Plastics Recycling: Clean Opportunities in a Dirty Industry
Contents
Introduction
More than meets the eye
Market forces
Facts, figures, forces
Investment opportunities
3 market segments
Mechanical, Chemical, Pyrolysis
Sectors
Market movers
Leaders & fast followers
Investors
VC / PE / Funds
Final Thoughts
Cautions, downsides
Plastic Pollution: More Than Meets the Eye
Plastics recycling is one answer to the rising problem of emissions and waste
“Plastics,” whispers a businessman to young Benjamin Braddock in the iconic 1967 film “The Graduate.” Plastics was a lucrative business prospect then. And while it remains one now, today the businessman might whisper two words: “plastics recycling.”
Plastics recycling is booming. That’s because our problems with the petroleum product go way beyond the visual pollution of shredded bags in trees or mountains of the stuff in landfills. Making this material — which shapes our lives to a degree that some say we are living in the Plastics Age — is a dirty process, as it contributes vast amounts of greenhouse gasses.
In fact, greenhouse gasses from making plastic are expected to soon outpace emissions from U.S. coal-fired power generation, says a 2021 report by Bennington College and Beyond Plastics (this is partially due to the recent phasing out of coal at many electricity-generating plants). Every part of the plastics lifecycle emits pollutants: production, use, and end-of-life processes.
“Transitioning to more sustainable materials faces a complex of hurdles, meaning that we’ll be managing waste from fossil fuel-based plastic for at least the foreseeable future.”
So how to manage the problem? From syringes to tires to the vinyl that wraps suburban homes, our lives rest to a degree on a foundation of plastic. Transitioning to more sustainable materials faces a complex of hurdles, meaning that we’ll be managing waste from fossil fuel-based plastic for at least the foreseeable future.
The world produces a half-billion tons of plastic a year, double what it pumped out in 2000, and around 80% of that becomes waste, according to a February 2022 report from the Paris-based Organization for Economic Co-operation and Development. Production doubled from 2000 to 2019, the group said.
The world’s top 3 plastics producers — China, U.S. and Germany — together exported $420.7 billion in plastic in 2020, according to the Plastic Industry Association.
The UN’s Environmental Assembly in March 2022 said the world is “officially on track for a cure” as members endorsed a plan to create a legally binding agreement to end plastic waste. The Assembly described plastic pollution as a global industry worth $522.6 billion that’s expected to double in capacity by 2040.
Plastics recycling is growing since it’s the only way to manage the waste that can’t be reused or reduced. Recycling of U.S. plastic packaging and food-service plastic alone may represent earnings of $2 billion to $4 billion per year (not including interest, taxes, depreciation and amortization), consulting firm McKinsey & Co. estimated in 2019.
Government Support & Other Market Forces
Market Forces
So-called end-of-life plastics end up mostly dumped in landfills or burned in incinerators. As countries aim for higher recycling totals, the industry will need more recycling facilities and more efficient technologies.
Market Facts
Two types of plastics recycling dominate the market: the traditional, mechanical method involves crushing and melting down plastic trash for reuse; the newer chemical method uses heat and chemical reactions to break down used plastics into raw materials for new plastic, fuel or other chemicals.
Currently, only 9% of plastic waste is recycled globally.The bulk of plastics recycling revenue now comes from mechanical recycling programs, though chemical recycling is projected to make up about one-third of that revenue by 2030.
Market Figures
The global plastics recycling market is projected to reach a size of $47.3 billion by 2026 with a CAGR of 6.1%.
Global revenues from plastics recycling are expected to expand by about 30% annually in the coming decade.
McKinsey places the cost to reach the EPA recovery goal at $15 billion to $20 billion annually.
Investment Opportunities: 3 Market Segments
The plastics recycling industry is made up of three parts: companies that collect and processing waste; those that make products from the processed waste and and the actual buying and selling of goods made with recycled plastic. Capital investments are concentrated in processing and manufacturing technologies.
Recycling collection
Before plastics can be recycled they must first, of course, be picked up from homes, offices, businesses, manufacturing plants, and the like. A number of entities collect recyclable plastics, including state- and city-funded haulers as well as commercial and manufacturing facilities and direct-disposal sites.
SOURCE: CENTER FOR INTERNATIONAL ENVIRONMENTAL LAW
Recycling processing and manufacturing
This part of the cycle represents what’s usually thought about as “recycling.” McKinsey reports that pyrolysis — the heating of an organic material, such as biomass — and mechanical recycling both have sizeable market shares today, and will generate the most profit-pool growth. However, chemical recycling, which had little market share in 2020, is estimated to make up about one third of plastics recycling. Other recycling processes will also be upgraded. For instance, sorting technology has advanced thanks to the recent introduction of artificial intelligence and automation technologies. These type of advancements are expected to continue.
Support businesses
These are businesses that assist recycling efforts. Examples include the manufacturers that make recycling equipment, the consulting services that provide input and the transportation that moves the materials between locations
Mechanical Recycling, Chemical Recycling, Pyrolysis
Mechanical Recycling
Mechanical recycling is currently the dominant technology used for recycling plastics. The “mechanical” aspect refers to the physical processes that recover plastics from the waste stream. The plastics must be separated, sorted, washed, granulated, and transported, to list only a few of these processes. Mechanical recycling has a sizeable share of the market, but it’s labor-intensive and generally deals with lower-quality plastics.
Mechanical Recycling:
While this is the main plastics recycling method, it’s labor-intensive and generally deals with lower-quality plastics.
Chemical Recycling
Chemical is expected to be the fastest-growing method for recycling plastic. Chemical recycling, also known as monomer recycling, is considered an advanced recycling method to complement mechanical recycling. Chemical recycling uses chemical reactions and heating to recover used plastic into virgin plastics or other chemicals.
Pyrolysis
The pyrolysis process is sometimes called plastics-to-fuel. It gets that name because it heats plastic waste at different temperatures, resulting in liquid feedstock that can be used as fuel. Though pyrolysis is currently limited to a small part of the recycling effort, players that have large-scale recycling capabilities are emerging.
Market Movers: Current and Future Heavy Hitters
Market Leaders:
Agilyx is a Norwegian company that offers chemical recycling technology that converts plastics into valuable products. It delivers technology-based solutions, including commercial-scale platforms that recover hard-to-recycle plastics.
KW Plastics, based in Alabama, says it is the world’s largest plastic recycler for high-density polyurethane foam (HDPE) and propylene (PP). It has the capacity to recycle more than a billion pounds of plastic annually. KW Plastics also sells recycled plastics such as polyethylene and polypropylene as products.
MBA Polymers, based in New Jersey, converts plastics to high-quality granulate. It has factories in Germany, Austria, China, and the UK.
Future Heavy Hitters
Brightmark, in San Francisco, owns four plastics recycling facilities globally. In July 2021 the company announced plans to build the world’s largest advanced plastics recycling facility in Macon, Georgia.
Novoloop, previously known as BioCollection, is a California startup that focuses on the chemical decomposition process, which produces a byproduct that can be used as a replacement for fossil fuels. In February 2022, Novoloop raised $11 million to advance its efforts in upcycling, which creates a new product from recycled materials.
Venture Capital/PE and Other Fund Investors
Closed Loop Partners: New York-based Closed Loop includes venture capital, private equity, and growth equity firms focused on the circular economy, supported by corporations including Microsoft and Autodesk. In December 2021, the fund raised $50 million. It has also established a Closed Loop Circular Plastics Fund that invests in plastics recovery and recycling projects in the U.S. and Canada.
Infinity Recycling: Netherlands-based Infinity Recycling’s Circular Plastics Fund focuses on advanced recycling technologies that convert plastic waste into commodities such as oil and polymers. Global chemical maker LyondellBasel invested in the plastics fund in early 2022.
Circulate Capital: Based in Singapore, Circulate Capital focuses on solutions to plastic waste and climate change, and is backed by companies including PepsiCo, Unilever, Chanel, Coca-Cola, and Chevron Philips Chemical. In December 2021, the firm managed $25 million in assets.
Final Thoughts & Potential Risks
Plastics recycling is a solution to the growing scale of plastic waste. As such, it represents a large profit pool for investors. Potential roadblocks and downsides include barriers to technology and the pollutants released by the recycling process. Other drawbacks include:
“Oceans are expected to contain more plastics than fish by weight by 2050.”
Recycled plastics may be of lower quality and can only be recycled a few times.
The high upfront capital investment needed to advance technologies, especially chemical recycling, and the long capital paid-back investment periods .
Volatile organic compounds can be released into the atmosphere in the processing stage. Improper disposal of debris and waste can contaminate land, air, and water.
Although plastics recycling has negative net emissions, some processing stages still required significant amounts of energy.