Recycling and sustainable plastics markets: Keeping pace with fragmented and evolving markets

Author Will Collins, Recycled Polymers Editor

Why is Argus launching a recycled and sustainable plastics report now?

Consumers and brand owners are demanding more of their suppliers, and governments are increasingly introducing stricter regulations. This is creating an urgent need for reliable information, prices and analysis of many evolving and brand new markets.

Argus has more than 50 years’ experience in bringing clarity to opaque and fragmented markets. It began with crude oil, before expanding into all energy commodities, such as gas and power, and related commodity markets around chemicals, fertilizers, metals and chemicals. Across these sectors Argus has already played a prominent and key role in developing markets for greener and more sustainable products, including carbon emissions, biomass, biofuels and hydrogen.

We have been present in petrochemical markets for many years, from base chemicals down to polymers, and we have strong relationships with producers, traders and converters that can help us understand the bigger picture. We have witnessed growing interest and questions from our existing clients and new customers around the complex issues of recycling, sustainability and net zero.

What will the report cover?

 The focus initially will be on the most developed markets for recycled polymers, including rPET and polyolefins. But we will also be covering developing markets for chemical recycling, bionaphtha and other sustainable feedstocks.

News and analysis will cover partnerships, technology, regulatory developments and supply chain developments. And we also believe that, while markets may be local, they too will become increasingly standardised regionally and globally as they become less fragmented and technologies become more widely available. A holistic view of the petrochemical and polymer markets across different regions will help participants keep abreast of developments.

How do you deal with fragmented recycling markets?

 Markets are fragmented by nature, particularly in the case of polymers, where there is a vast array of different specifications and end-user markets. And the recycled plastics industry is even more complex. The quality and consistency of material can be affected by recycling technologies, waste stream composition and local infrastructure. But this fragmentation will gradually reduce, as technology and policies aimed at standardising and tracking recycling processes mature.

Currently, rPET is the most developed recycled market globally, with established price indexes and accepted product specifications in some regional markets. But there is space in the market for more refinement and expansion, particularly in pricing, and we hope to capture more areas of the market. For example, buyers of rPET for non-bottle applications are increasingly looking at ways to develop a “tray-to-tray” market, to close the loop and secure their own supply of recycled material as demand for rPET in the bottle market continues to surge.

In recycled polyolefins, company consolidation on the supply side is creating larger producers that will combine with growing end-user demand. This accelerates the need for reliable price indexes ‒ for instance, to set contracts. Our research shows that many market participants value clear, specific pricing. And this will become easier as technologies and classifications homogenise and develop.

What will the coming years bring?

 The collection and recycled content targets that the industry has set itself, and that have been set by legislation in some regions, are ambitious. Rapid expansion and innovation will be key to meeting these goals.

EU27+3 rPET food grade pellet (FGP) deficit
EU27+3 rPET food grade pellet (FGP) deficit

The rPET market requires major expansion, as the market is already strained by voluntary goals and legislative targets. In the UK, multiple brand owners have pledged much higher recycled content targets than the 30pc required by the UK government plastic tax. But this is overstretching UK food-grade rPET pellet production capacity, pushing prices higher.

The situation is the same in Europe. There is no excess supply from Europe, where EU mandates for 25pc recycled content in all PET bottles by 2025 are likely to require well over 1mn t/yr of food-grade material to be produced. Production in 2020 was about 630,000t.

In polyolefins, there is a need for innovation, as well as expansion. Penetrating the enormous food packaging market would ensure significant growth in PE and PP recycling and would likely be seen as a great marketing tool for brand owners. But recycling polyolefins for food contact or personal care packaging by traditional methods is not easy. The industry is looking for developments in sorting, packaging design (such as mono-material manufacturing and watermarking) and chemical recycling as solutions to this problem.

In both markets a major bottleneck is the collection of plastic waste. And this is driven largely by forces beyond the recycling/plastic industry.

Market participants want a single source of information about legislation, technological advances and capacity expansions. This is imperative to those already on the frontlines of plastic recycling, as well as the many “traditional” plastic manufacturers that are scoping out investment opportunities in the new industry.

What about non-mechanical recycling?

The chemical recycling market, which is moving towards a largely mass-balance-based market structure, logically should be less prone to fragmentation. But pricing mechanisms will still be needed to support the growth of the industry to commercial scale.

European pyrolysis projects - a forward view
European pyrolysis projects - a forward view

For example, pyrolysis projects currently under construction or in an advanced planning stage in Europe will add over 400,000 t/yr of capacity in the next three years if completed on schedule. And, in Texas, plans for more than 400,000 t/yr of new capacity have been announced just this month, with a similar scheduling time frame. As these technologies and developments scale up commercially there will be a need for price references to support feedstock offtake agreements and polymer sales.

Argus has strong connections with many of the upstream petrochemical players that are at the forefront of chemical recycling. We also already produce prices for bio-feedstocks that are used in the plastics industry, and we expect to add more. We can bring years of pricing experience, including in the biofuels industry, which has undergone many similar developments, to work with the industry to address these issues.

Argus Global Recycled Polymers service will launch soon. Register your interest and get the first report free.

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