Report

Wood Mackenzie: Was 2019 the year of recycled PET?

| Business function | Wood Mackenzie | Edinburgh | United Kingdom

2019 has been a year of successes within the recycled PET (RPET) industry.The continued war against plastics and heightened awareness of plastic pollution has driven an unprecedented level of interest in RPET. As such, there has been a significant momentum behind collection and recycling commitments.

"Beyond regulatory commitments, such as the EU's single-use plastics directive that was announced earlier this year, ambitious recycled content sustainability goals have been publicised by many brand owners. Some brand owner targets exceed the EU single-use plastics directive, further highlighting the momentum behind the shift towards achieving a circular economy," said Pieterjan Van Uytvanck, Wood Mackenzie Principal Analyst.

The first step in recycling is collection, which remains a problem.

According to Wood Mackenzie’s analysis, the collection of post-consumer PET bottles in Western Europe is expected to increase because of regulatory support. However, despite forecasting aggressive growth rates, Wood Mackenzie predicts that reaching the 90% EU single use plastics directive target will remain a critical challenge for the industry.

Collection rates in Western Europe are currently estimated at 57% in 2019. From 2019 to 2029, collection volumes are expected to increase by 5% per year and collection rates are forecast to increase to 78% across the region. Yet, this will still fall short of the 90% target for 2029.

Today, RPET costs more than virgin PET (VPET). However, savings from reduced VPET resin prices can facilitate increased RPET content while maintaining the overall packaging procurement cost.

“When considering overall packaging portfolios, we need to think about the blended cost of RPET and VPET resin.

“We ran a high-level hypothetical scenario, which found that the increased cost of RPET content to customers can, in fact, be compensated by the reduction of VPET resin prices. By preserving the overall packaging budget, moving towards a more sustainable solution doesn’t need to hit consumers in the pocket.

“In our scenario, we assumed a fixed budget of €1131/tonne – the highest free market virgin PET resin price seen this year – for sourcing PET and RPET for packaging, as well as no additional conversion losses and costs in switching between VPET resin and food-grade RPET pellet.

“The reduction in VPET prices since April means that increased RPET content could be procured while maintaining the same budget - without resulting in any additional cost to consumers. In fact, for the same packaging budget, RPET content in November could have been increased by up to 50%.

“This scenario example helps to highlight why RPET prices have also been able to maintain their premium. Customers have both a willingness and ability to pay for the material to meet RPET sustainability commitments, funded in part by declines in VPET resin prices.

“However, in addition to collection, the other factor limiting a greater uptake of food grade RPET in the European market is availability of decontamination and pelletising capacity.

“Government initiatives, such as taxation or shifts to deposit return schemes, are unlikely to increase recycling rates if they are carried out in isolation. There needs to be a better appreciation of how recycling works, including the benefits, and an understanding of contamination. This level of education is one that could be spearheaded by governments, who have access to the necessary funding, resources and regulation needed to make a lasting difference.

“Our analysis also underlines the potential risk to the food-grade RPET market should VPET prices increase again. Potentially, this would reduce the budget available - and ability to pay - for RPET and would therefore result in increased VPET substitution to maintain the same packaging portfolio cost.

“2019 started strongly with increased sustainability commitments, new regulation, growing demand and rising prices. However, in the latter half of 2019, the intermediate RPET flake market has weakened, drawing the year to a close with a fizzle rather than a bang. Therefore, the outlook for 2020 is a cautious one,” added Dr. Van Uytvanck.

www.woodmac.com





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