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‘I hate plastic bottles. Just think about it before you buy one. We pay more for a gallon of water than we do for a gallon of gas. I think people will realize that water quality standards in most municipalities are as good or better for the stuff coming out of the tap than bottled water companies. You'll save money and save the environment too,’ – film producer and author Philippe Cousteau Jr.
The rise and fall of single-use plastic
Dubbed as the ‘material of a thousand uses’, plastic has transformed the world we live in and become one of the most favoured materials used in global manufacturing, due to its versatile nature and cost advantages, with its popularity continuing to grow.
However, plastic’s reputation has been taking a battering over recent years. Awareness over the detrimental environmental impact of single-use plastics like straws, cutlery and food containers has heightened following high-profile television documentaries and international campaigns highlighting the staggering amount of plastic that is leaked into the world’s oceans. Although consumers have long been aware of the environmental impacts of plastic pollution for decades, the world is only just starting to address the growing issue that has seen a gigantic ‘plastic island’ form in the middle of the Pacific Ocean that is thought to be up to two times the size of France.
Global plastic production has soared from just 15 million tonnes in 1964 to over 311 million tonnes per year and that is expected to double again in the next twenty years. The plastic problem that is plaguing the world is being caused by packaging, which uses more plastic than any other industry and accounts for about a quarter of all plastic production worldwide.
The Ellen MacArthur Foundation estimates that 95% of all plastic packaging material (based on value) is never used again after just one use, and most of the plastic packaging that is recycled is usually turned into a lower-quality plastic that is not recyclable again. That can be compared to the global recycling rates for paper at 58% and iron and steel at somewhere between 70% and 90%.
UK and Europe lead bans on single-use plastics
Following the measures taken on plastic carrier and shopping bags, the UK has committed to ridding the country of unnecessary plastic waste after a swathe of big brands vowed to cut out plastic from their products. But while the government has pledged to do this by 2042, companies like consumer goods giant Unilever and supermarkets J Sainsbury, WM Morrison and Tesco have all sworn to take action much sooner. The hospitality industry is also turning its back on plastic, with McDonald's, JD Wetherspoon and Whitbread’s Costa Coffee among the many high street eateries that have already started to move away from using the material.
And so has the EU, which has taken more affirmative action by pledging to ban or restrict the use of a list of single-use plastics by 2021. The likes of straws, cotton buds and balloon handles will be banned entirely, and drinks bottles will only be allowed to be made out of plastic if the caps remain attached (like on a sports drink bottle). They are also aiming to reduce plastic use to make things like drinks cups and food containers.
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Many have criticised the plans for targeting the wrong products, and claim the UK and EU should be cracking down on the likes of coffee cups, drinks bottles and food containers and not simply trying to reduce usage, claiming the impact of targeting straws and stirrers will do little to make an impact.
But there is good reason – substitutes are thin on the ground. While technology has yielded many new materials and capabilities, there simply isn’t the infrastructure or capacity to cut plastic out entirely by tomorrow. In the UK, for example, there is a chronic shortage of capacity to recycle the 2.5 billion coffee cups that are thrown away each year, because facilities lack the ability to process the plastic lining used to make the rest of the recyclable cup waterproof.
In addition, and bearing in mind that huge consumer giants like McDonalds are to replace plastic straws next year, there is not a single factory in the UK producing the paper straws that are to replace them. Although that demonstrates the problem, it also highlights the opportunity, with a new company named Transcend Packaging setting up the country’s first paper straw manufacturing facility in Wales. It will open next year so that it can deliver its new contract with the fast food giant.
This is why the UK and EU have been reluctant to take such stern action against the packaging that uses the most plastic, because alternatives need to be developed and infrastructure needs to be built to make them fit for a new environmentally-friendly economy. The EU has targeted smaller items because it believes these can, and should, be replaced with more sustainably sourced materials right now. It is following companies like Johnson & Johnson that have already taken action by changing its iconic blue plastic stem in its cotton buds to one made out of paper.
Plastic ban: straws and stirrers are just the start
Although the plastic bans have so far failed to inspire people, it is a crucial moment for global policy on the material. Regulation and government policy often evolves at a snail’s pace, much slower than the corporations and technology it usually applies to, but it is the most drastic action to be taken so far. Overhauling the way balloon sticks are manufactured isn’t going to transform the packaging industry, but it is the first step toward that.
Pressure on food and drink packaging will grow, and this will be the next set of items that governments are likely to target. This will impact both those producing food and drink, like Premier Foods, as well as those that package these products.
This includes companies like Robinson that make packaging for the likes of deserts, soups and spices, Coral Products that makes food packaging through its Interpack unit, and the aptly-named Plastics Capital that produces specialist food pouches through its Synpac subsidiary in addition to film packaging and packaging consumables.
The longer-term threat falls firmly at the feet of consumer packaging, not just the packages our lunch comes in but the hundreds of products wrapped in plastic that we find around our house: detergents, cables, drug packaging, cling film and everything else. This will effect firms like AptarGroup which produce plastic dispensing products used for the likes of air fresheners, and present a deepening problem for firms like Robinson that also produce plastic packaging for personal care products on behalf of firms like Gilette and Boots.
Meanwhile, there are firms that provide plastic packaging used by companies transporting or delivering products. These include Sealed Air, famous for its Bubble Wrap brand cushioning and Cryovac brand food packaging, as well as Macfarlane Group that also produces bubble wrap in addition to plastic bags and polythene and stretch wraps.
Paper packaging companies to thrive on backlash against plastic
The current expectation is that the paper packaging companies will be the immediate beneficiaries of the crackdown on plastic packaging, demonstrated by the choice made by McDonalds to opt for a paper straw supplier.
There are numerous listed paper packaging companies listed in London. Smurfit Kappa is the largest cardboard box maker in Europe, and DS Smith provides all the cardboard boxes for Amazon in the UK (and has recently bought Spanish rival Europac for €1.9 billion including debt). However, DS Smith also has a plastic packaging business, creating items like bags used inside cardboard boxes that it has placed under review, stating it is considering all options including a possible sale.
Similarly, Mondi primarily provides packaging made from paper but also has a division making flexible plastic packaging for consumer goods, personal care products and food.
Ban on plastic packaging to accelerate development of sustainable alternatives
Although plastic has slowly displaced other materials over the past 50 years, replacing everything from glass to wood, it now itself faces being displaced not only by paper but new alternatives that are emerging in the market.
James Cropper, another paper packaging firm, has developed Colourform under its 3D Products unit. Colourform is a renewable and recyclable substitute that is still versatile and able to be moulded and coloured in numerous ways, as well as being a direct substitute for plastic packaging like coffee cups and food containers. This is made using renewable, natural wood fibres – some of which it sources from its own recycling plant.
Meanwhile, Symphony Environmental offers an interesting opportunity. Instead of developing an alternative to plastic, the company has decided to tackle the problem head-on by developing a treatment that is applied to short-life plastics like bin liners, straws and coffee capsules that make the plastic biodegradable, should it escape a recycling plant or landfill. The company markets this as an insurance policy to its clients, and believe it is suitable for the majority of all flexible plastics produced worldwide. Its recent investment in Eranova will also see it slowly move away from fossil-fuel feedstocks to bio-based feedstocks, using algae as a key ingredient rather than petrochemicals.
Earlier this year, Symphony said it was raising investment to capitalise on the ‘media, political and commercial opportunities’ that have emerged about plastic. Over 11 countries have now introduced legislation to make oxo-biodegradable products mandatory, with more expected to follow suit. Symphony believes that ‘it is not possible to collect 100% of the plastic waste’, and is therefore providing a way of reducing plastic waste rather than replacing it.
RPC Group was one of the first companies that investors expected to be hit by the recent bans on plastic products and packaging, but was quick to come out and clarify that it produces none of the items affected, instead producing the likes of screw caps, bottle tops and asthma inhalers. In fact, RPC expects the change to be beneficial for the business as it is working with suppliers to develop biodegradable polymers as well as renewably-sourced feedstocks.
Plastic isn’t all bad: high-end applications only continue to grow
Attention has been so firmly fixed on single-use plastic that it can be easy to forget it is becoming an increasingly crucial material for major high-tech industries. The lightweight nature and lower cost of plastic has encouraged many industries to replace key components traditionally made out of much more expensive material. This includes machinery parts, construction products and even parts of aircrafts.
The evolution of plastic resins and additives has seen sectors like the automotive industry increasingly source plastic parts to replace heavier, usually more expensive parts made out of say metal.
Coral Products introduced over 90 new plastic automotive components in just two months earlier this year. While the company does produce packaging for personal goods, it also produces high-quality products used in other industries like telecoms and rail. Carclo also serves automakers, producing plastic LED lighting systems. Although most of its plastic is used to produce medical devices. Similarly, Plastics Capital also produces plastic bearings, in addition to industrial packaging products and invested in expanding the bearings facilities so it could meet a new contract supplying parts for home appliances this year.
Victrex produces polymers that are used to produce infrastructure such as pipes, and sells polyketones that are used to make items like oilfield equipment, airplanes as well as automobiles, with the benefit of owning most of its supply of raw materials.
Replacing products with lighter plastics has enormous benefits, as demonstrated by Polypipe. The company is one of Europe’s largest manufacturers of renewable plastic pipes and fittings. Plastic pipes weigh up to 94% less than concrete ones, according to the Polypipe, meaning 1 kilometre of pipe can be transported in three trips compared to the 12 it would take to transport concrete ones. The same principle applies to cars and planes – less weight means less fuel, which means lower costs and less of an environmental impact.
The diverse nature of plastic is constantly leading to new applications being found for the material. Ground-breaking technology is even being based around it, with the likes of 3D printing set to revolutionise industries around the world using plastic and more environmentally-friendly materials going forward.
Oil firms and chemical companies unfazed by trend in plastics
Still, for the immediate future, crude oil and gas are the two main sources of feedstock used to make plastic and plastic packaging. Big Oil is banking on growing demand for petrochemicals that see oil used as a feedstock rather than as a source of energy, as the world continues its shift away from fossil fuels through the likes of electric vehicles and renewable energy.
Currently, about 10% of all oil and gas produced is used as a feedstock (or non-combusted use), where it is used to make the likes of petrochemicals. This is according to BP, which says the non-combusted use of fuels is an ‘increasingly important component of overall industrial demand’.
The suggestion from some of the biggest oil firms is that bans on single-use plastic will, while still notable, not be material on overall growth. Oil currently accounts for about two-thirds of non-combusted demand, with gas making the up the remaining third. While this currently accounts for only a small fraction of total demand, BP states this is the largest contributor of the combined growth of oil and gas demand over the next couple of decades.
BP states that about 15% of all the oil and gas used as a feedstock in the likes of petrochemicals ends up producing single-use plastics. While the company expects bans and growing pressure on single-use plastics to ‘dampen growth quite materially relative to past trends’, it still forecasts demand for oil and gas as feedstock to grow around 2% per year out until 2030, comfortably outpacing forecasted growth in the wider industry.
Royal Dutch Shell, which is heavily investing in petrochemical plants around the globe, has also shrugged off the impact of banning single-use plastics. Downstream director John Abbott recently claimed a ban on all single-use plastic would reduce demand for chemicals by just 3% to 4%.
The chemical industry seems to support this view. There are many major players in the global chemical industry, such as BASF, Dow Chemical, LyondellBasell, DuPont and LANXESS – but none solely rely on making single-use plastic. Croda International for example, does make polymer additives designed for plastic packaging and printing, but it also produces specialty chemicals for everything from engine lubricants to health and beauty products.
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China exacerbates huge lack of plastic recycling capacity
Another important part of the EU’s proposal is the requirement for member states to collect 90% of all single-use plastic drink bottles by 2025, bearing in mind that there is already a chronic lack of recycling capacity and capability to deal with the plastic problem. This presents a major opportunity for the waste and recycling sector, which will essentially be guaranteed more volumes going forward.
This lack of capacity has not only encouraged the amount of waste plastic that escapes collection and ends up becoming a pollutant, but also the amount of waste that has to be sent abroad to be recycled or processed overseas. The UK government’s current recycling credit system has also been criticised for paying exporters to take rubbish out of the country.
The UK, which exports huge amounts of waste overseas, plans to reduce the wide array of plastics that are used in the market, as this is a key reason why recyclers have a tough time processing much of the plastic in the market. For example, there is only around two or three facilities in the country that are able to recycle most of the coffee cups because most cannot handle the plastic coating inside the cup.
Until recently the UK was sending most of its waste to China, but the country has recently imposed a ban on importing foreign waste which has left many countries scrambling to find new markets. According to government figures, UK exports of plastic waste to the likes of Malaysia, Thailand and Taiwan rocketed after China’s ban.
DS Smith, which is Europe’s largest recycler of cardboard and paper, has warned China’s ban on foreign waste is significant. ‘The challenge presented by China’s stance is real, and will reverberate around all parts of our industry. But we must remember that the position China has taken is rooted in a quest for quality materials. On that, we must learn the lessons for the future sustainability of recycling markets,’ the company has said.
The UK government is to release a long-term waste and resources strategy paper sometime later this year, and this issue is expected to play a major role.
Waste and recycling firm Viridor, part of water company Pennon Group, states that 85% of the 4.5 million tonnes of plastic that is produced in the UK each year ends up in landfill. But it is already encouraged by the increasing amounts of plastic bottles being recycled, claiming that around 45% are now collected for recycling with, expectations for this to continue growing.
Viridor has heavily invested in its newer plastic recycling facilities in Rochester and Skelmersdale, recycling plastics that are then sold back in to the company’s supply chain.
Meanwhile, Biffa also has large recycling facilities, with two fully-automated sites that handle mixed recyclables, enough to process the household recycling from 4 million homes. It also has a newer facility specifically designed to process plastic milk bottles, in order to help the UK dairy sector achieve its goal to ensure at least 50% of milk bottles are made from recycled materials by 2020 (from the current level somewhere between 15% and 20%). Much of this supports Biffa Polymers, the company’s division that is one of the country’s leading plastic processors.
Polypipe is now one of the largest processors of post-consumer waste in the UK after ploughing significant sums into a new polymer reprocessing plant in Horncastle. Meanwhile, Symphony Environmental couples its oxo-biodegradable solution with its recycling arm that recovers useful products from waste plastic and rubber.
Opportunities from ban on single-use plastics far outweigh the threats
On balance, the opportunities that are arising from the crackdown on single-use plastic outweigh the threats. Governments are starting to incentivise innovative companies to come up with new sustainable materials and ways to tackle the existing plastic problem through recycling.
While the world is getting to grips with its plastic problem, the material has a bright future. The increasing use of plastic as a substitute for more and more materials used in high-end applications looks set to continue.
Although the government’s current efforts have focused on items like straws with the expectation that bottles and cups will be next on the list, any further restrictions on using plastic for other products or types of packaging could have more serious consequences for firms involved in making the likes of personal care products. This has already started, following the UK implementing a ban on microbead products that will come into force toward the end of July, targeting the tiny amounts of plastics that are often used in products like shower gels.
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