Sources are particularly concerned about the limited volumes entering collection systems, disruption in logistics, potential declines in demand in non-packaging product sectors, and a reduction in long-term investment.

At the end of March, concerns in the recycling industry were associated only with changes in the prices of primary raw materials competing with recycled materials, and with relations with individual customers in countries such as Italy.

Quarantine waste shortage

Coronavirus has had a tremendous impact on the petrochemicals market, hindering global supply chains, altering consumer demand patterns and causing major market fluctuations. At the same time, oil prices fell sharply in view of the ongoing price war, which is also felt in the markets for primary polymer raw materials in Europe. Meanwhile, trading in the secondary markets mainly went within the normal range, not excluding some buyers’ apprehension. However, this is starting to change.

Reliable sources in the market for recycled polyethylene terephthalate (R-PET) – the most widely recycled plastic in Europe – are already seeing changes in consumer behavior, especially with regard to consumer habits and, more importantly, recycling habits.

“People buy bottled water and don’t return it, but store it,” a German processor recently said. Demand for clean PET has already increased significantly in March, as Europeans began to panic, buying food and other necessities.

“On the one hand, this is the usual seasonal effect in February and March – people drink less because it’s cold. But, on the other hand, purchases increased significantly, so consumers store bottles at home, and some even switched to glass, ”the processor added.

Sources in Germany that use one of Europe’s most well-established deposit refund schemes (DRS) – where consumers return their used PET bottles through vending machines in places like supermarkets – are trying to gauge the impact of social distance and self-isolation on the recycling market.

Reliable sources in the market for recycled polyethylene terephthalate (R-PET) are already seeing changes in consumer behavior, especially with regard to consumer habits and, more importantly, recycling habits.

For many today, it is important how used PET bottles will be returned to the recycling stream during the COVID-19 outbreak, since bottle availability after consumption is already limited due to the previously mentioned reduction in bottle beverage consumption.

It can also affect seasonal trends related to bottled drinks. If social distancing lasts all summer, people will rarely leave their homes, which will reduce the availability of secondary PET. Someone thinks that coronavirus can make people start drinking running water or use glass bottles instead of plastic.

A similar downward trend in waste collection is expected in other key polymer recycling sectors, such as recycled polyethylene (R-PE) and recycled polypropylene (R-PP).

“We are preparing for the fact that in the coming weeks we will have less material coming to our plants,” said a major French waste collector and recycler.

A decrease in waste collection is usually felt on the market in a few weeks due to the time it takes for consumer or production waste to go through the entire recycling chain. This means that any shortage is likely to become palpable during the start of the high season for recycled PET and recycled polyolefins (R-POs). However, given the uncertainty of demand, it is unlikely that the peak of the 2020 season will be typical.

Decrease in demand for secondary raw materials

The effect on the demand of secondary polyolefins is likely to depend on the market for the final product. The key markets for secondary polyolefins are automotive, construction, trash bags, outdoor furniture and packaging. Demand for cars has already fallen sharply due to the outbreak of the virus, and is likely to continue to decline after the car manufacturers temporarily stopped working in Europe.

The construction industry is more protected from direct effects on production caused by coronavirus, but is likely to be hit hard by the concomitant economic downturn. At the same time, the demand for outdoor furniture may also suffer due to quarantine.

The construction industry is more protected from direct effects on production caused by coronavirus, but it is likely to be hit hard by the concomitant economic downturn.

At the same time, the demand for packaging will increase. First, consumers are expected to prefer plastic-wrapped food for hygienic reasons. Secondly, due to the widespread use of polyolefins in packaging for cleaning and hygiene products.

However, it is difficult to determine the scale of the impact of all of the above on the recycling industry. Some sources suggest that the pandemic will divert attention from the focus on recycling and recycling in the short term. It is also expected that many brands will return to raw materials, which may become more affordable.

Since the price of recycled PET, high density polyethylene and polypropylene is now higher than that of the starting material, the likelihood of a return to the primary raw materials increases.

“In the current situation, if it is impossible to find secondary low-density polyethylene, primary HDPE will be used only because it is necessary to continue supplying products,” a major packaging manufacturer said.

Among other things, there are concerns about a lack of staff, as the pandemic is gaining momentum. It is also unclear whether small recycling enterprises will be able to survive in the market if they cannot operate for a long period of time. The cash reserves at recycling plants are usually quite small compared to the petrochemical industry.

Logistics Challenges

A much bigger concern is the issue of logistics. Now that several countries across Europe have already closed their borders and restricted the movement of goods and people, the delivery of materials to recycling facilities has become a problem for many.

“In the field of logistics, we faced many problems in the delivery of both bottles and our finished products. Some borders are closed, but this mainly concerns passenger transportation, not cargo delivery, but mainly it concerns passenger transportation, and not cargo delivery … Checking the temperature of drivers at the borders delays transport activity, ”said the manufacturer of secondary PET. “Logistics in Europe at the moment is a sore point for all goods and materials, I don’t know what it will lead to in the end, and how it will affect the use of products,” said the cereal producer in Central Europe.

Of great concern is the issue of logistics. Now that several countries across Europe have already closed their borders and restricted the movement of goods and people, the delivery of materials to recycling facilities has become a problem for many.

Logistic problems already force some companies to build warehouses to cope with any potential problems.

“We purchase large volumes from France, the Netherlands and Italy, and when the borders are completely closed, a big problem will arise: where to get our material from? In addition, 50% of our final product goes outside Germany to Europe, and our customers ask us if we can deliver the material they need if it is necessary to reduce production. Now, when we request transport, we are told that there are no problems. The situation seems stable at the moment, but the question is what will happen tomorrow, when the government decides to close the border, ”said one of the largest European processors.

The growing uncertainty over a wide range of pandemic measures by European governments makes the demand situation even more uncertain – while some manufacturers clog their warehouses, others take the opposite approach and avoid new orders.

“We have orders now, but there is nothing for the next weeks. Our immediate future is a big question, ”said a major French waste collector and recycler.

Recycling Investment Prospects

The long-term impact on investment decisions also remains uncertain. Investing in both mechanical and chemical recycling is crucial if the industry wants to meet the ambitious legal requirements and brand goals for packaging their products. Currently, there is an acute shortage of secondary raw materials for food products in all types of polymers – both in terms of collection and processing.

Take, for example, secondary PET. The volume of processing of food pellets approved for food is 300,000 tons per year, while for recycled HDPE this figure is about 100,000 tons per year.

Recycling investments have a significant impact on investment in recycling – investments from small startups are common here because of lower barriers to entry than for petrochemical products.

For other secondary plastic grades, food grade material is only available in very small volumes due to the European Food Safety Authority (EFSA) sorting requirements.

New technologies, new collection methods, an increase in chemical recycling and an increase in recycling volumes – all this is necessary to achieve the goals of 2025.

However, bleak economic prospects have a significant impact on investment, especially in areas such as recycling, where small startups are more likely to invest because of lower barriers to entry than petrochemical products, and where collection systems remain largely controlled local authorities. Both are vulnerable in the current situation.

For example, the economic repercussions of the 2008 global economic downturn have led local governments to invest insufficiently in collection systems for more than a decade, due to stringent economic measures that are widespread throughout Europe. Given the scale of social exclusion needed to contain a pandemic, a global recession seems increasingly likely.

Despite the fact that in March the majority of European recycling enterprises operated as usual, the consequences of the situation with COVID-19 can be felt for many years.