Sustainable Plastics - April 2020 - 23

packaging
Packaging shall be designed, produced and commercialised in such a way
as to permit its reuse or recovery, including recycling, and to minimise
its impact on the environment when packaging waste or residues from
packaging waste management operations are disposed of"

solution to create a sustainable
future for plastics.

Who'll foot the recycling bill?

To meet the targets set
out by the EU significant investment needs to be made
to meet the demand that is
growing for recycled resins.
Demand for recycled resins is
not the issue, it is the supply
side of the equation that needs
to satisfied. This of course requires investment - and the
open question now is who will
fund the investment, and will it
be enough?
The mooted tax by the EU
of €800 per ton for unprocessed plastics waste will go
some way to meeting investment needs and there have
also been commitments by
producers and brand owners to step up investment in
recycling infrastructure. Italy has also recently ratified a
tax of €0.45 per kilo of plastic
contained in non-recyclable packaging products and
this is expected to come into
force in July 2020. However,
controversially the tax raised
is expected to go directly into
government coffers and it not
designed to support sustainability initiatives for plastics,
but rather to offset a growing
government budget deficit.
It is also critical to note that
the new recycling capacity,
be that chemical or mechanical based, will need to be able
supply resins that are equal in
quality to virgin in order to meet
the EU directives; downcycling
is not being viewed as the endgoal by the EU. IHS markit
estimates that for PP approximately 14% of the demand is
supplied by recycled resins and
for PE this figure estimated to
be 11%. These numbers are far
below the targets thresholds
that the EU aspires to reach by
2025 and 2030 respectively.
The recently announced
'Green Deal' by the European

Union could hold some of the
answers for funding gaps that
need to be filled for collection,
sorting and recycling infrastructure. The ultimate goal of
the deal is for Europe to become climate neutral by 2050
and the European Union plans
to publish an action plan in early 2020. The Green Deal is still
in its infancy although it has
the potential to develop into a
blueprint which could have significant ramifications on the future development of all sectors
of the plastics value chain, from
production right through the
waste management.
There is the potential for
overarching legislation that
supports the goal of climate
neutrality to be implemented
by 2050 and this could be rolled
out to all 28 member states.
Legislation is not likely designed to be punitive, but rather
targeted at achieving the stated
aim. To reach the initial 2030
goals, it is calculated that €260
billion will need to be invested
by public and private partners.
The Green Deal specifically
mentions plastics as part of the
equation and the need to reduce the resources to produce
them, as well as, the reduction
of plastics waste. A European
plan to develop a circular economy will feature in Green Deal
and this will no doubt include
plastics. Such a comprehensive
long term sustainability plan is
also likely to be closely watched
by other regions and it is likely
that successful plastics sustainability models will be replicated
in other countries in the future.

Recycling bottlenecks:
virgin prices and availability
Most of the sustainability discussions have been focussed
on Euro-centric topics and it
is also worth considering that
factors outside of Europe could
also play a role future developments. Plastics are a globally

traded commodity and 2019 we
saw a huge impact on the European polyethylene markets as a
result the US/China trade war.
Huge volumes of the newly
constructed US PE capacity
flooded into Europe as the Chinese market was closed for the
US due to restrictive tariffs. The
net result was PE prices falling
in Europe to levels not seen for
several years and non-integrated producer margins collapsed
into negative territory. There
were even reports to some European PE producers temporarily shutting PE capacity to stem
the loses.
In addition, IHS Markit analysis shows that next year China
is also expecting to see huge
capacity growth for both PP
and PE and this will result in
global markets shifting longer.
The growth in US capacity, a
low Brent crude outlook, as well
as over-build in China, could
keep the price floor for global
polymers low for the next several years. Taking into account
the current demand profile in
Europe, as well as the external
factors mentioned above, IHS
Markit estimates that polypropylene prices in Europe could
fall as much as 7% in 2020 from
this year's levels and a further
4% in 2021, while polyethylene
prices could fall as much as 16%
over the next two years from the
average 2019 level.
With prices of virgin resin falling to such low levels it could
present a challenge for the recycling industry in Europe where

demand for recycled resins are
soaring and supply is struggling
to keep pace. Brand owners and
convertors with deeper pockets
will be able to justify the costs of
using potentially higher cost recycling resins, however, for many
along the value chain it will be a
challenge to pass on the costs to
price sensitive consumers.
While legislation will drive
the agenda in future, the price
relationship between virgin
and recycled resins, as well as
the availability of recycled resins, could play a huge role in
the evolution of the market in
the coming years. There are no
simple answers, quick fixes or
solutions to creating a circular
economy for plastics and the
approach from all stakeholders
will need to be multi-faceted
and forward thinking.
There are going to be cost
implications to "reduce, reusing
and recycle plastics" and while
large consumers are now seemingly willing and able to absorb
these, there are likely to be holdouts from the tail end of industry,
as they enjoy the lower prices
that IHS Markit anticipates seeing in the next few years.
Kevin Longworth is associate director polyolefins, at
IHS Markit

NOTE FROM THE EDITOR: This article was completed before
the impact of COVID-10 became fully evident.
IHS Markit has sharply lowered its forecast of 2020 polypropylene (PP) demand by 2.5 million metric tons to account
for the economic disruption created by the coronavirus disease 2019 (COVID-19). It moreover has said that the 'combined
shock of coronavirus disease 2019 (COVID-19) quarantines
and plunging crude oil prices will cut global polyethylene demand by about 4 million metric tons this year, essentially wiping out all of the growth that had been forecast.'

April 2020

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Sustainable Plastics - April 2020

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