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The recycled plastics market is going global

Company News > The recycled plastics market is going global

From January 1, 2021, the EU will impose a plastic tax of 800 euros/ton on non-recyclable plastic packaging. The tax is just an example of policies issued by governments around the world to solve the problem of plastic pollution.

A series of new legislation and voluntary commitments by major plastic users and producers are designed to free the world from plastic waste and promote the increasing demand for recycled plastics.

Standard & Poor's predicts that by 2030, mechanically recycled plastics will replace more than 1.7 million tons of virgin polymer raw materials, and in 2020 this number will be 688,000 tons.

In order for the ambitious waste reduction plan to succeed, recycled plastics need to be developed into an efficient global commodity market. There are signs that this trend has gradually emerged.

Commercialization

Recycled plastics have shifted from a local market based solely on cost-effectiveness to a global market where demand is concentrated on the highest value materials.

The value of recycled plastics is being released. It is this value that promotes the commercialization of the plastic waste market and may ultimately help solve the problem of plastic waste pollution. Simply put, when a substance has such a high value and can be exchanged in an efficient market, it does not make sense to discard it in the natural environment.

Many different factors are driving the commercialization of the recycled plastics market. Some of these reasons, such as the increase in the number of participants active in the market, all stem from legislation.

Governments, starting from Europe, but recently in the United States and throughout Asia, have asked participants in certain industries, mainly those engaged in plastic packaging, to reduce their reliance on virgin plastics and increase the use of recycled materials. In some cases, this is supported by taxation.

The UK will charge £200/ton for plastic packaging that does not contain 30% recycled content by April 2022. S&P analysis shows that although the use of recycled materials is more expensive than virgin plastics, for market participants, the cost of levying taxes will be higher than complying with the minimum recycled plastic content.

The effect of these policies is to increase the number of market participants, mainly buyers or "users" of plastic packaging, thereby increasing competition and requiring more supplies to expand the market. There are already signs that the local market's supply is insufficient to meet local demand, because the recycling rate will never reach 100%. This makes the company set its sights on further areas.

In Europe, demand exceeds the potential of the local and regional markets, causing participants to turn their sights on Southeast Asia to seek more supply, thus making the region a growing global market.

standardization

A larger market and more market participants require a certain degree of product standardization.

In the virgin plastic market, this is not a problem. Buyers of virgin polymers can be confident that the plastic purchased from one supplier is the same, or at least compatible, with the plastic purchased from another supplier. The technical characteristics, volume and color are all consistent.

On a global scale, this makes the arbitrage economy help balance global supply and demand. This is why polymer price trends are similar in different regions. This is why the global view of these markets is so important.

Product standardization of recycled plastics is more difficult. After all, they are generated from waste. Different product specifications and pollution levels, as well as concerns about traceability in different regions or even within the same region, are all factors that hinder arbitrage. Even in the same country, the waste collection system will be very different, producing different components of waste to be recycled and different quality of recyclable materials. Get as much as you invest.

Buyers want to ensure product quality, but they also want to ensure that their materials (especially collected in developing countries) are legally sourced.

At present, some large companies from the waste management industry to the fast moving consumer goods industry are making large-scale investments in standardization.

The most mature recycled plastics markets are in Europe. The key contaminants in R-PET transparent sheets (such as PVC, acetaldehyde and benzene) will affect the appearance and performance of beverage bottles and have an impact on health. Now its content is declining, and in some cases it can be ignored. Production has also become more and more consistent, which means buyers can ensure that the quality of each batch of products is the same.

Companies such as Suez, Veolia, and Coca-Cola have all invested in new plants in Southeast Asia to produce R-PET transparent sheets with lower PVC content.

S&P pricing data clearly shows that the reduction of PVC contaminant content is related to the increase in the market value of R-PET transparent sheet. In some cases, the premium for materials with a PVC content of less than 30 ppm compared to materials with a PVC content of up to 100 ppm can reach US$50/ton-100 ton.

Recycled PET in the United States is also becoming more uniform, and the content of pollutants has also been reduced. California is pushing for this work. Starting in 2022, it will impose a 15% minimum recycled plastic content in PET bottles.

The R-PET transparent sheet market in California is dominated by materials with PVC pollutant content as high as 100 ppm, which reflects that the US R-PET industry is geared towards low-end end markets, such as the fiber and textile market. However, more and more materials with a PVC content of no more than 10 ppm are entering the market, bringing it closer to the standards of the entire Northwestern Europe and meeting the growing demand for high-quality materials.

Globalization

These developments in Southeast Asia and the United States have made materials produced in different regions more similar, which means that market participants have more choices-whether they are buyers or sellers, and no matter where they are.

Standard & Poor's data shows that the regional recycled plastics market has an increasing influence on the global market.

Recycled PET markets in Europe and the United States saw price increases at the beginning of this year, partly due to insufficient supply due to a shortage of containers for imported materials from Asia. These increases exceeded those in Southeast Asia, as participants there struggled to ship materials to Europe and the West Coast of the United States.

Plastic pollution is a global problem and requires global countermeasures, and the development of a large and mobile recycled plastics market can play an important role in this regard. Unleashing the value of plastic waste will mean fewer fish slip through the net. Understanding this value is the key to pushing the plastics industry forward.

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The recycled plastics market is going global

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