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Global plastics usage and waste generation. (Source: IHS Markit)
Global plastics usage and waste generation. (Source: IHS Markit)

The growing global plastics sustainability movement is one of the biggest potential disruptors for the plastics industry and is putting future plastics resin demand and billions of dollars of industry investments at risk. Sustainability efforts around plastics will, in fact, have significant implications for the entire petrochemical value chain, extending to feedstock markets, according to initial research from IHS Markit.

The study, Plastics Sustainability - A Sea Change: Plastics Pathway to Sustainability,” from a research alliance led by IHS Markit, analyzed the plastics demand growth for six key plastic markets.

Spurred by images of the “Great Pacific Garbage Patch,” a growing accumulation of floating ocean plastic waste estimated to be larger than France and weighing in excess of 593 million pounds, many global consumers have become increasingly outspoken in regards to plastics use and recycling.

Some figures shared by both the Ellen Macarthur Foundation and the World Economic Forum, estimate that by 2050, there will be more plastic than fish in the ocean, and that annually, according to THE OCEAN CLEANUP, 8 million metric tons of plastic waste are added to the world’s oceans, much of it from rivers and mismanaged plastic and municipal waste from Asia. By 2025, the non-profit agency estimates the amount of plastic waste added to the world’s oceans will nearly double.

Plastics sustainability is, by far, the most critical issue facing the global base chemicals & commodity plastics industry during the decades to come,” said Nick Vafiadis, vice president of plastics research at IHS Markit and lead author of Plastics Sustainability - A Sea Change: Plastics Pathway to Sustainability.

Vafiadis pointed out that during the past decade, a rapid increase in consumer activism, and regulatory bans and restrictions regarding plastics consumption and the handling of plastics waste, has been seen, particularly as it relates to single-use plastics. It is a trend that is going to continue, and the entire petrochemical value chain will be impacted by the coming changes in plastic demand growth.

While the petrochemical value chain continues shifting with various market drivers, the study said that “plastics sustainability is no less a fundamental driver.” However, “plastics sustainability is, perhaps, one of the least understood market drivers from a demand, supply, regulatory and technology standpoint,” said Vafiadia.

“It’s a challenge that involves every participant of the value chain – from energy to consumer, encompassing both the private and public sector. Importantly, plastics sustainability also is one of the biggest potential disruptors on the policy front and an issue that could lead to greater regulation (including bans) and/or deselection by consumers, retailers and brand owners.”

The demand for plastics also effects upstream feedstock demand (olefins, aromatics and chlorine), which is critically important to the petrochemical value chain, as well as for integrated oil companies seeking refuge in petrochemicals from uncertain refining markets, Vafiadis said.

New market pressures may threaten demand growth

According to IHS Markit, global demand for PE, the world’s most-used plastic, has nearly doubled during the last 20 years. IHS Markit expects 2018 global PE demand to exceed 100 million metric tons (MMT).

However, significant new market pressures, including a rise in consumer expectations around sustainability, along with tightening environmental regulations in mature markets such as Europe and key growth markets such as China, could threaten future demand growth, which is why producers are keen to understand and plan for the implications, Vafiadis said.

In the study, researchers examined the potential risk to the entire supply chain from energy to resins. That initial analysis indicated that a 10 MMT decline in PE led to a 10 MMT loss for ethylene and would reduce global operating rates for ethylene production by 3% to 5%, which is equivalent to slightly less than two years of demand, IHS Markit said. That, in turn, could reduce global demand for natural gas liquids (NGLs) and naphtha, depending on ethylene feedslate assumptions. 

A significant reduction in the demand growth for plastics could have a fairly pronounced impact on refiners, in particular, who are already facing long term declining demand for transportation fuels globally due to mobility changes and increasing fuel efficiency standards in the world’s automotive fleet,” Vafiadis said.

Vafiadis commented that to counter that growing demand destruction and market uncertainty, refiners are increasingly seeking refuge in petrochemical markets, but that option would also become less viable if there is a rapid or significant decline in plastics resin demand growth.

The approach toward sustainability: Shift from reactive to proactive

There is a clear shift happening in the approach toward sustainability moving from reactive to proactive, according to Robin Waters, director, plastics planning and analysis, chemicals, at IHS Markit and co-author of the IHS Markit study.

Waters explained that in the reactive phase, the target was preventing littering and focusing on plastics waste. Thereafter, the focus moved to managed disposal of plastic waste (incineration, landfill, export, recycling).

Now, we are focused on circularity, often described as a circular economy, which makes the producer a stakeholder in the careful management and reuse of plastic and reducing end-waste. This is critical, but before you can truly achieve viable solutions, you have to understand the scope of the challenge or the opportunity, which plastics sustainability presents,” Waters said.

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