Regional Investment Opportunity

Over the past few years, global plastic production has increased rapidly. Rising adoption in packaging, building & construction, textiles, consumer & institutional products, transportation, electrical & electronics, and industrial machinery is expected to further increase the demand for plastics over the coming years. Over the past decade, increased plastic production has led to many environmental issues such as greenhouse gas emissions and plastic pollution. Recycling appears to be the best possible solution for plastic waste.

Before 2000, plastic waste disposal by recycling and incineration was negligible, so nearly 100% waste was terminated. Plastic recycling rates have increased by more than 0.7% year on year from 2000. In 2018, an estimated 20% of the global plastic waste was recycled and the trend is expected to continue over the projected period.

In order to decrease pollution from recycling process, China barred plastic waste imports from other countries in 2017. In 2018, shipments from Japan to China dropped from a peak of more than 86 thousand tons in August 2017 to just 2 thousand tons per month. It is hard to find alternative destinations as other Asia Pacific countries have tightened plastic waste regulations. In order to tackle the situation, industry leaders are strengthening their skills. For instance, during fiscal year 2020, Daiei Kankyo Holdings, a Kobe-based recycling firm, is looking to open a USD 13.8 million plant in Osaka Prefecture.

In November 2017, Suez SA, a French multinational engaged in water treatment and waste management systems has shown its intention to work with multinational polymer and chemical companies to upgrade plastic waste by increasing investment in recycling process. Additionally, Alba Group, based in Germany, has announced that it will be establishing a plant in western Germany with an abundance of petrochemical plants, with the aim of working with plastic waste recycling companies to seek optimum compound mixtures and handling measures to manage plastic scrap.

In terms of types, HDPE accounted for more than 20% of overall market share in 2018. It is a popular form of plastic because of its versatility, owing to its wide spectrum density, molecular weight and distribution of chemical inertia. HDPE resins can be tailored for use in a wide variety of applications, including film, crates, caps, boxes and closures, bottles and containers for food products, pharmaceuticals, cosmetics, household and industrial chemicals, fuel tanks, and water and gas pipelines.

Polypropylene end user industries are divided into building, consumer products, packaging, electrical & electronics, and automotive. Because of its distinctive characteristics, packaging industry is the biggest market for polypropylene. These include rigidity and twist retention, making it an especially suitable packaging material. Also polypropylene is widely used in packaging of soap, detergents and toiletries, as well as of various perishable food items such as yogurt in the consumer products segment.

In terms of application, post-consumer recycled plastic packaging for cups accounted for more than 20% of overall market share in 2018. Due to demand from foodservice sectors, fast food outlets, and cafes, the plastic cups industry is witnessing tremendous development. Increasing disposable income, improving living standards and growing preference for comfortable and disposable cups is further contributing to the development of the industry.

Europe is the base of most developed and stablished packaging manufacturers. It is accounted for more than 30% of the overall market share in 2018. Packaging and recycling industry in the region is mainly characterized by stringent norms of the European Union. Plastic packaging finds wide range of applications from food, cosmetic, personal care industry to medical, pharmaceutical, and retail industry.

The treatment of discarded plastic is governed by laws and regulations laid down by the respective domestic governments. At the regional level, the European Union has set regulations that impose recycling targets for plastics up to 22.5% (recycling of the total plastic waste generated). This target is set to increase by 2020 and 2025. Among these plastics, PET is the most recycled plastic in the region. In 2013 and 2014, 1.6 Mt and 1.7Mt of plastics was collected respectively, out of which, 500 KT was recycled for usage. After PET, PVC is also a prominently recycled plastic in the region.

South America is regarded as one of the most potential regions for recycled plastic packaging industry. With the growing consumption of plastics in various forms, the plastic waste generation and its subsequent disposal is now becoming a serious concern in the region. To combat this, several initiatives are being taken by the governments in the region. For instance, legislation for banning single use plastic in the region is one of the major steps taken for reducing the usage of plastic. Government authorities and legislator bodies are also focusing on increasing awareness for recycling through organizing various campaigns.

The Middle East post-consumer recycled plastic packaging market is projected to grow at a CAGR of more than 8.0% over the forecast period. According to ECOMENA, 11 billion plastic bags were used in the region in 2016. A typical resident in UAE uses 450 plastic bottles in one year. In August 2019, Saudi Investment Recycling Company (SIRC) announced its plan to build recycling and sorting facilities in Riyadh, as a part of government initiative of circular economy. Overall, favorable policy changes coupled with rising environmental awareness is projected to boost the post-consumer recycled plastic packaging market over the forecast period.