Plastics recycling – How to square supply and demand

Global recycled plastics supply

As of 2021, there were over 48m tonnes of input capacity for recycled polyethylene terephthalate (R-PET), recycled polyethylene (R-PE), and recycled polypropylene (R-PP) globally, representing over 2,500 mechanical recycling plants, according to the ICIS Recycling Supply Tracker – Mechanical

The average capacity of a mechanical recycling plant is approximately 20,000 tonnes per year, which is relatively small in comparison to the average size of virgin polymer plants. At this scale, it makes it challenging for the mechanical recycling industry to grow at a significant rate.

Typically concentrated in large cities, recycling plants are located alongside either recycling infrastructure for more developed economies or highly populated areas in less developed economies. However, waste is everywhere, so should be recycling capabilities.

In terms of region, Asia holds the majority of global capacity at 40%, mainly due to strong end markets, namely recycled polyester fibres. This is followed by Europe with over 30% share. The top three regions, which are Asia, Europe, and North America, together represent almost 90% of the total. This emphasises the disparity in recycling capacity development across the globe.

Asia’s growth really started when China implemented waste management and recycling policies in the early 2000s while Europe is a mature market, having established its recycling industry many decades ago.

In North America companies have been using recycled polymer feedstocks for economic advantage in typically low-quality applications. However, in the last couple years, demand is growing for premium applications.

Most developing regions have been driven purely economics in adopting recycled polymers by end markets that were able to do so. The take-up of recycled polymers in higher value applications is happening, though at a different pace. In those regions, there have not been enough drivers in the market, including lack of funding, infrastructure and pull from end markets.

Globally, R-PET is the largest recycled polymer with 40% share of total recycling input capacity, followed by R-PE with 38%, and R-PP with 22%. PET recycling is reliant on post-consumer bottles for its feedstock, while polyolefins have a greater split between post-consumer packaging and bottles and post-industrial sources.

Certification for the use of recycled polymers in food contact applications brings an additional challenge to the supply of recycled plastics. Currently, only 10% of global recycling capacity is certified as food grade, with PET representing more than 80% of that supply and polyolefins the balance.

Global demand for recycled resins is growing across all polymers, not just PET and most specifically for post-consumer recyclates (PCR), and food grade materials. Thus, increasing PCR and food grade recycled polymer volumes beyond PET will be a high priority in the mid-term, as demand from food and beverage packaging sectors gains momentum.

Recycled plastics demand drivers

Below are the two main factors that directly influence demand for recycled plastics:

1. Corporate sustainability goals

Corporations are setting individual voluntary targets around sustainability, besides taking part in initiatives such as the Global Commitment and Plastic Pacts. A common goal is increasing recycled content in plastic packaging and products. Targets typically range between 10% and 50%. The voluntary goals have been driving demand worldwide due to the multinational presence of these corporations and FMCGs.

2. Legislation

Europe has a range of targets on collection and recycling of plastic waste as well as specific region-wide mandatory recycled content targets of 25% in PET bottles by 2025 and 30% of all plastic bottles by 2030 under the Single Use Plastics Directive.

Similarly, in the US, three states have passed minimum recycled content mandates. California’s mandate for plastic beverage containers came into effect on 1 January 2022. Washington and New Jersey have passed similar bills that start in 2023 and 2024, respectively, and include more product categories such as non-beverage containers, plastic carryout bags, and trash bags. Targets vary from 10% to 50% over the time, depending on the category.

Elsewhere in the world, many regions still lack the legislative push to recover or recycle plastic waste, although that landscape is gradually changing. Asia, in particular south-eastern countries including Indonesia, has a raft of policies being developed to tackle marine pollution and these are now beginning to be implemented.

However, aside from voluntary initiatives led by NGOs or industry action groups, other regions such as Middle East, Africa, and Latin America currently lack any substantive government action on managing plastic waste.

Although there is some expectation that recycling goals will increase over the time, uncertainties remain on whether current goals can be achieved. The constraints on recycled plastics supply, together with high prices mainly due to the supply and demand imbalance, could make it unrealistic for most companies to reach the targets or their own pledges.

Global supply and demand gap

Based on global recycle output as a percentage of global virgin consumption (for PET, PE, and PP), ICIS has assessed a recycling penetration rate in 2021 of under 12%. However, average recycled content targets over the next few years to 2030 are way beyond that. To quantify that, ICIS has recently created an outlook model to calculate how much recycled resin is required to meet the expected global demand for 2025 and 2030.

The model considers the following recycled content assumptions:

• 50% for both 2025 and 2030 for PET
• 25% for 2025, and 35% for 2030 for PE and PP

As a result, a Compound Annual Growth Rate (CAGR) of over 45% would be needed on recycle output to achieve the recycle content rates assumed by 2025 for PET, PE, and PP.

The challenge in meeting this growth rate is primarily in the constraints in collection and sorting, for both formal and informal infrastructures. It is possible to build a new recycling plant in 12-24 months, depending on technology but there at present insufficient qualities and quantities of waste feedstock to run the plants.

Regarding PET alone, at least 1,800 new recycling plants with an average output of 25,000 tonnes/year would be necessary globally to achieve the 2025 targets.

In addition, over 20% CAGR would be required to meet the targets set for 2030 with a need of nearly 600 new recycling plants per year in the next 9 years for the three polymers.

The model does not restrict the virgin consumption to certain applications and does not limit the recycle output to PCR and food grade. For primary packaging that requires food grade PCR, the gap on capacity requirements would be even higher.

The investment required to grow capacities are not only dependent on the financial viability of the recycling plant, where costs include logistics, sorting, collection, washing, drying, grinding, among others, and approvals for food grade, if needed. But also, the availability of quality feedstocks to run the plants, the biggest challenge of all.

There are also still markets that lack the end market pull for recycled polymers for high value applications that drive growth in new capacities. The outlook at present is, without some fundamental changes in policy or more robust and urgent industry action in managing waste, these growth rates will be challenging to meet.

In order to square the supply and demand gap, significant improvement in collection is needed worldwide.

Plastic waste collection rates are overall low globally and contamination is a limitation. Therefore, both quantity and quality of waste collected must improve to meet the requirements of the different grades of recycled products.

Though the physical act of collection is critical, making sure that material is compatible with current collection and sorting systems is the first step to increase volumes that can be processed by the Material Recovery Facilities (MRF). Then, expanding the range of items collected as technology evolves will enable the recycling supply chain to deliver more grades to meet new end markets’ demand.

Design for recycling is vital to address the compatibility of materials and composition to ensure materials are technically recyclable and acceptable to collection systems. As brands work towards 100% recyclable, reusable, or compostable packaging by 2025, significant improvements are expected in this space.

Collaboration between government and industry is essential with focus on:

• Legislation to support improved collection such as Deposit Return Schemes (DRS) and Extended Producer Responsibility (EPR) schemes.
• Harmonisation within the supply chain, supported by trade association co-ordination and guidelines.
• Support and investment from brand and producers in improving the recyclability of products and packaging as well as development of collection infrastructures to deliver higher quality and quantities of materials for recycling.

All of this requires consumer engagement in recycling programmes to reduce plastic littering and actively recycle, as well as consumer purchasing behavior for more sustainable products including those with recycled content.