Plastics and Chemicals Industry Perspectives 2nd Quarter 2018

CIRCULAR ECONOMY

By Kevin DuffyPE Resin compared to feedstock, crude oil and Natural Gas

A circular economy is an economy that moves away from a take-make-dispose extractive industrial model to an economy that moves towards the removal of waste from the system and reduces consumption of natural resources.  Studies show that at least eight million tonnes of plastic leak into the ocean each year, which is the equivalent of discarding one dump truck full of plastics into the ocean every minute.  At current growth rates, it is estimated there will be more pounds of plastics in the ocean than fish by 2050.  Industry leaders have taken notice.  For example, the American Chemistry Council’s (ACC) Plastics Division announced in May 2018 three ambitious goals that crystalize U.S. plastics resin producers’ commitment to recycle or recover all plastic packaging used in the U.S. by 2040 and to further enhance plastic pellet stewardship by 2022.  In 2017, an EU Commission confirmed it would focus on plastics production and use and work toward the goal of ensuring that all plastic packaging is recyclable by 2030.  Additionally, 11 leading brands, retailers, and packaging companies – including The Coca-Cola Company; Walmart, Inc.; and Unilever – have committed to works toward 100% reusable, recyclable, or compostable packaging by 2025 or earlier.        

In the U.S., plastic resin producers plan to focus on six key areas to achieve their goals: designing new products for greater efficiency, recycling, and reuse; developing new technologies and systems for collecting, sorting, recycling, and recovering materials; making it easier for more consumers to participate in recycling and recovery programs; expanding the types of plastics collected and repurposed; aligning products with key end markets; and expanding awareness that used plastics are valuable resources awaiting their next use.

Currently it is estimated that 95% of the plastics packaging used today is lost to the economy after a short single use.  Additionally, current recycling efforts are not effective enough and public efforts of removing straws from restaurants and stadiums, as well as taxing single-use bags in stores, are also not enough to make a dent.  All efforts are important and needed, but it will take change at many levels to create the needed results.  It is important that industry leaders, resin producers, and major retailers are interested and participating in attempting to create change.

Companies that are able to practice circular economy principals today often have a cost advantage over competitors, as obtainable feedstocks are often cheap.  The issue is that reliable feedstocks in the form of consistent recyclable material are currently challenging to obtain.  Also, companies that are able to position themselves with compliant materials in markets with increasing regulation requirements also have a competitive advantage over their competitors.  Collecting plastics and creating more recycled plastics are a couple of the many difficult steps that need to be achieved.

There are an extremely large number of complexities to be solved and behaviors that need to be changed.  The important piece is that the industry knows that change is necessary and is taking steps to make those changes happen.

Kevin Duffy

Kevin Duffy is a Senior Valuation Director who specializes in the plastics and chemicals industries. He has valued numerous plastics and chemical-related companies in North America that are involved in distributing, compounding, and manufacturing chemicals, resins, films, sheets, and molds. Kevin received his B.A. in finance from Illinois State University, and passed the CPA exam in Illinois. Kevin has diverse business experience in accounting, manufacturing, distribution, and retail.