Material Focus: Plastics (January 2023)

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The last few years has seen a renewed focus on the UK’s move towards recycling and environmental targets, but packaging producer responsibility schemes and historic policy continues to cause challenges for the industry in its push towards these efforts. RECOUP is delighted to be given the opportunity to share insights with MRW and its readers at a time when the plastic supply chain is going through such impactful changes.

Since 2018 in particular, the UK has been a part of the global effort seeking to address environmental concerns, including those relating to plastic waste and recycling. This has included political and legislative efforts to create a landscape in which industry, from packaging producers down to the waste management companies, is incentivised to reduce its use of virgin plastic material, increase its recyclability, and pay towards the required infrastructure to handle it in a circular manner. Progress has been slow, and unavoidably impacted by the various global challenges over the last few years, but 2022 saw the UK move forward with these efforts.

In 2022, the UK saw the introduction of HMRC’s Plastic Packaging Tax, which aims to increase use of recycled content in packaging, and some progress in the future introduction of the reform of the current producer responsibility system, Extended Producer Responsibility (EPR), Deposit Return Schemes, Consistent Collections for Household and Business Waste in England and Single-Use Plastic bans and restrictions. There was also significant activity in relation to European policy. This included changes to internal and international waste shipping regulations and the Plastic Packaging Waste Regulations (PPWR) proposals. Changes to the PPWR include new targets relating to recycled content, compostable biodegradable packaging use, and re-use targets. While these European policy changes do not directly impact the UK, the significant amount of trade between the UK and EU Member States of products, packaging and waste means that there is an inevitable impact on the UK system as well. This may include changes in material use, packaging types and formats, and the waste stream in general.

The existing market for both plastic prices, and packaging recovery notes (PRNs), the UK’s current packaging producer responsibility system, is volatile. Furthermore, this system financially incentivises export over domestic recycling. Despite this, there has continued to be a shift in global attitudes towards the export of recycling, and the move towards domestic processing. In 2017, export of plastics for recycling were around 65%, and 2022 has seen this drop to closer to 45%. This is despite the UK’s current systems not incentivising domestic recycling, and the UK’s infrastructure for certain materials and formats, particularly reprocessing of films and flexibles and food-grade plastic packaging being lacking.

Nonetheless, without supporting policies, the current system risks undermining political and industry efforts to increase capture and recycling rates for materials. This has not been helped in the last few years with the various impacts of foreign waste markets restricting imports of material for recycling, the Covid-19 pandemic, the UK’s exit from the European Union, and the impact of war and spiralling energy costs, have all fed an already volatile market, and increased other commercial pressures on the plastic packaging supply chain and recyclers.

Over the course of 2022, PRN and plastic prices continued to vary wildly, though less so than in the previous year. Plastic Packaging PRN prices ranged from around £50 to over £350 per tonne, and the value of plastics including PET and HDPE ranging in excess of £400 per tonne from their highest to lowest prices throughout the year. Most prices peaked during the summer and were at their lowest point at the start and end of the calendar year.

For packaging producers, despite the £200 per tonne Plastic Packaging Tax, this may mean that use of virgin plastic is more attractive than recycled plastics, both financially in terms of assurances of quality of the material. Volatility in both recycled plastic and virgin oil prices have meant that recycled plastic often costs far more than £200 per tonne more than virgin prices. Conversely, for recyclers, the wild fluctuation in the value of both plastic prices and PRNs make for uncertainty in the value of investments, restricting the UK’s progress in terms of developing new infrastructure for sorting and reprocessing. This has not been helped by the delays and lack of information on both timing and content of upcoming EPR, recycling consistency and DRS policy. This is particularly true for EPR as it is due to provide the funding structure for the collection of kerbside material.

Stability in the market is key. Packaging producers and investors in the industry require a level of certainty that allows them to plan long-term, and the current open market which produces price fluctuations can make this challenging. To add to this, 2022 saw confirmation from Defra and the UK government that the current PRN system will continue to be used throughout the implementation of EPR. While there may be some assurance in knowing this to be the case, concerns will remain about the suitability of the existing system going forward.

Recycling infrastructure in the UK requires focus and investment. There is still potential for capturing more high value, high quality plastic packaging, something that the likes of upcoming DRS are looking to capitalise on. However, it is the large quantities of lower value, often labelled ‘hard to recycle’ plastics that offer the greatest potential for the UK to increase its capture and recycle rates. To do this, however, where the recycling infrastructure is in place, more value is needed in this material to make this commercially viable.

2023 can be a defining year. With PRNs here to stay, the Plastic Packaging Tax going into its second year, reporting for EPR being introduced, and DRS to be introduced in Scotland from August, there is clear progress in legislation, and further updates and information around EPR in particular will be key for stability and to grow confidence in the plastic recycling market.

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