European recycling markets reel from coronavirus

“In the current situation, if they can't find recycled low density polyethylene (R-LDPE) they'll use LDPE simply to [be able to] supply [their goods],” a major packaging manufacturer said.

Coupled with this, there are concerns about staff shortages as the pandemic gathers pace, and the ability of smaller recyclers to manage cash flow if they are unable to operate for a sustained period of time. Cash reserves at recyclers are typically kept low compared with the petrochemicals industry.

Of wider concern is the impact on logistics. Now that several countries across Europe have closed their borders (see interactive map below) and restricted the movement of goods and people, getting material to and from recycling units is already proving a challenge for some.

“We see [problems] on the logistics side, so getting bottles delivered, and also delivery of our finished goods. There are some borders closed but it's mainly focused on people trends, not transport of goods... Checks on temperatures [of drivers] at boarders… delay transport activities,” an R-PET producer said.

Across the recycling industry, pan-European trade flows are common with both post-consumer and post-industrial waste commonly sourced from overseas - depending on availability and quality - and finished recycled flakes and pellets also commonly exported cross-border.

“Logistics is very painful at the moment in Europe, for all products and all materials, don't know what it'll mean in the end as it'll impact the usage of the products,” a flake producer in central Europe said.

Logistic problems are already causing some companies to build up inventories to manage any potential disruption.

“We buy big quantities from France, Netherlands and Italy and when the borders close completely there's a big problem as where do we get our material? Also 50% [of our end product] goes outside of Germany to Europe and our customers ask us if we're able to deliver the material they need, if we have to reduce production.

“When we ask our plants for transport, they say no problem. At the moment it seems to be… stable, but the question is what will happen tomorrow when the government makes the decision to close the border,” a major European recycler said.

Ongoing uncertainty over the wide array of response by European governments to the coronavirus has further obscured the demand picture -while some are stockpiling, others are taking the opposite approach and avoiding new orders.

“We have orders, but not new orders for the next weeks. There's a big confusion over the next weeks,” the major French waste collector and reprocessor said.

The longer term impact on investment decisions also remains uncertain. Investment across both mechanical and chemical recycling is vital if the industry is to meet ambitious legislative and brand targets for packaging recycling. There is a current severe shortage of food-grade material across all recycled polymers - both on the collection and reprocessing side.

Take R-PET as an example. Reprocessing capacity for food-grade approved pellets stands at 300,000 tonnes/year, whereas for recycled R-HDPE it is around 100,000 tonnes/year.

For other R-PO grades, food-grade material is only available in very small volumes because of European Food Safety Authority (EFSA) requirements on traceability and sorting.

New technology, new collection methods, the growth of chemical recycling and increased reprocessing capacity are all needed to meet 2025 targets.

However, a weaker economic outlook is having a limiting effect on investment, particularly in areas such as recycling where investment from small start-ups is common due to lower barriers to entry than for petrochemicals, and where collection systems remain largely in the control of local authorities. Both are vulnerable in the current situation,

The economic fallout from the global recession of 2008, for example, resulted in more than a decade of underinvestment in collection systems by local authorities because of widespread austerity measures across Europe.

With the scale of social distancing measures necessary for the containment of the pandemic, a global recession is looking increasingly likely.

For the time being, the majority of the European recycling industry continues to operate on a business as usual basis - but the consequences may be felt for many years to come.

Mark Victory and Matt Tudball, Senior Editors, Recycling, ICIS