How plastics waste
recycling could
transform the chemical
industry PART
II
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 (Exhibit 3). 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.
Exhibit 3 SEE THE ORIGINAL ARTICLE
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.
Toward a new manufacturing landscape for the plastics industry
A reuse level of this kind would also
profoundly affect new plastics production. By 2030, up to almost one-third of
plastics demand could be covered by production based on previously used
plastics rather than from “virgin” oil and gas feedstocks. This estimate is
based on a high-adoption scenario, comprising a massive increase in mechanical
recycling volumes, a takeoff in pyrolysis, and oil prices at around $75 per
barrel.
Projecting to 2050 suggests that nearly 60
percent of plastics demand could be covered by production based on previously
used plastics (Exhibit 4). This will substantially reduce the amount of oil
required to cover global plastics demand, with projections suggesting oil
demand running 30 percent lower than a business-as-usual scenario. This outcome
would require revisions of recently published forecasts that show
petrochemicals making the largest contribution to oil demand growth over the
next two decades.
Exhibit 4 SEE THE ORIGINAL ARTICLE
What
this could mean for petrochemicals and plastics players
Under the high-adoption scenario, the cost
position of plastics-waste-based feedstocks—via mechanical recycling, monomer
recycling, or reuse through pyrolysis or other feedstock supply—could
potentially be so attractive that they could account for two-thirds of the
profit-pool growth of the petrochemicals and plastics industry by 2030 (Exhibit
5).
Exhibit 5 SEE THE ORIGINAL ARTICLE
We would like to underscore the
repositioning of the industry that this change would represent. Over the past
two decades, the petrochemical industry has seen a major part of its profitability growth
come from accessing advantaged feedstock. Assuming the scenario conditions can be
met, the ability to access and handle plastics waste would be a comparable key
to success in the future, with plastics waste potentially becoming the next
source of feedstock advantage for polymer production.
How should petrochemical and plastics
companies position themselves for these possibilities, and what steps should
they take to be able to capture a share of the potential profit pool?
First, chemical-company CEOs should
acknowledge up front that resolving the plastics-waste issue is a long-term
challenge that may not be resolved on their watch, but it is nevertheless one
where they need to decide what steps to take in the long-term interest of their
enterprise and of society. At the same time, they need to recognize this as a
classic case of “strategy under uncertainty” in which they need to factor in
potentially different outcomes and plan their strategies with the appropriate
degree of flexibility.
Second, they need an understanding of how
the position of their product portfolio is likely to evolve, under the
different plastics-recycling scenarios. That will bring to the surface
potential actions to take and investment opportunities, or conversely, problems
to be addressed in their current portfolio.
Third—and this will be partly determined
by what geographies they are active in and which polymers they make—companies
must plan their moves around three areas of activity that will underpin future
growth in plastics recycling. Plastics companies should work with OEMs and
regulators to design uses of plastics that are straightforward to recycle, and
push for levels of recycled content that will stimulate demand. Next, to assure
a growing and high quality supply of waste to recycle, plastics companies need
to get involved in waste-management technology improvements that will
facilitate collection, sorting, and cleaning. Finally, plastics makers should
support development of technologies and building of recycling infrastructure
that will bring waste plastics back into the value chain.
The new
to-do list
A number of no-regrets moves are coming
into view. Establishing partnerships or identifying acquisition targets could
help players gain access to needed technology or secure sufficient access to
waste-plastics feedstock supply. In the case of technology, that may include
investing in start-ups undertaking promising process development and
collaborating with research institutes. In the case of feedstock, this could
take the form of long-term supply agreements with municipalities,
waste-management companies, landfill sites, and, in effect, any player with access
to large quantities of plastics waste. Possible strategies could even include
back integration, whereby a petrochemical company acquires or establishes a
waste-collection operation.
Plastics companies may want to boost their
investments in mechanical recycling operations to facilitate rapid expansion of
their offering to include recycled resins. There have been some recent
acquisitions of plastics-recycling companies in Europe by major petrochemical
companies, a trend likely to continue.
Petrochemical and plastics companies have
to be prepared to adopt a different business model, where they will have to
source plastics-waste supply from a large number of scattered players rather
than getting their raw materials in bulk from one source.
As our discussion above has laid out,
certain regions, technologies, and polymers could be much more attractive than
others. Companies will need to identify what their product-portfolio priorities
should be, and what their regional focus should be.
As demand for plastics continues to grow
worldwide, the imperative to put in place an effective system to handle the
waste-plastics volumes that will be generated becomes all the more pressing.
Our research shows that a development path could be established that could
quadruple the amount of waste plastics going to reuse and recycling, to around
50 percent of the volumes produced. Getting there will require achieving an
alignment of regulators and supporting conduct from major user industries such
as consumer goods and automotive—and not least support from society more
generally that relies on plastics daily. For the chemical industry the stakes
are high. It has much to lose if the waste-plastics issue develops into
widespread product bans and demand destruction. But it also has a lot to gain,
through building a new recycling-based branch of the petrochemicals and
plastics industry and tapping potential profit-pool growth.
By Thomas Hundertmark,
Mirjam Mayer, Chris McNally, Theo
Jan Simons, and Christof Witte
https://www.mckinsey.com/industries/chemicals/our-insights/how-plastics-waste-recycling-could-transform-the-chemical-industry?cid=other-eml-alt-mip-mck&hlkid=7a60e368b7744b859005ab00f4eede70&hctky=1627601&hdpid=6c036e83-2fc7-43fa-9629-a7793913b229
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