Rabobank: Despite challenges, plastic recycling poised to grow

An 18-page report prepared by the RaboResearch department of Netherlands-based RaboBank acknowledges hiccups in the establishment of plastic packaging circularity, but says recycling activity is poised to grow.

After an initial flurry of corporate packaging sustainability commitments, RaboResearch says, “Despite good intentions, many companies have had to adjust their sustainability goals and packaging strategies by shifting the target date of the goals further into the future.”

The report points to ambitious recycled-content and recyclability goals with target dates as soon as 2025 or 2030 that ran into a set of “pervasive challenges,” including technical and material limitations like sufficient plastic scrap supplies.

On the technical side, the methodical issuance of U.S. Food & Drug Administration food-contact letters of no objection has provided one constraint on postconsumer recycled-content resin (PCR) supply, along with inadequate collection networks.

“The demand for recycled polymers has grown in both regions and is expected to continue to rise in the coming years,” the report says of the U.S. and Europe.

“Europe is the frontrunner in the PCR market, commanding over half of PCR consumption. The region is poised to maintain its lead, with the U.S. trailing closely. The food and beverage sector, responsible for two-thirds of PCR usage in 2021, is set to expand its demand for sustainable packaging through 2026.”

Although some companies appear to be backing away from their earlier commitments and the EU government might have set unrealistic targets, optimism comes in the form of progress on the FDA nonobjection front and increased PCR production capacity.

“The FDA’s issuance of ‘letters of no objection’ has broadened the approved sources for PCR, potentially easing the supply constraints in the U.S.,” RaboBank says of recent developments, mentioning Florida-based polypropylene (PP) recycler PureCycle Technologies and Arkansas-based low-density polyethylene (LDPE) recycler Revolution by name.

On the capacity side, RaboResearch says Europe is second only to Asia in recycled plastics production and the continent’s PCR production volumes have steadily grown in the past years.

The most common packaging resin, polyethylene terephthalate remains problematic.

“There is a looming supply-demand gap for recycled PET (rPET), with consumption possibly outpacing supply growth by a significant margin,” RaboBank says. “Without additional actions, this could potentially lead to a future supply-demand imbalance of rPET in the market.”

Government policies may come into play.

“Solutions like extended producer responsibility (EPR) schemes and deposit refund schemes are proving effective in bolstering high-quality plastic collection for recycling,” according to RaboResearch.

For Europe to meet its ambitious Packaging Directive targets for 2030 though, RaboResearch estimates it must triple its recycled plastic production from 2021 levels, with recycled-content PP and PE needing a nearly fivefold increase, while rPET volumes must double.

In the U.S., regulations and capacity need to catch up with current and potential future demand, according to the bank. RaboResearch says between 2012 and 2012, U.S. consumption of rPET grew by about 4 percent per year while supply was only growing by 1 percent.

The bank concludes that with adequate collection, investment and resulting rPET supply in the U.S., because of company commitments, consumption could potentially grow up to 15 percent per year until 2030.