Plastics

During our BIR Plastics Committee webinar in October last year, my fellow board member Sally Houghton used the entirely appropriate phrase “perfect storm” to describe the combination of factors that had blown the recycling sector way off course in 2020. On top of ever-increasing regulation (and the promise of more to come at the start of 2021), our markets were suddenly confronted not only with a pandemic but also with far cheaper competition from virgin plastics as a result of nosediving oil prices. 

The slump in oil, triggered by the demand impact of the pandemic and by a production/price dispute between Russia and Saudi Arabia, was unlike anything most of us had witnessed during our working lives: famously, the benchmark WTI crude oil price had traded as low as minus US$ 40.32 per barrel at one point in late April 2020. 

Demand for recycled plastics had already been weakened hugely by the pandemic and so the slide in virgin plastic prices left our sector to contend with a steep fall in the value of our products, far fewer orders, massive stocks and inevitable liquidity problems. As pandemic-related restrictions began to bite around the world, there was also an inevitable decline in collection volumes. 

Demand and prices for recycled material mounted a recovery as 2020 progressed, boosted by an improvement in oil values. However, our prices never regained all of the ground they had lost since the start of the pandemic. Conditions for our sector were not helped by tighter enforcement of China’s existing regulations on importing recycled pellets and the prospect of steeper financial penalties for any transgressions.

But despite this tide of negatives in 2020, our resilient plastics recycling sector has always retained its ability to see the wider picture and to identify opportunities. During the October webinar, for example, there was discussion of a growing and encouraging disconnect between recycled plastics prices and those of oil and virgin plastic: Sims Lifecycle Services’ Global Plastics Manager Jan-Hein Stiens pointed out that, to an ever-increasing extent, brand-owners’ corporate and social responsibility programmes are committed to using recycled material, irrespective of cost considerations; and our board member Max Craipeau confirmed that government moves towards mandating recycled contents were also helping to decouple recycled prices from that of oil. 

To this I can add that demand for recycled material is certainly on the increase as more and more companies are seeking co-operation along the value chain to ensure maximum recycled contents as well as packaging designs that take best account of recyclability. 

The need to find new outlets for recycled materials in the mammoth packaging sector was underlined by Dr Dirk Textor of German recycling association BVSE in his guest presentation to our eForum in June last year. One of his key points was that legislation should be used to assist rather than burden the recycling sector, such as through the use of carbon emission taxes or financial benefits for users of recycled materials. 

The introduction last year of the European Commission’s Circular Economy Action Plan would appear to provide a clear signal that forthcoming legislation should include not only recycling targets but also recycled content targets in order to stimulate demand. At the same time, there is a growing appreciation among governmental authorities of the CO2 emission savings achieved through the use of recycled materials. 

Unfortunately, actual regulation appears slow to capture this positive mood. Indeed, the very first day of 2021 brought new UN Basel Convention listings for transboundary movements which, experts agree, could hamper necessary flows of plastics. Patricia Whiting, Senior International Policy Analyst at Sims Lifecycle Services, had told our webinar in October that the new criteria would affect all but a few types of scrap plastic shipments, leading to “negative implications” for the Circular Economy through limits on plastic waste available as inputs for recycling facilities and limits on the availability of recycled plastics.

To ensure that plastics recycling plays its fullest possible role in the green revolution desired by politicians, there needs to be some rebalancing between incentive and disincentive.