.
- The Chinese ban on polymer waste imports has provided European recyclers with less competition for collected bales. Additionally, it has incentivised the EU and local authorities to rapidly develop the recycling capacity and capabilities in the region.
- Oil prices have progressively recovered to increase the differential between recyclate and virgin resins, which has attracted more demand from the packaging, automotive and construction sectors and improved recycler margins. This, in turn, should attract more investment to develop more modern and efficient recycling facilities that are able to deliver better product for use in higher-end and more profitable applications – i.e. creation of a virtuous cycle.
- Brand owners wishing to promote their green credentials and ambitious recycling pledges will help to drive demand.
- Partnerships between the value chain participants have helped them better understand each other’s expectations and requirements.
However, in order to maintain the momentum in recycling and achieve forward looking targets in Western Europe, local authorities, industry and brands/companies will need to ensure that:
- Countries that currently exhibit poor recycling rates improve their performance through the help of EU-level grants and private investment. This should be backed-up with the threat and enforcement of fines or penalties, as appropriate.
- MRF capacity across Europe will need to keep up with increasing volumes of waste.
Transitioning Towards a Circular Economy
Despite the described differences between the United States and Western Europe region, industry participants will need to address common issues in order to improve the overall performance of plastics recycling:
- Improve the lack of harmonisation in kerbside collection practices that result in some articles and materials not being collected even at the local authority level.
- Improve MRF technologies that increase the ability to sort different classes of plastic, colours and product types, notably film, in an efficient and cost-effective manner.
- CPG brands and companies will need to design their packaging solutions that better meet the requirements of the circular economy. This would include less complex designs – such as the use of monolayer or recyclable multilayer films – and selecting plastics that are easily recycled.
Improvements in recycling rates can be achieved through the use of consistent practices across countries and regions, which in turn can be facilitated by companies, brands and supply chains that operate at the global level.
Find out more in our recently published report: