In 2020, long-term industry trends collided with the Covid-19 pandemic, bringing new challenges to the already-beleaguered market for recycled plastics.
Industry has long been planning increased plastic production to prepare for the reduction in fossil fuel consumption that is necessary to avoid runaway climate change. Since 2010, energy companies in the United States have invested $200 billion in over 300 plastics and petrochemical projects, and in 2020 major petrochemical companies announced $25 billion in investments in China.[i] This development, in-and-of-itself, presents a major challenge to a global recycling system that currently only manages about 9% of plastics produced.
The recycled plastic market was still in the process of adjusting to China’s National Sword policy (which went into effect in 2018 banning the importation of many waste streams) when Covid-19 further upended the market. Some municipalities in the US, Europe and Australia had stopped collecting certain plastics, incineration of plastic waste increased and (often illegal) exports of plastic waste increased to nations like Indonesia and Malaysia.
Covid-19 lockdowns then sent fuel demand and prices sharply lower, decreasing the price of virgin plastics and making it harder for recycled plastics to compete. Firms struggling through a global economic downturn demanded less recycled plastic: ICIS reports that demand for recycled material from packaging businesses fell by 20 to 30% in Europe in Q2 of 2020 compared with the prior year; in South and Southeast Asia there was a 50% decrease in demand for recycled plastics.[ii] While companies sourced less recycled plastic, consumer demand for plastic spiked as covid-19 drove the need for masks, face shields and takeout containers.[iii]
With an increasing awareness of the ubiquity of plastic and microplastic pollution in the environment, there is a growing consensus that the status quo is untenable. Various actors are approaching the problem from different angles.
- Consumer brands are pledging to increase the amount of recycled plastic in their products and packaging, increasing the demand for recycled plastics.
- Many major brands are unfortunately behind on their pledges: Coca-Cola reported using 9.7% PCR content in 2019 with a target of 25% by 2025; PepsiCo, also aiming for 25% PCR content by 2025 reported only 4% PCR in 2019.[iv]
- Footwear and outerwear companies are moving quickly to embrace the circular economy, developing shoes made from beach plastics and jackets made of recycled PET. This approach is well-suited to outerwear, but microplastic pollution is an issue when using synthetic fibers for garments requiring frequent washing.
- Industry is developing chemical recycling technologies/processes to convert difficult-to-recycle plastics into their original chemical building blocks, which can then be used to make new fuels and plastics.
- Chemical recycling is starting to show promise, though it has yet to be widely implemented at scale.
- National, state, and local governments are banning single use items and regulating plastics.
- California’s first-in-the-nation requirement that beverage containers contain 15% recycled content will begin in 2022. This should boost demand for recycled plastics starting in Q3/Q4 of 2021.
- Europe’s tax on unrecycled plastic waste (in effect as of Jan. 1, 2021) is supporting demand for recycled plastics in the region.[v]
- Bans on various single use plastic items are being explored and implemented by many state and local governments, though this trend has been somewhat slowed by the Covid-19 pandemic.
- NGOs and consumer groups are pressuring companies and governments to increase their efforts as awareness surrounding plastic pollution increases.
China’s National Sword policy and increased international scrutiny of illegal waste shipments drive home the truth that there is no “away” when it comes to plastic waste. Recycled content targets set by companies (or requirements legislated by governments) are a welcome recognition of this fact and will help to drive demand for recycled plastics. The impact of Covid-19 on the plastic recycling market will subside, but recycled plastics will continue to struggle against low-cost virgin plastics as nations aim to reduce fossil fuel consumption more aggressively and petrochemical companies shift from fuel to plastics production.