Sustainability in Petrochemicals:

Recycling

Mark Victory, Senior Editor Recycling, ICIS

Matt Tudball, Senior Editor Recycling, ICIS
Helen McGeough, Senior Analyst & Global
Analyst Team Lead, Plastic Recycling, ICIS
Recycled polymer supply and
demand: The state of play pre-
COVID

Mark Victory, Senior Editor Recycling, ICIS

Europe Recycling Capacity

Polymer Input Input volume as a % Food-Grade Pellet

volume(tonnes/year) of virgin capacity
consumption* (tonnes/year)

R--PET 2.0m 55% 350,000 reprocessing

capacity

R-HDPE 700,000-800,000 11% 100,000 input

capacity

R-LDPE 700,000-800,000 15% N/A

R-PP 600,000-700,000 5.52% N/A

Virgin capacity source: ICIS Supply & Demand Database

3
 Packaging

• EFSA 95% rule = barrier to further growth

• Majority of R-PO end-uses = non-packaging due to tensile strength and
sorting/separating challenges
• Cosmetics/household goods firms that previously had preferred food-grade
trialling natural and other pellet grades where possible

4
Recycling
prices have
decoupled
from virgin

5
Even For
Less
Established
Recycled
Polymers

6
This Caused A
Two-Tier Market

7
Margins for
packaging
grades rose

8
As margins for
non-packaging
grades fell…

9
Squeezed by
falling virgin
values

10
Prices have
broken typical
seasonal
patterns –
intensified by
COVID

11
Coronavirus and virgin
polymer price collapse:
Impact on the recycle supply
chain

Matt Tudball, Senior Editor Recycling, ICIS

Prices have
broken typical
seasonal
patterns –
intensified by
COVID

13
 The Impact of Coronavirus on Supply and Demand –Q2

• Players substituted to virgin on price, security

of supply, and ease of use
• Packaging demand fell 20-30% in Q2 y-o-y
across recycled polymers
• Non-packaging demand falls even more
sharply
• Projects and investments delayed
• Testing cycles delayed, impacting R-PO
especially
• 20% extra PE waste in Q2 year-on-year due to
home working

14
 The Impact of Coronavirus on Supply and Demand – cont.

• Virgin prices were already falling BEFORE

coronavirus – it just accelerated the drop

• Substitution to lower-priced, better quality PET

was already taking place in 2019

• Coronavirus amplified a shift that was already

taking place in the recycled markets driven by
consumer demand and structural shortages

15
 Waste collection impacted

• March – France collects post-consumer

bottles alongside household waste
• April – UK government guidelines
deprioritises collection of kerbside
recycled materials
• May - Plastics Recyclers Europe (PRE)
urges EU to including recycling sector
in recovery plans in order to sustain the
industry

Photo: Rex Features

Coronavirus
Placed
Packaging
Grade Margins
Under
Pressure…

17
…And
Intensified
Downward
Pressure On
Non-Packaging
Margins

18
Construction
Has Rebounded

19
 Q4 Supply concerns remain

• Demand for recycled polymers varies across

markets and end-use sectors
• Inventory levels remain high; just-in-time purchasing
increasing in some regions/sectors
• Second wave causing concerns around supply
chain disruption at country level
• Hybrid of blended pellets seeing more attention

Photo: Rex Features

Future outlook:
investment, regulation and circularity

Helen McGeough, Senior Analyst & Global

Analyst Team Lead, Recycling, ICIS
 Regulatory Pressure

• In EU:
o 55% plastic waste recycling rate by 2030
o Plastic waste recyclability 100% by 2030
o SUP ban, recycled content mandate …..
• EU plastics charge on non-recycled plastic packaging
waste of €800/tonne comes into effect on 1 January
• National taxation: Italy, Spain, UK
• Further regulation likely, post-Covid recovery and beyond

22
Shift to Alternatives

• Tax costs either passed to consumer or

drive the switch to other materials
Non-plastic food packaging on-average
• Some considering shift to R-PET, but R-
PET material also insufficient
• For food-packaging, alternatives typically
have higher environmental impact • Uses 2.2 x the energy
• 2.2% more Co2
• Weighs 3.6 times as much
Source: UK Commons Select Committee report Sep 19

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Mid-term Supply and Demand Divide Intensifies

• Lack of investment/delayed start-ups intensifies the demand short-falls for high-

quality material
• Negative macroeconomics could mean lower municipality infrastructure
investment
• Underlying consumer pressure dormant but not dissipated
• Limited cashflow and bank refinancing add insolvency risk
• Mergers & acquisitions intensify
• Industry response rate challenged:
o Average reprocessing plant build time = 12-18 months
o Average testing time = 18 months

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Longer term Supply/Demand Imbalance Builds

• FMCGs remain committed to recycling targets

• Petrochemical firms increasingly enter the chain
• EU €800/tonne plastic charge, Spain tax, Italy tax, France subsidies point to
regulatory divergence
• More ‘social taxes’ such as plastic taxes and extended producer responsibility
likely in post-COVID-19 reconstruction
• Missed underlying growth heightens existing supply shortages
• Competition for material increases

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World Polyolefin Planned Capacity
Additions 2019-2025
Polyethylene Polypropylene
10
9
8
7
6
1,286
Equal to the addition of
1,286 recycling units
5
4
3
2
1
0
50,000
With output capacity of 50,000
tonnes per year
Total increase: Total increase:
Source: ICIS Supply
33.5 Mt 26.6 Mt and Demand Database

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 Size of the challenge - Polyolefins

• If every single tonne went to the packaging industry

Annual growth rates needed to reach 25% recycled content in Europe Packaging sector by 2025

R-HDPE 31.3%

R-LDPE 34.3%

R-PP 41.4%

• With natural material around 10% of rigid collection and up to 50% wastage
rates, needed growth is likely 10 times this

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Growth in Europe RPET market

European RPET usage in food contact

bottles current and projected
1600
RPET flake and food grade RPET usage
currently maximised to available capacity 1400

To reach SUP recycled content targets usage 1200

of food grade RPET must almost triple 1000

Average growth rate in food grade RPET

000/t
800
volumes would need to be 26% pa to 2030
600
Lack of high quality feedstocks is limiting
400
investment in food grade RPET capacity
200
Preform producers installing extrusion
capacity 0
2018 - 2025 2030
Current RPET usage in food contact bottles
RPET usage to meet SUP targets

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Chemical recycling

• Expectations of CR are high – to achieve higher

volumes and overcoming limitations of mechanical
recycling

• Industrial scale anticipated 5-10 years, but indications

are commercial plants on stream earlier

• Typically expensive and low yield

• Chasing same waste volumes as mechanical recyclers

• Average pilot plant size approx. 30,000 tonnes/year -

Same as a full-scale average recycling facility
• Unknown environmental impact and regulatory status
unclear
• No clear leading technology

Date Presentation title 29

Strong push for
‘green’
investment
from across the
board

Green Recovery Alliance

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ICIS R-PET Asia Prototype

R-PET FOB colourless flake Asia

For more information or to receive a copy, please contact:

Hazel Goh
Hazel.goh@icis.com

9 October 2020 ICS GLOBAL PETROCHEMICALS OUTLOOK SEMINAR - EPCA 31

ICIS Recycling & Sustainability Contacts
Editorial:
Senior Editors, Recycling:
Mark Victory
Mark.victory@icis.com
Matt Tudball
Matt.tudball@icis.com
ICIS Director of Sustainability
Louise Boddy
Louise.boddy@icis.com
9 October 2020
Analytics :
Senior Analyst, Plastic Recycling, & Global Analyst Team Lead
Helen McGeough
Helen.mcgeough@icis.com
Global Analyst Team:
Daria Grossi (Europe) Jia Hui Tan (Asia)
Daria.grossi@icis.com Jia.hui.tan@icis.com
Carolina Perujo Holland (Europe) Paula Leardini (Americas)
carolina.perujoholland@icis.com Paula.Leardini@icis.com
Agata Wolk-Lewanowicz (Europe) Hyejin Kim (Americas)
Agata.Wolk-Lewanowicz@icis.com Hyejin.kim@icis.com
ICS GLOBAL PETROCHEMICALS OUTLOOK SEMINAR - EPCA 32