To increase plastic recycling, learn from clean energy

Last week at a meeting of materials recovery stakeholders in Oregon, two plastic recycling experts delivered a blunt message to attendees: plastic recycling is in trouble.

“This really should be a boom time for plastic recyclers: the world is saying we need to do more of this, we want to move in this direction,” said Kate Bailey, policy director at the Association of Plastic Recyclers. “And the market signals are kind of going in the other direction.”

APR is the owner of Resource Recycling, Inc., the company that publishes Plastics Recycling Update.

Depending on who is asked, the problem is either an insufficient supply of material entering the recycling stream, meaning there is not enough post-consumer resin to ultimately be purchased, or not enough end-users purchasing post-consumer resin, meaning recycling companies cannot be profitable.

Bailey joined Kate Eagles, program director at APR, to present whether both claims are true during a session at the Association of Oregon Recyclers for Oregon Sustainability Annual Meeting on June 18 in Portland.

They also showed some optimism, pointing out the similarities between recycling and renewable energy. With a similar roadmap, speakers said, plastics recycling stakeholders can increase the amount of recycled resin in the same way that the solar, wind and other renewable energy sectors have scaled up.

Supplies to receive policy support

On the supply side, one issue has come up time and time again: EPR for packaging, including Oregon’s Recycling Modernization Act, will be a game changer in increasing the supply of recycled plastics.

“We are already in the process of making sweeping changes to the U.S. recycling system that will significantly increase the amount of plastic we can collect and recycle,” Bailey said.

Numerous recyclers across the country have the capacity and infrastructure necessary to process much more waste than they can currently collect. For example, the yield is enough to double the U.S. plastic bottle recycling rate if reprocessors were able to get more bottles to process, Bailey said.

EPR will help on the supply front due to “ambitious but achievable” recycling targets set out in laws passed in five US states. These targets will drive investment in improved collection as packaging manufacturers work to achieve compliance. Expanding the collection to meet these goals will involve more tons coming into the system, Bailey explained.

However, EPR-led supply growth will take time to bear fruit.

“It’s still a few years before more tons flow into the program, but we’re pleased that the foundation is in place to be successful,” Bailey said.

The key question is, if the recycling sector solves the supply problem, will end users actually buy recycled resin? Despite numerous brand promises and multiple PCR mandates emerging in U.S. states, the answer turns out to be surprisingly unclear.

Demand challenges due to virgin resin and imports

A key driver of demand for recycled resin is the global over-expansion of virgin resin production capacity. This excess capacity has led to the creation of “many low-cost virgin raw materials and their equivalents,” such as virgin chemical resins or sub-specification resins, Eagles said.

The glut of low-cost virgin resin entering the market is in direct competition with recycled resin, at least when looking purely at price.

“Recycled materials are an environmentally preferred alternative, but they won’t always be the cheapest option,” Eagles said.

Recycled resin has long had to compete on price with virgin resin, and in the past, recycled resin has been at the same level or slightly cheaper than virgin resin, providing end users with a price advantage over recycled material. Eagles said that dynamic has changed with the huge influx of virgin resin.

Competition from abroad adds to the negative pressure on the U.S. remediation industry. More post-consumer resin is being imported from abroad, from countries where the cost of producing it is lower – due to looser regulations, for example – and is being sold at prices that U.S. reclaimers cannot meet, Eagles explained.

“This is undercutting markets,” she said, adding that erosion of domestic PCR production “is not the direction we want to go.”

Upcoming demand trends

While EPR offers positive signs of increasing collection volumes, Bailey offered a less rosy outlook regarding demand pressures. She presented chemical market analysis data compiled by OPIS, highlighting a global excess capacity of 12.1 million metric tons – or 26.7 billion pounds – of primary PE in 2022 and 2023. This was due to new production capacity that significantly eclipsed demand still lagging behind as the pandemic surges.

The numbers point to another projected surplus of 7 million metric tons, or 15.4 billion pounds, in 2027 and 2028 because, although demand is flat in these years, OPIS forecasts indicate significant new capacity will come online. These powers are concentrated in China, the Middle East and North America.

“We are seeing a large discrepancy between the number of factories being built and the amount of demand for virgin plastic,” Bailey said. “The short story is that there is an excess of virgin plastic on the market.”

This translates into plants simply having to throw a lot of material out the door, regardless of price, which means throwing cheap resin into a market that competes with PCR.

Bailey said that as long as demand for recycled resin remains tied to price competition with virgin resin, the recycling sector will be impacted by a range of factors that affect global oil markets.

“We’re really dependent on what’s happening throughout the supply chain, China’s decisions to build factories, OPEC’s decisions to produce gasoline and so on,” Bailey said. “There are many macroeconomic trends that show that there will be a lot of virgin plastic on the market for several years, and it will be very cheap.”

Recycled content mandates and more

Bailey and Eagles said current plastic dynamics are very similar to those seen 10 to 20 years ago.

Renewable energy was a fraction of what was produced in the market, and coal, oil and natural gas dominated electricity production. Now, the use of solar, wind and other renewable energy sources is starting to gain momentum, and although fossil fuels still dominate, the International Energy Agency has forecasts that peak demand for fossil fuels will come this decade, and fossil fuels declining as a share of the world’s energy supply. This is due in part to “phenomenal growth” in the use of solar, wind, and electric vehicles, heat pumps and other clean-energy technologies.

“We’ve finally reached this inflection point on the curve and we need to do the same for plastics,” Bailey said.

She noted that tools that have boosted the renewables sector will benefit the recycling space.

Renewable energy has received federal subsidies, as plastic recycling stakeholders in the recycling world are calling for. Regulations have begun to require certain energy users to include a certain percentage of renewable energy, similar to the PCR mandate. Government procurement guidelines have begun to favor renewable energy, and they do movement towards federal procurement guidelines that would support recycled products.

“The good news is we have the playbook,” Bailey said.

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