WEBVTT - Plastics Greenium Boosts Chemical Recycling Outlook 0:00:00.280 --> 0:00:02.800 This is Dana Perkins and you're listening to Switched on 0:00:03.160 --> 0:00:06.800 the BNAF podcast. So, as mister McGuire said to Ben 0:00:06.800 --> 0:00:10.799 in the graduate, just one word plastics, there's a great 0:00:10.840 --> 0:00:13.760 future in plastics. Think about it all right. I'm pretty 0:00:13.760 --> 0:00:15.840 sure that it was delivered slightly better in the movie 0:00:15.960 --> 0:00:18.280 and possibly on this show, because I don't think it's 0:00:18.320 --> 0:00:20.759 the first time we've actually used that quote, but I 0:00:20.760 --> 0:00:23.840 think about it every time when we talk about plastic recycling. 0:00:24.079 --> 0:00:26.960 So here we are at Biennia doing some thinking about 0:00:27.040 --> 0:00:30.760 plastics again. Plastic production is set to double between twenty 0:00:30.800 --> 0:00:33.760 twenty two and twenty fifty, so action is needed to 0:00:33.800 --> 0:00:38.560 address the inefficiencies in the existing recycling process. At the moment, 0:00:38.720 --> 0:00:42.520 only seven to ten percent of it is actually recycled. 0:00:42.680 --> 0:00:46.080 So four years ago on this show, we discussed chemical recycling, 0:00:46.200 --> 0:00:47.960 and at the time it was an up and coming 0:00:48.000 --> 0:00:51.360 technology that could potentially help address issues with lower grade 0:00:51.400 --> 0:00:55.960 feedstocks that the existing system can't recycle. So on today's show, 0:00:56.000 --> 0:00:58.880 four years on, we're going to revisit chemical recycling and 0:00:58.960 --> 0:01:02.160 look at what's chained in the intervening period. I'm joined 0:01:02.160 --> 0:01:05.080 today by Kirti Vasta, who's a senior associate from our 0:01:05.120 --> 0:01:09.399 Sustainable Materials team. Kirti recently wrote a two part note 0:01:09.440 --> 0:01:13.080 which reviews the science behind chemical recycling. She also gets 0:01:13.120 --> 0:01:16.080 into the expanding capacity in the near term and the 0:01:16.120 --> 0:01:18.880 forecast for the longer term, and she also thinks about 0:01:18.920 --> 0:01:22.000 the investors who are in this market. To access parts 0:01:22.040 --> 0:01:25.680 one and two of Karti's recent research on chemical recycling 0:01:25.720 --> 0:01:28.120 of plastics, B and e F subscribers are going to 0:01:28.160 --> 0:01:30.800 be able to find it at BNF dot com or 0:01:31.160 --> 0:01:33.720 on the Bloomberg terminal. Now, if you like this podcast, 0:01:33.880 --> 0:01:36.840 make sure to subscribe to receive updates on future shows, 0:01:36.920 --> 0:01:38.759 and if you want to share us with others, give 0:01:38.840 --> 0:01:41.200 us a review. But right now, let's jump into our 0:01:41.240 --> 0:01:44.319 conversation with Kirti Vasta to find out what is the 0:01:44.440 --> 0:01:56.560 latest in chemical recycling. Kerti, thank you for coming on 0:01:56.560 --> 0:01:57.160 the show today. 0:01:57.280 --> 0:01:58.160 Thank you for having me. 0:01:58.440 --> 0:02:02.560 We are here for an update on the chemical recycling space. Now, 0:02:02.600 --> 0:02:05.080 for those who aren't familiar, we're going to talk about 0:02:05.120 --> 0:02:08.160 this and actually get into some more detail. But really 0:02:08.200 --> 0:02:11.919 what's happening from a policy standpoint, economics, market dynamics, and 0:02:12.320 --> 0:02:15.919 we're going to update because actually on switched on we 0:02:16.000 --> 0:02:18.680 add a whole show dedicated to the fundamentals of chemical 0:02:18.720 --> 0:02:21.720 recycling back in twenty twenty. But let's just assume that 0:02:22.440 --> 0:02:25.160 nobody's listening to every single one of our episodes and 0:02:25.160 --> 0:02:27.960 they remember exactly what we said four years ago. So, Katy, 0:02:28.080 --> 0:02:31.120 can you just talk a little bit about chemical recycling 0:02:31.240 --> 0:02:36.000 from a definition standpoint and how it differs from mechanical recycling. 0:02:36.440 --> 0:02:40.840 So maybe before I dive into exactly what chemical recycling is, 0:02:41.080 --> 0:02:43.040 it might be helpful to just take a step back 0:02:43.080 --> 0:02:47.200 and explain the majority of recycling processes today and how 0:02:47.240 --> 0:02:49.640 they work and how it relates to chemical recycling. So, 0:02:49.760 --> 0:02:54.919 the majority of recycling infrastructure in place today is mechanical recycling. Now, 0:02:54.960 --> 0:02:57.840 this is a fairly simple process. What it essentially involves 0:02:57.880 --> 0:03:02.120 is plastic waste being sold by grade and type and 0:03:02.160 --> 0:03:05.959 then being washed and shredded and melted back into pellets 0:03:06.080 --> 0:03:08.239 which can then be used to produce plastics. 0:03:08.240 --> 0:03:08.480 Again. 0:03:08.680 --> 0:03:11.440 Now, this is, as I mentioned, a fairly simple process 0:03:11.600 --> 0:03:14.840 and often leads to waste that is of quite a 0:03:14.880 --> 0:03:19.280 low grade, doesn't always go back into high quality packaging materials, 0:03:19.360 --> 0:03:22.160 and can often have a few challenges associated to it 0:03:22.200 --> 0:03:25.840 around the efficiency of that yield, and of course the 0:03:25.919 --> 0:03:28.400 sorting process can be quite a challenge. It it has to 0:03:28.400 --> 0:03:31.200 be very meticulously sorted, and of course that can be 0:03:31.240 --> 0:03:34.360 costly considering the different types of colors and grades and 0:03:34.440 --> 0:03:37.440 types of plastics that are in our packaging and our 0:03:37.520 --> 0:03:38.400 materials today. 0:03:38.680 --> 0:03:42.080 So this is an industry ripe per disruption. It's too complicated. 0:03:42.160 --> 0:03:44.480 Inter Chemical recycling, yes. 0:03:44.400 --> 0:03:48.400 So chemical recycling is a broad term that refers to 0:03:48.720 --> 0:03:52.640 new forms of recycling using chemical processors. And an analogy 0:03:52.760 --> 0:03:55.520 I like to use here is something quite similar to 0:03:55.800 --> 0:03:59.840 unbaking the cake. Right, so assume your plastics is the cake. 0:04:00.200 --> 0:04:05.280 You're basically stripping down plastics back to its original ingredients. 0:04:05.440 --> 0:04:08.280 So this is in some cases your flour, your sugar, 0:04:08.880 --> 0:04:11.720 your eggs, but in the case of plastics, it would 0:04:11.720 --> 0:04:14.600 be the hydrocarbons. So this is the oil that has 0:04:14.680 --> 0:04:18.479 originally gone into producing plastic. And the best part of 0:04:18.640 --> 0:04:22.000 chemical recycling is that you can actually make virgin quality 0:04:22.040 --> 0:04:25.239 plastics again given that you strip down your waist into 0:04:25.360 --> 0:04:27.880 the original ingredients that it was made of, and that 0:04:27.920 --> 0:04:31.200 can go back into producing high quality plastics. Again that 0:04:31.279 --> 0:04:35.680 can go into packaging and your sensitive contact materials. 0:04:36.080 --> 0:04:38.599 So getting it to that virgin grade must be really 0:04:38.640 --> 0:04:41.280 important because when I think of the plastics that are used, 0:04:41.279 --> 0:04:43.680 for example, that are possible to be used for food 0:04:43.720 --> 0:04:46.359 preparation or to hold food, is actually what I'm thinking of, 0:04:46.640 --> 0:04:51.360 is that where needing virgin quality plastics is really really 0:04:51.400 --> 0:04:55.120 important or is it across all applications that virgin materials 0:04:55.120 --> 0:04:56.520 are actually preferred. 0:04:56.640 --> 0:05:00.880 That the area of packaging is currently where the biggest 0:05:00.880 --> 0:05:05.560 demand is for chemically recycled or high quality recycled plastics. So, 0:05:05.800 --> 0:05:09.640 as we know, there's the plastics crisis ongoing, Mismanaged waste 0:05:09.680 --> 0:05:12.120 is ending up in our oceans and our environment, and 0:05:12.200 --> 0:05:15.680 a lot of brand owners of companies like Pepsi, Coca Cola, 0:05:15.760 --> 0:05:19.520 do None are setting targets now to really manage that 0:05:19.600 --> 0:05:24.320 waste and improve their packaging to incorporate more recycled material now. 0:05:24.320 --> 0:05:26.280 In order for them to do that, they need a 0:05:26.360 --> 0:05:30.520 high quality material that can be food contacts approved, it 0:05:30.560 --> 0:05:33.680 can be going into packaging materials and the like. So 0:05:33.880 --> 0:05:37.840 this is where chemical recycling really poses as an opportunity. 0:05:38.040 --> 0:05:41.479 Considering the mechanically recycled material that's currently on the market, 0:05:41.480 --> 0:05:44.120 as I mentioned, is often of quite a low grade. 0:05:44.279 --> 0:05:48.160 So consumer brands that are actually using plastic packaging are 0:05:48.160 --> 0:05:51.080 now coming up with different targets to try and get 0:05:51.120 --> 0:05:53.640 more of the plastic recycled, which then makes the question 0:05:53.839 --> 0:05:57.279 how much of existing plastic waste actually is being recycled 0:05:57.360 --> 0:05:57.800 right now. 0:05:58.120 --> 0:06:02.000 So right now it's extremely low. Globally, plastics recycling is 0:06:02.040 --> 0:06:06.080 around seven to ten percent, and that's extremely low. That's 0:06:06.120 --> 0:06:09.160 way too low, absolutely, and that can vary right between 0:06:09.200 --> 0:06:11.760 different markets. So in Europe it's a little bit better 0:06:11.880 --> 0:06:14.880 because the infrastructure for recycling is already in place, but 0:06:14.920 --> 0:06:17.880 if you look at developing countries, it's extremely low. Often 0:06:17.880 --> 0:06:21.640 plastic waste just ends up getting incinerated and land filled, 0:06:21.920 --> 0:06:24.599 and so there is a real challenge here. And what's 0:06:24.720 --> 0:06:27.800 exciting about chemical recycling actually is that a lot of 0:06:27.800 --> 0:06:31.760 this waste that's often mismanaged it cannot be recycled, can 0:06:31.920 --> 0:06:36.680 actually be recycled through chemical recycling processes. So chemical recycling 0:06:36.720 --> 0:06:40.440 can accept mixed bales of plastic waste, so this is 0:06:40.560 --> 0:06:43.039 all of your different types and colors and grades of 0:06:43.040 --> 0:06:46.400 plastics with a certain level of contamination. It can then 0:06:46.480 --> 0:06:50.400 take that waste and process it and produce the hydrocarbons 0:06:50.400 --> 0:06:53.119 that can then go into making plastics again. 0:06:53.440 --> 0:06:56.320 So such a small amount of plastics are actually being recycled, 0:06:56.360 --> 0:06:57.960 and I am thinking back to the show that we 0:06:58.000 --> 0:07:00.440 did over four years ago on this time, and I 0:07:00.480 --> 0:07:03.320 think the number was roughly the same back then. There 0:07:03.400 --> 0:07:06.240 just isn't a lot that's actually being recycled. So the 0:07:06.279 --> 0:07:09.680 exciting thing about chemical recycling is that we could get 0:07:09.840 --> 0:07:14.360 more of our plastic waste recycled. Are there projects that 0:07:14.440 --> 0:07:17.600 are happening right now or reasons that we might see 0:07:17.640 --> 0:07:19.400 in the industry to believe that this might be the 0:07:19.480 --> 0:07:23.040 right time to see chemical recycling scale and actually fulfill 0:07:23.120 --> 0:07:26.000 its potential to increase the amount of our waste stream 0:07:26.000 --> 0:07:27.320 that's actually being turned over. 0:07:27.760 --> 0:07:31.520 Absolutely yes. So Actually, in the last two or three 0:07:31.600 --> 0:07:36.120 years at BINF we've been tracking capacity of chemical recycling projects, 0:07:36.320 --> 0:07:40.120 and since twenty twenty, we've tracked around forty new chemical 0:07:40.160 --> 0:07:43.440 recycling plants being announced. That accounts for about two point 0:07:43.520 --> 0:07:47.080 three million tons of expected capacity that's likely to be 0:07:47.120 --> 0:07:50.360 commissioned by twenty thirty. So this is really exciting because 0:07:50.360 --> 0:07:52.800 it can really fill that gap that's currently in the 0:07:52.800 --> 0:07:55.800 market in terms of managing and dealing with this this 0:07:55.920 --> 0:07:58.880 waste that's very difficult and hard to recycle. Of course, 0:07:58.920 --> 0:08:02.200 this is still only announced capacity, but it is quite 0:08:02.280 --> 0:08:05.600 exciting to see that companies are really jumping on board 0:08:05.640 --> 0:08:09.000 now and planning to build this capacity in different parts 0:08:09.000 --> 0:08:09.520 of the world. 0:08:09.920 --> 0:08:12.080 So these new projects and these new plants that are 0:08:12.080 --> 0:08:15.400 going in, what type of chemical recycling are they actually 0:08:15.400 --> 0:08:17.600 going to be? Because there are kind of two subsets 0:08:17.600 --> 0:08:21.440 of this, which is feedstock recycling and monomer recycling, And 0:08:21.600 --> 0:08:23.640 I want to know which of the two is getting 0:08:23.680 --> 0:08:27.120 better adoption and might be the bigger one of the two. 0:08:27.360 --> 0:08:30.280 So let me start with monomer recycling. So this is 0:08:30.400 --> 0:08:35.440 essentially a process whereby plastics like polyethylene territhylate also known 0:08:35.440 --> 0:08:38.760 as PET, so this is what your clear plastic water 0:08:38.800 --> 0:08:42.760 bottles are made of and polystyrene are basically broken down 0:08:42.960 --> 0:08:45.640 into that monomer level, so they go from a polymer 0:08:45.679 --> 0:08:49.720 to a monomer. And this is often a fairly energy 0:08:49.760 --> 0:08:53.480 intensive process. But what it then means is that plastics 0:08:53.480 --> 0:08:57.120 which previously would not be easily recycled, can then go 0:08:57.200 --> 0:08:59.760 through this process and we get a higher grade, a 0:08:59.800 --> 0:09:03.320 high equality of scrap, but also more feedstock can actually 0:09:03.320 --> 0:09:06.760 go through this process and produce the monomers to then 0:09:06.800 --> 0:09:10.400 go back into plastics. Now, what's really exciting about monomery 0:09:10.400 --> 0:09:14.120 recycling is that it's not only plastic packaging materials that 0:09:14.200 --> 0:09:17.240 actually can go through this process. So actually just last 0:09:17.480 --> 0:09:21.160 month we had an announcement from BASF who is basically 0:09:21.240 --> 0:09:25.080 using the same process to actually produce recycled nylon which 0:09:25.120 --> 0:09:27.760 is going into jackets that are being sold in Zara. 0:09:28.000 --> 0:09:31.480 So this is actually a really interesting application for all 0:09:31.520 --> 0:09:34.480 types of polymers which can go through this process of 0:09:34.640 --> 0:09:35.600 monomer recycling. 0:09:35.960 --> 0:09:38.680 So when I see this item is made from recycled 0:09:38.720 --> 0:09:41.360 plastic bottles, that is essentially the process it's going through, 0:09:41.400 --> 0:09:44.080 and we can think about chemical recycling as really the 0:09:44.320 --> 0:09:46.400 technology that was used to make that possible. 0:09:46.679 --> 0:09:49.200 Yes, now there is still a gap in terms of 0:09:49.280 --> 0:09:52.840 how much material is being chemically recycled. So for example, 0:09:52.880 --> 0:09:55.679 pet bottles, that is actually one of the most easily 0:09:55.720 --> 0:09:58.680 recycled plastic today, and a lot of it can actually 0:09:58.720 --> 0:10:02.520 be mechanically recycl called quite well. But where chemical recycling 0:10:02.600 --> 0:10:04.640 is really going to make a dent in the market 0:10:04.800 --> 0:10:07.760 is for the flexible wrappers and films that are very 0:10:07.840 --> 0:10:10.400 hard to recycle today, and that's something that isn't quite 0:10:10.400 --> 0:10:13.840 on the market yet as a chemically recycled product. And 0:10:13.880 --> 0:10:17.480 then the other type of recycling process that we look 0:10:17.520 --> 0:10:20.880 at is feedstock recycling, and this is often a process 0:10:20.920 --> 0:10:24.280 called pyrolysis, which is basically heating up plastic waste in 0:10:24.280 --> 0:10:27.280 the absence of oxygen to produce a type of naptha 0:10:27.640 --> 0:10:30.560 or a pyrolysis oil, which can then be used to 0:10:30.600 --> 0:10:33.679 produce your plastics again. Now, this is actually the most 0:10:33.720 --> 0:10:37.920 popular form of chemical recycling capacity that we're seeing being announced. 0:10:38.080 --> 0:10:41.000 About seventy percent of all the capacity we've tracked actually 0:10:41.240 --> 0:10:44.000 is for feedstock recycling, and a lot of this is 0:10:44.040 --> 0:10:49.400 actually being led by plastics producers, including companies like Exomobile, 0:10:49.640 --> 0:10:52.920 Lined or Bizell Borealis to Some of these companies are 0:10:53.200 --> 0:10:56.280 the traditional oil and gas companies who are thinking about 0:10:56.360 --> 0:11:00.480 ways in which they can introduce more sustainable feedstock into 0:11:00.600 --> 0:11:04.440 their value chain and also are basically responding to what 0:11:04.520 --> 0:11:07.559 their customers are now demanding, which is more recycled, more 0:11:07.600 --> 0:11:09.760 greener products for their products and packaging. 0:11:10.120 --> 0:11:12.880 So there are two benefits here when we think about recycling, 0:11:12.920 --> 0:11:16.280 and this really a broader conversation around circular economy. One 0:11:16.320 --> 0:11:18.560 is the reduction of waste and the things that you'd 0:11:18.559 --> 0:11:21.240 pointed out with plastic ending up in the ocean and 0:11:21.320 --> 0:11:23.640 you know, in some cases ultimately our food. But then 0:11:23.760 --> 0:11:28.959 there are the emissions associated with recycling plastics and reducing 0:11:29.000 --> 0:11:32.880 the overall emissions through not using virgin materials and the 0:11:33.280 --> 0:11:37.760 emissions associated with extraction. Are these waste streams through these 0:11:37.800 --> 0:11:41.520 new plants ultimately being made more local and also reducing 0:11:41.640 --> 0:11:45.240 the shipping and supply chain related emissions, or are their 0:11:45.360 --> 0:11:48.319 centers of the world where most of this chemical recycling 0:11:48.400 --> 0:11:50.240 is likely to be placed and we're going to be 0:11:50.320 --> 0:11:53.120 strapped with those shipping related emissions for some time to come. 0:11:53.360 --> 0:11:56.680 That's a great question. And right now, because the market 0:11:56.760 --> 0:11:59.400 is still quite new, a lot of this capacity that 0:11:59.400 --> 0:12:02.600 has been announ hasn't yet come online officially. Right we're 0:12:02.640 --> 0:12:05.520 just starting to see the first large scale plants actually 0:12:05.600 --> 0:12:08.120 come online. It's going to be really interesting to see 0:12:08.160 --> 0:12:12.040 how this kind of dynamic evolves and where exactly chemical 0:12:12.080 --> 0:12:16.000 recycling plants are located. There's currently this debate if chemical 0:12:16.040 --> 0:12:20.720 recycling plants are located close to existing waste management facilities. 0:12:20.800 --> 0:12:23.160 What's really great is what could happen is all of 0:12:23.200 --> 0:12:27.040 the waste that can be mechanically recycled using the existing infrastructure. 0:12:27.120 --> 0:12:29.600 Would be mechanically recycled first, so that would be like 0:12:29.640 --> 0:12:33.720 your rigid plastics, your pet bottles, your shampoo bottles, and 0:12:33.800 --> 0:12:37.400 detergent bottles, which are made of HDPE high density polyethylene. 0:12:37.400 --> 0:12:40.160 That's often an easily recycled material. And then all of 0:12:40.200 --> 0:12:43.240 the rest of the plastics which can't be easily recycled, 0:12:43.280 --> 0:12:45.800 will go through a chemical recycling plant. And what that 0:12:45.880 --> 0:12:48.800 means is for a chemical recycler is they're located very 0:12:48.800 --> 0:12:52.160 close to the existing feedstock stream that might be the 0:12:52.240 --> 0:12:56.000 remainder of waste from a material recovery facility site. And 0:12:56.080 --> 0:12:58.960 so that's kind of one way that they could be positioned. 0:12:58.960 --> 0:13:01.400 It would reduce their car in terms of shipping the 0:13:01.440 --> 0:13:05.440 feedstock that they need from maybe other areas of the country. Now, 0:13:05.480 --> 0:13:09.439 another way which we see potential chemical recycling plants being 0:13:09.480 --> 0:13:13.280 positioned is at a petrochemical facility. So this would be 0:13:13.320 --> 0:13:16.880 integrated within a large petrochemical complex, for example, and the 0:13:16.880 --> 0:13:20.240 benefit there would be that they would have the existing infrastructure, 0:13:20.520 --> 0:13:22.720 so this is like the pipes and the tanks to 0:13:22.800 --> 0:13:25.520 store the different types of feedstocks that are being produced 0:13:25.600 --> 0:13:28.920 and This would also result in a cost saving if 0:13:29.080 --> 0:13:31.640 the chemical recycling plants were to be located here, and 0:13:31.679 --> 0:13:34.319 then the feedstock produced would go straight into a steam 0:13:34.360 --> 0:13:37.480 cracker at the petrochemical facility and also result in a 0:13:37.520 --> 0:13:38.080 cost saving. 0:13:38.520 --> 0:13:40.520 Can you talk about some of the companies that are 0:13:40.559 --> 0:13:43.160 actually in this space. Are there big brands that are 0:13:43.160 --> 0:13:46.200 doing this and is it being spun out from existing 0:13:46.240 --> 0:13:49.640 companies like, for example, the chemical recycling companies or the 0:13:49.640 --> 0:13:52.760 petrochemical companies or are they new companies that are looking 0:13:52.800 --> 0:13:56.040 to join partnerships with these existing players in this space. 0:13:56.400 --> 0:13:59.640 Yes, So what's really interesting in this market is that 0:13:59.679 --> 0:14:03.000 there is a really diverse group of players. So you've 0:14:03.040 --> 0:14:07.079 got the pure play chemical recycling companies. These are fairly new, 0:14:07.160 --> 0:14:11.600 early stage startups. So companies include mirror technology, plastics, energy, 0:14:11.720 --> 0:14:14.520 and what they're doing is they are in many cases 0:14:14.600 --> 0:14:18.800 partnering with plastics producers. So this is companies like Dow 0:14:19.000 --> 0:14:22.120 Lined or Bezel to actually sell the feedstock that they're 0:14:22.160 --> 0:14:25.840 producing from their chemical recycling plants to these companies that 0:14:25.880 --> 0:14:30.280 want to produce more recycled plastics. The other really interesting 0:14:30.360 --> 0:14:33.040 area that we've seen companies get involved in is the 0:14:33.080 --> 0:14:37.280 brand owners companies like the non Nesle, Coca Cola that 0:14:37.400 --> 0:14:40.640 have targets to really increase the amount of recycled material 0:14:40.800 --> 0:14:44.960 in their products are forming partnerships directly with chemical recyclers 0:14:45.200 --> 0:14:48.120 like Loop Industries, for example. And this is mostly around 0:14:48.200 --> 0:14:51.280 pet given that that's really one of the areas where 0:14:51.440 --> 0:14:54.360 a lot of demand for the recycling material is today. 0:14:54.680 --> 0:14:56.920 So you've mentioned some of the consumer brands that have 0:14:57.000 --> 0:15:00.800 created these targets. How are they incentivizing people to actually 0:15:00.840 --> 0:15:03.800 recycle these things properly if you will? Are they just 0:15:03.840 --> 0:15:07.080 going into the usual municipal waste streams and it's about 0:15:07.080 --> 0:15:10.280 how well things are then collected from that point, I mean, 0:15:10.280 --> 0:15:12.760 I guess my question is really how are they going 0:15:12.800 --> 0:15:14.240 about achieving their targets. 0:15:14.640 --> 0:15:17.920 Yeah, it's a really good question. So for some companies 0:15:18.160 --> 0:15:21.920 like Denan Nesle, they have targets to increase their post 0:15:21.960 --> 0:15:25.720 consumer recycled content in their products and packaging by fifty 0:15:25.760 --> 0:15:28.680 percent by twenty twenty five. Now twenty twenty five is 0:15:28.760 --> 0:15:31.880 round the corner, and we know that that material isn't 0:15:31.960 --> 0:15:34.560 quite on the market and isn't available for these brand 0:15:34.560 --> 0:15:37.600 owners to really make use of and incorporate today. So 0:15:37.920 --> 0:15:40.440 it's a really interesting question to see kind of what 0:15:40.560 --> 0:15:43.840 exactly will happen and how these companies will reach their 0:15:43.840 --> 0:15:46.520 targets by next year. One thing they should absolutely be 0:15:46.600 --> 0:15:49.360 doing more of is thinking about the end of life 0:15:49.480 --> 0:15:52.480 management options for their plastic packaging. What we have seen 0:15:52.560 --> 0:15:56.760 is some companies redesigning their packaging to make it more recyclable. 0:15:56.880 --> 0:16:01.120 I know Coca Cola has recently introduced right bottles without 0:16:01.160 --> 0:16:03.800 the label around the side of it, which is basically 0:16:03.840 --> 0:16:07.200 reducing the amount of packaging needed but also improving that 0:16:07.280 --> 0:16:10.480 recyclability of that material. So these are sorts of design 0:16:10.600 --> 0:16:13.520 changes which we're likely to see more of as this 0:16:13.640 --> 0:16:17.320 material becomes kind of more in demand and required on 0:16:17.360 --> 0:16:17.800 the market. 0:16:18.120 --> 0:16:21.720 Is there a policy pressure in policy incentives to increase recycling. 0:16:22.040 --> 0:16:24.440 Yes, So policy is the one thing that I would 0:16:24.480 --> 0:16:27.840 say has really changed since the last time that we 0:16:27.920 --> 0:16:30.640 looked at this area of chemical recycling and the impact 0:16:30.640 --> 0:16:32.960 it can have. So in the last few years, we've 0:16:33.000 --> 0:16:37.440 seen governments introduce post consumer recycle content mandates. For example, 0:16:37.480 --> 0:16:40.840 in the UK, there's currently a thirty percent recycled content 0:16:40.920 --> 0:16:43.760 mandate for all plastic packaging on the market today, and 0:16:44.000 --> 0:16:47.160 if that isn't met there's a plastics tax which is 0:16:47.200 --> 0:16:51.200 imposed on companies, so this is really driving demand now 0:16:51.240 --> 0:16:54.280 for more recycled material on the market. Now, we did 0:16:54.280 --> 0:16:57.120 some number crunching to really understand what the demand and 0:16:57.160 --> 0:17:00.480 supply looks like currently in the UK, and we believe 0:17:00.480 --> 0:17:04.280 there's quite a significant supplied deficit of around thirty thousand 0:17:04.359 --> 0:17:07.479 metric tons of recycled plastic, which is high grade and 0:17:07.520 --> 0:17:10.679 can go back into some of these packaging applications. In 0:17:10.720 --> 0:17:14.080 other markets as well, Europe is considering a similar post 0:17:14.080 --> 0:17:17.840 consumer recycled content mandate. France Spain that have also introduced 0:17:17.840 --> 0:17:21.800 similar mandates, So this is really pushing corporates that maybe 0:17:21.840 --> 0:17:24.119 don't have their targets in place already to have to 0:17:24.160 --> 0:17:26.080 abide by these rules as well. 0:17:26.480 --> 0:17:29.240 So policy makers want to see more recycled, the brands 0:17:29.320 --> 0:17:32.200 themselves want to see more recycled, and I think most 0:17:32.240 --> 0:17:34.520 everyday citizens I'm just going to speak from my own 0:17:34.680 --> 0:17:37.080 heart here, would like to see less plastic in the 0:17:37.080 --> 0:17:39.199 waste stream and more things being turned around in the 0:17:39.200 --> 0:17:42.480 circular economy. But then that brings us to the economics 0:17:42.520 --> 0:17:44.639 of it all and whether or not that really holds up. 0:17:44.760 --> 0:17:47.000 So let's just talk a little bit about the green 0:17:47.080 --> 0:17:51.240 premium that's currently associated with certain types of pet and 0:17:51.520 --> 0:17:52.919 really how big that is. 0:17:53.760 --> 0:17:56.720 So at BINGF, what we did was some economic analysis 0:17:56.760 --> 0:18:01.120 to really understand how profitable chemical recycling plants could be. Now, 0:18:01.160 --> 0:18:04.359 the advantages, of course, chemical recyclers have a low feeds 0:18:04.359 --> 0:18:06.960 doot cost because they're using a low quality scrap which 0:18:07.000 --> 0:18:10.399 would otherwise be incinerated or landfilled, and they're producing a 0:18:10.520 --> 0:18:14.800 very high quality, potentially virgin quality material, which means that 0:18:14.840 --> 0:18:17.159 you can sell it on the market at the same price. 0:18:17.320 --> 0:18:19.480 But in the last few years, what's also been really 0:18:19.520 --> 0:18:23.080 interesting to see is the green premium that's been stacked 0:18:23.119 --> 0:18:25.760 on top of that virgin price for some of these 0:18:25.920 --> 0:18:30.080 recycled plastics. And so we think currently for materials like 0:18:30.160 --> 0:18:35.000 pet and polyethylenes which are chemically recycled, given the green 0:18:35.080 --> 0:18:39.359 credentials of those materials, there's roughly a fifty percent green 0:18:39.440 --> 0:18:43.159 premium above the virgin price in markets like the US 0:18:43.240 --> 0:18:46.720 and Europe. So fifty percent is of course a huge 0:18:46.840 --> 0:18:49.640 markup right, And as a result, what we also looked 0:18:49.680 --> 0:18:53.159 at is the internal rate of return of projects. So 0:18:53.200 --> 0:18:56.080 we looked at a typical chemical recycling plant in the 0:18:56.240 --> 0:18:59.160 US and what we found is that the IRRs can 0:18:59.200 --> 0:19:02.240 be in the range of fourteen percent to twenty two percent, 0:19:02.280 --> 0:19:03.840 which is really quite high. 0:19:04.119 --> 0:19:06.399 As we think about the future, do you expect to 0:19:06.440 --> 0:19:09.520 see these IRRs staying at this relatively high place or 0:19:09.560 --> 0:19:11.320 do you think things are going to actually get cheaper 0:19:11.320 --> 0:19:13.920 in the future making this an easier market to enter. 0:19:14.320 --> 0:19:16.639 Yeah, so that's a great question. What we did in 0:19:16.680 --> 0:19:20.159 our report was we broke down the different cost components 0:19:20.200 --> 0:19:22.800 associated with a chemical recycling plant. So we looked at 0:19:22.880 --> 0:19:26.000 the capex costs, the opex costs, and of course the 0:19:26.000 --> 0:19:28.560 feeds dot costs as well. And what we found actually 0:19:28.680 --> 0:19:31.479 is compared to the previous year when we looked at 0:19:31.520 --> 0:19:34.639 the economics of these recycling plants, that capex costs have 0:19:34.720 --> 0:19:37.800 actually risen quite a lot and it's had a pretty 0:19:38.000 --> 0:19:42.320 significant impact if we look at the overall costs associated 0:19:42.359 --> 0:19:44.920 to building these plants. And that's of course, because construction 0:19:45.000 --> 0:19:48.240 costs have increased over time, energy costs have as well, 0:19:48.320 --> 0:19:50.879 material costs have, and so a lot of the plants 0:19:50.920 --> 0:19:54.160 that were planned to come online back in twenty twenty 0:19:54.200 --> 0:19:56.600 one and twenty twenty two actually got pushed back and 0:19:56.640 --> 0:19:59.959 delayed because of these rising costs and in some cases 0:20:00.040 --> 0:20:03.760 because of permitting delays as well. So if capex continues 0:20:03.800 --> 0:20:06.679 to rise over time, this could pose a problem to 0:20:06.920 --> 0:20:10.120 the returns that these plants could make, but we are 0:20:10.200 --> 0:20:13.520 hoping to see them stabilize somewhat and that to get 0:20:13.560 --> 0:20:16.840 easier over time. The other area that is really interesting 0:20:16.880 --> 0:20:20.080 here is the feedstock costs. So currently there isn't really 0:20:20.119 --> 0:20:24.960 a commoditized, transparent market for plastic scrap, and it's a 0:20:25.000 --> 0:20:27.560 challenge for chemical recyclists to really get hold of the 0:20:27.600 --> 0:20:30.159 scrap that they need in the correct format at a 0:20:30.200 --> 0:20:34.120 price which is affordable for them to process. Scrap Prices 0:20:34.160 --> 0:20:37.000 for pet for example, in the US, have been particularly 0:20:37.080 --> 0:20:40.159 volatile over the last three or four years, as have 0:20:40.359 --> 0:20:45.200 hdpe prices. So these are really interesting market dynamics which 0:20:45.280 --> 0:20:47.720 can have a really big impact in terms of how 0:20:47.760 --> 0:20:50.199 it can change the economics of these plants. 0:20:50.600 --> 0:20:53.080 Let's talk a little bit about how people may be 0:20:53.440 --> 0:20:57.640 perceiving the recycled plastics and actually why with an end 0:20:57.680 --> 0:21:00.520 consumer item, I might see, you know, ninety percent recycled 0:21:00.520 --> 0:21:03.840 plastics instead of one hundred percent recycled, and where there 0:21:03.840 --> 0:21:08.600 are needs to actually blend the recycled with the virgin feedstocks. 0:21:09.000 --> 0:21:12.160 So today the industry is still very far from producing 0:21:12.320 --> 0:21:16.040 one hundred percent chemically recycled plastics, but as the technology 0:21:16.040 --> 0:21:19.479 scales and more capacity comes online, we do expect to 0:21:19.560 --> 0:21:22.960 get closer to that one hundred percent mark. But currently 0:21:23.000 --> 0:21:26.880 what actually happens is, particularly from feedstock recycling, we get 0:21:26.920 --> 0:21:30.480 the pyrolysis oil, and often that pyrolysis oil doesn't meet 0:21:30.520 --> 0:21:34.880 the specifications that are required to produce plastics because they 0:21:34.960 --> 0:21:38.320 still have some forms of additives that are used in 0:21:38.359 --> 0:21:41.840 the original plastic manufacturing process. So that pyrolysis oil it 0:21:41.840 --> 0:21:45.240 has two options that either can go through an upgrading process, 0:21:45.320 --> 0:21:49.200