Cross Asset Solutions
Citi GPS: Rethinking Single Use Plastics
 

Citi Global Perspectives and Solutions (Citi GPS)

August 27, 2018

Citi GPS: Rethinking Single Use Plastics

Responding to a Sea Change in Consumer Behavior

“There’s no such thing as ‘away’. When we throw anything away it must go somewhere” — Annie Leonard, Executive Director of Greenpeace USA

Roughly half of global consumer packaging is made of plastic and over a third of resin that is produced by Chemical companies goes into packaging end markets. Plastics have become a staple of daily life in the modern world, steadily gaining share from other packaging materials over the last 50 years based on their low cost, durability, convenience, and malleability. However, environmental concerns around landfill contamination have grown steadily alongside increased plastics use, with a great deal of recent attention on ocean contamination and the growth of microplastics.

While debates around the sustainability and recyclability of plastics have been long-running in Europe and the Americas, the Chinese government took a revolutionary approach earlier this year, deciding it would no longer import ~50% of the world’s scrap plastic and paper. As China has been the dominant importer of plastic scrap with an annual plastics consumption of 8 million tonnes, this has led to a collapse in the price of various recovered plastics materials, and a glut of oversupply piling up in Western ports.

Echoing China’s actions, national and local governments have launched their own plastics bans. The U.K. has taken the lead position on preventing plastics waste with proposed bans on plastic cutlery, straws, and cotton buds/swabs. The EU has followed with their own ban, indicating once fully implemented in 2030 the changes could cost businesses over $3.5 billion per year. Some of the most aggressive bans have been in emerging market countries; given these countries’ per capita plastic use is very low, the bans have the potential to sharply impact future consumption growth of plastics.

In response to increased environmental scrutiny, the plastics industry is not standing by idly. Chemical companies are adapting their portfolios and practices towards more environmentally-conscious strategies, focusing on light-weighing their products, investing in plastic recycling companies, improving recycling systems, and creating bio-based polymers. Almost 1 million tonnes of biodegradable plastics capacity has been built, and with appropriate legislation, the economic incentives could be established to build-out these higher-cost product capacities, addressing the environmental concerns.

As plastics face increased regulatory and consumer scrutiny, substrates including metal, glass, and paper may potentially be positioned to gain back some market share. We see a few potential ‘battleground’ packaging products, including soft drink bottles, coffee cups, protective packaging for e-Commerce, and retail bags. However, consumer choices are not always clear cut, as other substrates may offer more favorable recyclability and waste performance at the expense of plastics’ cost and performance advantages.

In response to increased environmental scrutiny, the plastics industry is not standing by idly. Chemical companies are adapting their portfolios and practices towards more environmentally-conscious strategies, focusing on light-weighing their products, investing in plastic recycling companies, improving recycling systems, and creating bio-based polymers. Almost 1 million tonnes of biodegradable plastics capacity has been built, and with appropriate legislation, the economic incentives could be established to build-out these higher-cost product capacities, addressing the environmental concerns.

Click here to visit Citi GPS and access this piece in full