McKinsey & Company continuing its series of publications dedicated to plastic waste published a comprehensive assessment of where future global waste flows will come from, how they could be recycled, and what economic returns this activity could offer—research that has filled a major gap in the public debate.
If plastics demand follows its current trajectory, global plastics-waste volumes would grow from 260 million tons per year in 2016 to 460 million tons per year by 2030, taking what is already a serious environmental problem to a whole new level. In the face of public outcry about global plastics pollution, the chemical industry is starting to mobilize on this issue. In its publication McKinsey underlined – this is not only what society demands, and is becoming a condition for the industry to retain its license to operate, but could also represent an important and profitable new business opportunity.
Plastics reuse and recycling could generate profit-pool growth of as much as $60 billion for the petrochemicals and plastics sector, representing nearly two-thirds of its possible profit-pool growth over the period. We also discuss the levels of support that will be needed more broadly across society, including from regulators, major plastics users such as consumer-packaged-goods companies, and consumers, to get to this outcome.
For petrochemicals and plastics companies—and by extension the chemical industry, since plastics production accounts for well over one-third of the industry’s activities—this presents an array of threats and opportunities, and we outline the kinds of strategic questions they will need to evaluate and the choices to make.
Modeling a virtuous circle of plastics recycling worldwide
Our research shows that just 12 percent of plastics waste is currently reused or recycled. The fact that the great majority of used plastics goes to incineration, landfill, or dumps, means that these materials are lost forever as a resource, despite plastics’ potential for reuse and recycling. Plastics production requires substantial capital investment and a substantial carbon footprint.
What the chemical industry—along with major consumer industries, the waste industry, and indeed society, more broadly—has been lacking is a clear picture of a path forward under which the volumes of plastics being discarded could be recaptured and reused.
Also lacking has been a full perspective on where the majority of waste will come from and which recovery and recycling technologies offer the biggest potential.
Technologies to handle all polymer families: Tapping the potential
Mechanical recycling is already established as a sizeable business—if nowhere near the scale of the mainstream petrochemicals and plastics industry—in many of the world’s developed economies, and it’s focused on polyethylene terephthalate (PET), high-density polyethylene (HDPE), and polypropylene recycling. Contrary to commonly held assumptions that waste management is simply a cost burden for municipalities and taxpayers, there are many examples where mechanical recycling is already profitable, albeit often in selective applications or markets. This is because of its fundamentally different starting point from traditional plastics manufacture: mechanical recycling can generate new polymer without having to invest billions of dollars in steam crackers and other units to create petrochemical building blocks. Therefore, it starts out as a comparatively advantaged route to polymer production
The mechanical-recycling technology can also be used for recycling many other polymers. But these businesses have not yet grown much due to constraints in collection of the other major-volume resins such as low-density polyethylene (LDPE). Our modeling suggests that LDPE and HDPE mechanical recycling has the potential to generate the largest profit pool through 2030, primarily reflecting expectations for continuing high profitability in the virgin polyethylene market due to the tight supply–demand outlook. Our projections suggest that mechanical recycling rates could increase from the current level of 12 percent of total plastics volumes to 15 to 20 percent of the much larger projected total plastics output by 2030, assuming oil prices of $75 per barrel. Under a scenario where oil prices move below $65 a barrel, the economics of mechanical recycling become more challenging; this pattern was seen following the 2015 fall in oil prices, and was a factor in slowing recycling efforts.