How recycling could transform the chemical industry

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If plastics demand follows its current trajectory, global plastics-waste volumes would grow from 260 million tons per year in 2016 to 460 million tons per year by 2030, taking what is already a serious environmental problem to a whole new level. In the face of public outcry about global plastics pollution, the chemical industry is starting to mobilize on this issue. Our recent article “No time to waste” showed how industry leadership is moving beyond the use-once-and-discard approach — under which the plastics industry has grown up — and embracing an expanded definition of product stewardship that includes dealing with plastics waste. As we underlined in that article, this is not only what society demands and is becoming a condition for the industry to retain its license to operate, but could also represent an important and profitable new business opportunity.

That last insight is built on our comprehensive assessment of where future global waste flows will come from, how they could be recycled, and what economic returns this activity could offer — research that has filled a major gap in the public debate. In this article, we outline a scenario for the plastics industry through which 50 percent of plastics worldwide could be reused or recycled by 2030 — a fourfold increase over what is achieved today — and that also has the potential to create substantial value. Following that path, plastics reuse and recycling could generate profit-pool growth of as much as $60 billion for the petrochemicals and plastics sector, representing nearly two-thirds of its possible profit-pool growth over the period. We also discuss the levels of support that will be needed more broadly across society, including from regulators, major plastics users such as consumer-packaged-goods companies and consumers to get to this outcome.

For petrochemicals and plastics companies — and by extension the chemical industry, since plastics production accounts for well over one-third of the industry’s activities — this presents an array of threats and opportunities and we outline the kinds of strategic questions they will need to evaluate and the choices to make.

Modeling a virtuous circle of plastics recycling worldwide

Our research shows that just 12 percent of plastics waste is currently reused or recycled (Exhibit 1). The fact that the great majority of used plastics goes to incineration, landfills or dumps, means that these materials are lost forever as a resource, despite plastics’ potential for reuse and recycling. Plastics production requires substantial capital investment and a substantial carbon footprint. Reusing plastics not only reduces these investment needs but can also contribute to reducing total industrial carbon emissions.

Images of plastics waste across the globe have contributed to a consumer backlash that is translating to regulatory moves to ban or restrict plastics use in numerous geographies, notably the European Union. Marine plastics pollution has been a powerful force to mobilize public opinion, and our colleagues have suggested ways to address the problem. When considering the potential for plastics-waste recycling, however, marine plastics pollution could best be understood as the highly visible tip of the iceberg.

What the chemical industry — along with major consumer industries, the waste industry and indeed society, more broadly — has been lacking is a clear picture of a path forward under which the volumes of plastics being discarded could be recaptured and reused.

Also lacking has been a full perspective on where the majority of waste will come from and which recovery and recycling technologies offer the biggest potential.

We address this gap with a comprehensive model of global plastics-waste generation, the different approaches to plastics reuse and associated recycling technologies and their economics. Our reference case scenario assumes an oil price of $75 per barrel. We’ve also explored lower and higher price scenarios and their correspondingly smaller and larger potential profit pools, as well as different societal approaches to recycling, since these factors all have a major influence on the feasibility of plastics recycling.

Technologies to handle all polymer families: Tapping the potential

Let’s start with a look at the enabling technologies that underpin these projections — technologies that exist or are recognized as technically feasible and could make possible more plastics reuse. These include a massive expansion of mechanical recycling volumes and the launch on an industrial scale of two relatively new technologies — monomer recycling and reprocessing of plastics waste to make liquid feedstock in a cracking-type process, known as pyrolysis.

Mechanical recycling is already established as a sizeable business — if nowhere near the scale of the mainstream petrochemicals and plastics industry — in many of the world’s developed economies, and it’s focused on polyethylene terephthalate (PET), high-density polyethylene (HDPE) and polypropylene recycling. Contrary to commonly held assumptions that waste management is simply a cost burden for municipalities and taxpayers, there are many examples where mechanical recycling is already profitable, albeit often in selective applications or markets. This is because of its fundamentally different starting point from traditional plastics manufacture: mechanical recycling can generate new polymer without having to invest billions of dollars in steam crackers and other units to create petrochemical building blocks. Therefore, it starts out as a comparatively advantaged route to polymer production (Exhibit 2).

The mechanical-recycling technology can also be used for recycling many other polymers. But these businesses have not yet grown much due to constraints in collection of the other major-volume resins such as low-density polyethylene (LDPE). Our modeling suggests that LDPE and HDPE mechanical recycling has the potential to generate the largest profit pool through 2030, primarily reflecting expectations for continuing high profitability in the virgin polyethylene market due to the tight supply — demand outlook. Our projections suggest that mechanical recycling rates could increase from the current level of 12 percent of total plastics volumes to 15 to 20 percent of the much larger projected total plastics output by 2030, assuming oil prices of $75 per barrel. Under a scenario where oil prices move below $65 a barrel, the economics of mechanical recycling become more challenging; this pattern was seen following the 2015 fall in oil prices, and was a factor in slowing recycling efforts.

The second component is monomer recycling. Although it is inherently restricted in its application to condensation-type polymers such as PET and polyamide, monomer recycling has the potential to generate some of the highest plastics recycling profitability levels. Again, this is because monomer recycling can avoid the capital investments needed for steam crackers and aromatics plants, as well as the high-capital-cost plants required to make PET and polyamide intermediates.

Third, our analysis suggests that re-converting waste plastics into cracker feedstocks that could displace naphtha or natural-gas-liquids demand — most likely using a pyrolysis process to do this — also may be economically viable and it is more resilient to lower oil prices, remaining profitable down to $50 a barrel. Pyrolysis is an invaluable technology to treat mixed polymer streams, which mechanical recycling technologies currently cannot handle.

Pyrolysis also is an important back-up process to handle polymers that have exhausted their potential for further mechanical recycling. A number of pyrolysis players are coming forward, offering a range of facilities from large-scale plants with capacities of 30,000 to 100,000 metric tons a year to much smaller-scale modular units with capacity up to 3,000 metric tons a year.

Building a global picture

How could different regions contribute to worldwide value-creation growth? The modeling includes projecting the deployment of the most appropriate technology in geographies where it is needed and takes into account that some are still on a steep learning curve. The scenarios also incorporate an assessment of how waste collection and management will be able to ramp up. For example, most emerging-market countries lack infrastructure for sorting trash into different waste streams (and even in countries where human waste pickers salvage plastics, the volumes recovered are a small part of the total waste flow). As these countries build up their waste-management capabilities, the first step will be to separate the plastics waste from other wastes. Once this is achieved, pyrolysis of mixed plastics waste is likely to provide the most efficient way to process it, until capabilities are in place to separate different plastics. In the short to medium term, emerging markets are also likely to need to build incinerators to address their overall waste flows.

Not surprisingly, our projections for 2030 suggest China would represent the biggest potential profit pool — reflecting its position as the world’s biggest market for plastics use and biggest plastics-waste generator, as well as the fact that it has long had an established market for reused resin. Asia outside China will be the next biggest profit pool, a reflection of the massive projected demand growth in the region for plastics through 2030. In both the United States and Europe, redirecting plastics waste into plastics production via mechanical recycling or pyrolysis instead of abandoning it in landfills or incinerating it could generate sizeable profit pools.

Plastics-waste flows transformed

Based on these models, we project that plastics reuse could rise to as much as 50 percent of plastics production by 2030, assuming a $75-a-barrel oil price and an effective regulatory framework reinforced by supportive behavior from other industry stakeholders and consumers. This rate would still be lower than what the paper industry has achieved but would nevertheless represent a major step for the petrochemical and plastics industry.

To achieve a 50 percent recovery rate by 2030, the modeling suggests that waste-recovery capital investment of about $15 billion to $20 billion per year would be required. To put those figures in perspective, the global petrochemical and plastics industry has invested, on average, about $80 billion to $100 billion each year over the past decade.

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