Bale shortages hamper plastics recycling

03 December 2021

Tight supply of waste bales for plastics recycling is expected across Europe with growing demand exposing shortfalls in collection and sorting, says Mark Victory

MAJOR SUPPLY shortages of waste bales, the feedstock of the plastics recycling industry, are affecting recycled polyethylene terephthalate (R-PET), polyethylene (R-HDPE, R-LDPE), polypropylene (R-PP) and polyvinyl chloride (R-PVC), with shortages expected to last throughout 2021, and potentially 2022. Low availability adds pressure throughout the supply chain. For R-PP, for example, flake and pellet players have reduced operating rates up to 40% because of limited bale availability.

Contributing causes of the shortfall include projects delayed by the pandemic, logistics and workforce disruption, changes to waste input mixes, and substitution of virgin material because of shortages in H1 2021. All markets have experienced a shortfall in collection and sorting capacity, which hasn’t kept pace with demand for sustainable products from FMCG or growing consumer antipathy to single-use plastics.

In Europe, local authorities have slashed investment in waste collection since the 2008 crash. The continent produces around 700,000 tonnes of post-consumer rigid PP waste pa – enough to replace roughly 5.5% of European virgin plastic packaging consumption (assuming every tonne was used by the packaging sector, without wastage). Figures are similar for both R-HDPE and R-LDPE – enough to replace 11% and 15% of virgin plastic packaging, respectively.

Wastage rates (the amount of material lost during production because of contamination or mechanical losses), however, are typically between 25-50%. As packaging does not have a 100% market share, and many applications can only use natural material (which only comprises around 10% of bale input), at current collection capacity, this represents less than 1% of current virgin polyolefin (PP/HDPE/LDPE) packaging consumption.

Because of anticipated endemic bale shortages, downstream players are entering JVs with waste management (WM) firms and backwards integration. Some polyolefins players expect investment in selection systems for mixed-plastic bales, and increased use of mixed-plastic feedstock – the same feedstock many chemical recyclers in Europe require – putting chemical and packaging recyclers in direct competition.
Economic feasibility studies on chemical recycling assume WM companies will pay to have waste plastic bales taken away, or that partially sorted bales will remain low-cost. This assumption is common because the alternative would be to pay gate fees for incineration or landfill. If the money paid to chemical recyclers is below gate fee costs, WM firms are happy to recycle. But as this material becomes more desirable to the mechanical recycling chain, competition will likely intensify, eliminating material sold at negative values.

Traditionally, September is the month of peak bale availability. For R-PET, this is because plastic bottles are in peak demand during the summer months. And recyclers of polyolefins typically shutdown through July/August for routine maintenance, further lengthening the market.
In 2021, however, strong demand from packaging means the summer glut has not rebalanced the market. Tight bale supply in September causes particular concern for R-PET recyclers who usually build stock through the summer to offset lower volumes in winter.
According to estimates, R-PET flake consumption is up nearly 60% on 2019 levels, putting inflationary pressure on bale prices throughout 2021, compounded by rising electricity costs that have inflated cost of washing recyclable material.

“There is a risk that the escalation in recycled polymer prices and inability to increase supply due to structural constraints will begin to challenge some users in their ambitions to attain high recycled content levels and for some to use recycled content at even a minimum level," said Helen McGeough, senior analyst, plastics recycling, at ICIS, Independent Commodity Intelligence Services.

Demand, meanwhile, continues to grow. With plastic packaging taxes due in Italy, Spain and the UK in 2022, and with brands (and sectors like automotive, and fibre) increasingly marketing ‘sustainability’, this is expected to continue.

Mark Victory is senior recycling editor at ICIS