Following high expectations for market growth in the recycled plastic industry, largely driven by ambitious commitments to sustainable practices by big brand companies including the Coca Cola Company Inc., PepsiCo., and Nestle, the COVID-19 pandemic threw a curveball for expected outcomes and is instead leading to the creation of more plastic waste. We are now eight months into the global pandemic and many of the expected targets and outcomes have been delayed as many recycling facilities are closed or operating at low capacity. Around 40–60% of recyclers around the world are in critical financial positions at the risk of bankruptcy or permanent closure. The volume of recycled plastics traded has decreased 50–66% and sale prices have dropped 21%. The financial crisis is largely due to the decrease in price for virgin plastic as oil prices dropped during the pandemic, additionally with facilities operating at low capacity, there is less manpower thus less material being collected and processed to meet demands.
The coronavirus pandemic has also, however, increased the demand for single-use plastics as online delivery has grown and expanded the need for takeaway food containers and packaging for online shopping, which unfortunately for the most part cannot be recycled. Many governments have also recently loosened restrictions on single-use plastics as they are considered more sanitary for products such as masks, gloves, face shields, and hospital gowns. The price difference is so pronounced that even drinking bottles made of rPET (recycled Polyethylene), which are the most commonly recycled plastic item, have become less affordable as rPET is now 83–93% more expensive than virgin bottle-grade plastic. Some governments have also begun pushing some sustainability targets back, for example, Italy has delayed its implementation of a New Plastic tax for July 2020 to January of 2021. The Coca-Cola Company also pushed its target of getting recycled plastic into 50% of its UK packaging by early 2020 to November 2020 after missing its target due to COVID-19 delays. In the US, business has decreased as much as 60% for some firms. In California, rePlanet, the largest operator for beverage container redemption centers in the state, has shut down all 284 of its centers and more than 40% of redemption centers in the state of California have also closed down. Europe has seen a decrease of about 20% and business has shrunk by 50% in parts of Asia.
Another result of the drop in price and increase in demand for virgin plastic is a high number of companies purchasing what they believe to be 100% recycled plastic but in reality, is mostly virgin plastic mixed with a low amount of recycled plastic and labeled as 100% recycled material. Contributing to this trend is the fact that the price of Polypropylene (PP) has increased as demand has grown for its use in protective gear. As the price for PP escalates, more manufacturers are opting for virgin Polyethylene (PET) instead of recycled Polyethylene(rPET) to minimize their costs. This is particularly noticeable with reusable bags, which are usually made of a combination of PP and rPET. These are now increasingly being made with virgin PET while still being sold as “recycled reusable bags”. These kinds of issues are difficult to manage because it is hard for manufacturers to hold recyclers accountable as distinguishing virgin plastic from recycled plastic requires lab testing — adding to the already high costs of switching to recycled plastic at the moment. Additionally, the lack of a uniform certification system for recycled plastic makes it difficult to hold recyclers and manufacturers to a certain standard.
As a whole, the growth that was expected for recycled plastic has been put on hold and delayed. People are not confident in opening new supply roads while COVID-19 and its many uncertainties continue to unravel and supply chains are heavily impacted by the constraints on collection and processing due to lockdowns and lack of manpower. However, the consumer and legal pressure on companies and governments that have already made sustainability commitments are still there and will remain important with and without the pandemic, providing a source of long-term demand. The risk however is that the lack of current investment will lead to a tighter supply when the demand does come back, leading to greater contrast in price between virgin and recycled plastic and more opportunity for the false advertisement of recycled materials.
Sources:
ICIS Webinar on COVID-19 and the Recycling Market August 19, 2020: Helen McGeough, Tam Nguyen, Malini Harihanan
