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Recycled Plastics Making Strong Gains
rPET is having a moment right now
Happy Friday. I didn’t plan this, but I’m writing about recycled polyethylene terephthalate here and I find it somewhat ironic that my sponsor is a leader in making biobased PET a reality. If you have no idea what PET is just think about a soda bottle, your favorite fleece jacket, or a quick drying athletic shirt. I’ve been following developments on rPET for awhile since I was interested in using rPET for my own day job, but the prices were crazy in 2021. So far 2022 makes 2021 seem normal.
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Back in January, ICIS reported that recycled polyethylene terephthalate (rPET) prices are hitting record highs. PET is your standard plastic Coca-Cola bottle. Prices for rPET washed flakes were pushing towards €1750/tonne and colorless PET bottles were pushing towards €1000/tonne. Matt Tudball reported back in January that contamination levels on recycled PET is rising, which means that overall yields of rPET are going down. Further, rising energy costs for transport and converting can cause inflationary cost pressure.
A recent opinion in packaging Europe stated that the fight for raw materials has only just begun. The author states that consumer packaged goods, textiles for clothing, and construction products are putting pressure on raw material supply chains that are based on biobased and recycled materials. The pressure comes from increased demand to utilize recycled plastics or raw materials that are based on biomass as opposed to refined oil. If CPGs and other industries are all trying to squeeze through the sustainability door the author wants to know how we will get these new materials?
If we use rPET as an example here the constraints on supply will mean scarcity of material and already prices are at an all time high for recycled PET.
This is exactly what we want to happen.
In the short term high rPET prices on flake and bottle stock means that there is healthy demand and high prices means that bottle collection will become lucrative. We should start to see stratification of rPET into cleanliness grades where the cleanest go toward mechanical recycling and the less clean go towards chemical recycling such as methanolysis or glycolysis. Having both options available at scale should increase total available recycled polyester.
High prices on rPET should further push new players into the rPET supply chain, which I view as reverse logistics companies, and we should start to see new improvements in productivity in producing clean rPET flake. Public policy initiatives could further strengthen this movement by further incentivizing recycling capacity, collection sites, and public education.
We are already seeing additional capacity being announced and built to handle the the rapidly developing rPET market. Eastman is already planning to invest over a billion dollars into rPET for manufacturing locations in Tennessee and France. Eastman clearly see this as a growing market and are betting big on its development. On the glycolysis side DEG is loaning Polygenta (a subsidiary of Perpetual) about $16 million to build out additional capacity in India for their glycolysis process along with some other investors who are kicking in similar amounts. I interviewed Vikram Nagargoje, CEO of Perpetual, last year when I was researching the problem of clothing waste:
Vikram told me that Perpetual’s glycolysis process is continuous and uses the least amount of ethylene glycol compared to their competition. This enables them to take clear PET flakes from a recycler and turn it into a depolymerized intermediate composition consisting of polyester oligomers, BHET, and some glycol. He showed it to me on camera and it looked a bit like a white hockey puck that he was able to break apart in his hands.
In our conversation Vikram told me that his plant was completely sold out, that he was profitable, and that he was seeking additional funds to expand capacity. Vikram’s biggest customers are fashion and athletic apparel brands that are seeking to utilize recycled polyester for their clothing. Sustainability is the new black.
When it comes to biobased PET the only company betting big on the space is this newsletter’s current sponsor Origin Materials. Here is what Origin is trying to do in their own words.
A Message From My Sponsor
The team at Origin Materials is working to eliminate the need for fossil resources while capturing carbon in the process. Roughly half of global emissions are associated with the production of materials — a problem that no amount of solar panels or wind turbines can solve. By converting biomass into chemicals, Origin can tackle more than a few industries with a total addressable market of about 1 trillion dollars. Their first product is bio-based, carbon negative PET (polyethylene terephthalate).
Origin’s first plants are taking shape in Sarnia, Ontario, Canada and Geismar, Louisiana, USA. Once operational they’ll start fulfilling the $5.6 billion worth of signed offtake agreements and capacity reservations from companies like PepsiCo, Ford, Nestle Waters, Danone, Mitsubishi Gas Chemical, and Solvay. They are looking to hire passionate chemical industry professionals who believe in doing something different. If you’re interested in working for or with Origin, head to their website. The top 3 types of positions right now are:
Origin Materials is on a serious hiring spree because there is a significant opportunity in the biobased plastics space. John Bissell, we should talk when you get a chance about Origin’s future. The tailwinds of high oil prices and record demand around the world for raw materials should push Origin Materials and other companies like Avantium towards being healthy businesses with customers focused on securing raw materials that will not track on an oil derivative index. Plus, everyone wants to tell a good sustainability story to their customers and shareholders.
The consensus opinion seems to be that the current high post consumer raw material prices will continue as long as there is demand. I suspect these high prices will attract more capacity to be brought online. When companies realize they can partially switch their supply chains away from an oil derived material to something that is either biobased or recycled without spending significantly more money–the choice will be easy.