Plastic bottle recycling under threat

28-Apr-2015 - Last updated on 07-May-2015 at 12:25 GMT

Falling oil prices have undermined the economics of recycled plastics

The tribulations suffered by at least two major UK plastic bottle recyclers in recent months highlight the larger-scale crisis gripping the UK's bottle-to-bottle food-grade plastics recycling sector, with rock-bottom prices for oil and virgin polymer at the root of the problem.

The sale out of administration of recycling firm Eco Plastics last December to investment firm Aurelius and the fraught industry negotiations at Closed Loop London (CLL) that were still underway in April, showed that this was not a fleeting or company-specific issue.

As has been widely reported, the decision of Saudi Arabia and other oil exporters to lift restrictions on supply means that prices of virgin plastics have plummeted. “There’s a long-term strategy about recapturing the oil markets they’ve lost to other hydrocarbons and to renewable energy,” explained Ed Kosior, md of the Nextek recycling consultancy.

“When the price of many virgin polymers falls from around £1,000 per tonne to £900, there’s an expectation that the price of recycled polymer should fall, too,” he said. This is despite the fact that the cost pressures on recyclate are completely different.

Price

The situation has been exacerbated by an increase in the price of recovered high density polyethylene (rHDPE) in Europe, thanks to higher demand from Asian recyclers. “This means that some of our pioneering food-grade HDPE recycling plants in the UK are facing highly squeezed margins at the moment,” Waste & Resources Action Programme (WRAP) chief executive Liz Goodwin said in a statement in March.

For rHDPE, WRAP highlighted undertakings to integrate recycled content as part of the Courtauld Commitment and – in particular – the Dairy Road Map. “These public commitments give real confidence to the markets,” stated Goodwin, without a trace of irony. The dairy industry signed up to an increase from 30% recycled content in 2015 to 50% by 2020.

Kosior, on the other hand, argued: “The current situation is revealing the hand of the supermarkets and how cost-driven they really are. They took on undertakings when prices for recycled polymer were lower than virgin. Now they're saying it’s uncompetitive.”

The supply chain view should be that industry is seeing a discount on the 70% virgin content of a bottle rather than arguing about the price of the 30% recyclate, he suggested. He added: “If the industry steps away [from recycled plastics] it will invite some sort of government ‘suggestion’ about what to do. That could take the form of guidelines or mandatory content.”

Authorities

As Kosior pointed out, the authorities in California require brand-owners to include 35% recycled plastics in their bottles, unless they can provide a good reason for not doing so.

What if the recycled plastics market did collapse in the UK? Bottles would either not be collected at all, which would incur public displeasure (and landfill levies), or they might be shipped to the Far East to be recycled there.

As WRAP warned about rHPDE: “If we don’t stick with it now, there won’t be any to buy in the UK.”