The adoption of further containment measures across Europe has heightened concern in the recycling industry
The coronavirus pandemic could have long-term impacts on European recycling markets, says an expert.
Mark Victory, senior editor of recycling at market intelligence firm ICIS, believes the adoption of further containment measures across the continent has increased concerns in the recycling industry, as countries attempt to tackle the virus.
The pandemic has so far impacted heavily on the global economy, with crude oil prices taking a hit, travel restrictions being imposed and increased pressure on food supply chains.
Victory, who has produced detailed analysis on the impact of the virus, said the recycling industry is particularly worried about limited volumes entering collection systems, logistic disruptions, potential downstream demand losses in non-packaging sectors, buyers abandoning sustainability measures and a reduction in long-term investment.
“The economic fallout from the global recession of 2008, for example, resulted in more than a decade of underinvestment in collection systems by local authorities because of widespread austerity measures across Europe,” he added.
“With the scale of social distancing measures necessary for the containment of the pandemic, a global recession is looking increasingly likely.
“For the time being, the majority of the European recycling industry continues to operate on a business-as-usual basis — but the consequences may be felt for many years to come.”
How coronavirus could have a long-term impact on European recycling markets
The virus has had a major impact on the petrochemicals industry, with global supply chains heavily affected, leading to changes in demand patterns and swings in particular markets.
Victory said the ongoing oil price war between Saudi Arabia and Russia is now impacting European markets for virgin plastics, which is the resin produced directly from the petrochemical feed-stock that has not been used or processed previously.
Although the recycling markets have so far been trading as normal, despite some caution from buyers, Victory believes the pattern is starting to shift.
The analysis claims sources in the recycled polyethylene terephthalate (R-PET) market — the most widely recycled plastic across Europe — are already seeing a change in consumer behaviour, particularly around buying and recycling habits.
In Germany, which has one of the most established deposit return schemes (DRS) in Europe — where consumers return their used PET bottles via reverse vending machines — industry figures are waiting to assess the impact of social distancing and self-isolation on the recycling market.
Victory said many people will be looking at how used PET bottles are returned to the recycling stream during the outbreak, as it comes at a time when used bottle availability is already tight because consumers are storing them at home.
This is also likely to affect seasonal trends associated with the consumption of bottled drinks, claims Victory.
“If social distancing is still in effect during the summer, people may not go out as much, resulting in less R-PET availability,’ he added.
“Some have said the coronavirus may cause more people to turn to tap water or use glass bottles over plastic.”
The impact of reduced collection rates following the coronavirus
The analysis highlights that a similar trend may also occur in reduced collection rates in “other key recycled polymer sectors, such as recycled polyethylene (R-PE) and recycled polypropylene (R-PP)”.
Reduced collection rates typically take several weeks to be felt in the market because of the time it takes post-consumer or post-industrial material to work through the chain, according to Victory.
This means shortages “most likely will be felt during what would typically be the beginning of the peak season for R-PET and recycled polyolefins (R-PO)”.
But, given the demand uncertainty, it is unlikely that the 2020 peak season will be typical — with the impact on demand for R-PO likely to be divided by the end-use market, Victory claims.
Key end-use markets for R-PO include automotive, construction, bin bags, outdoor furniture and packaging.
Demand across the automotive industry has already fallen sharply because of the outbreak, and it is likely to decline further after temporary closures at manufacturers across Europe.
Although the construction industry is more protected from any direct production, it is likely to be heavily affected by any economic downturn.
But packaging demand is expected to rise dramatically, with buyers favouring plastic-wrapped food driven by hygiene concerns, and because of the widespread use of polyolefin in packaging cleaning and hygiene products, claims Victory.
“Nevertheless, the extent to which this will benefit the recycling industry remains unclear,” he added.
“Several sources suggest that the pandemic will take the focus off sustainability targets in the short term. They also expect brand owners to switch back to virgin, which may be more readily available.”
But Victory highlights the impact on logistics as a “wider concern”.
He said: “Now that several countries across Europe have closed their borders and restricted the movement of goods and people, getting material to and from recycling units is already proving a challenge for some.”