Chemical recycling: breaking down the current landscape

Challenges and opportunities of closing the plastic loop

June 2022

Trusted Intelligence woodmac.com

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Plastic waste, particularly from

plastic packaging, has captured
the world’s attention…

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…but only a few plastics can be

handled by existing mechanical
recycling processes…

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…opening the door for

chemical recycling to capture
residual plastic material

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Table of Content

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Overview 6
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Technology status update 9

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Challenges & opportunities 13

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Path forward 17
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Overview woodmac.com

Chemical recycling has the potential to capture over 50 million tonnes of

plastic packaging waste that is currently considered “non-recyclable”
Other rigids and films represent the largest opportunity to pull materials into the circular
economy via chemical recycling
Global plastic packaging demand growth Non-recycled plastic packaging waste in 2019
10%

Bottles
Growth rates (%)

Other Rigids
5%
Target market
Simple films for chemical
recycling

Complex films

0%
2020 2025 2030 2035 2040 0 13 25
million tonnes

Bottles Other Rigids Simple films Complex films PET HDPE PP LDPE LLDPE Other polymers

Source: Wood Mackenzie’s Circular Plastic Packaging Report 2022 6

Overview woodmac.com

Chemical recycling reduces plastic into component molecules whereas

traditional mechanical recycling retains a polymer’s molecular structure
Beyond the ability to process a wider variety of materials, outputs from chemical recycling can
go into higher value end-use applications
Key differences between chemical and mechanical recycling
Flake

PET HDPE Al Baled material

Waste Pellet

Feedstock collection Sortation Processing Output & end-uses

Incentivises a wider variety
of plastics to be collected,
Chemical potentially boosting
recycling collection rates
• More tolerant of low-
quality waste
• Might need more detailed
separation to supply
polymer-specific
technologies
• High carbon intensity
• Lower process loss due to
its ability to process a
diverse range of waste
• Yield might struggle under
commercial operations
• Virgin-quality material
• Acceptance as recycled
materials are subject to
regulatory bodies

Driven by local labour and • Requires a good bale • Lower carbon intensity • Many applications are
economic dynamics quality, which is cleaned • Significant process loss considered downcycling
Mechanical and sorted optically or due to bale purity and • Food-contact applications
recycling manually quality are limited to specific
polymers

Source: Wood Mackenzie Chemicals 7

Overview woodmac.com

Both categories of chemical recycling, “plastics to plastics” (P2P) and

“plastics to fuels” (P2F), face unique challenges and opportunities
P2F projects face headwinds when not incorporated into an integrated chemicals platform

P2F P2P
Feedstock recycling Chemical depolymerisation Solvent purification
Plastic waste is heated to produce Plastic waste is broken down chemically Plastic waste is dissolved in a solvent and
Description hydrocarbon products or syngas into its building blocks virgin-quality polymer is extracted

• Glycolysis
• Pyrolysis
• Hydrolysis • Supercritical fluid extraction
• Gasification
Process • Methanolysis • Selective dissolution
• Catalytic pyrolysis
• Enzymatic depolymerisation • Froth flotation
• Hydrothermal treatment
• Catalytic depolymerisation
• Enerkem
• Loop Industries Consider changing layouts
• Encina • PureCycle
Examples • Eastman
• Brightmark • APK
• Teijin
• Plastic Energy
• PET/ polyester • PET
• PS • PP
Feedstock Mixed plastics
• PA6 • PE
• PLA • PS

Fuel Monomer Polymer

Output
(Pyrolysis oil, methanol, hydrogen) (BHET,MEG, DMT, Styrene, CPL)
Source: Wood Mackenzie Chemicals 8
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Technology status update

Feedstock recycling/ thermolysis | Chemical depolymerisation | Solvent purification

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Technology status update woodmac.com

Feedstock recycling/ thermolysis

Feedstock recycling/ thermolysis leads the chemical recycling development with commercially
scalable projects and significant cost-advantage
Status of projects Cost considerations
100 87 9,000 100%

US$/tonne of capacity
Number of projects

61

50 4,500 50%

4
0 0 0%
Proof of Pilot / Early Commercial Investment cost Operating cost
Concept / Lab Commercial ramp-up

Microwave pyrolysis Catalytic hydrothermal Bale feedstock Catalyst & chemicals

Catalytic pyrolysis Gasification Cost range Chemical depoly. Solvent pur. Utilities Labour
Pyrolysis Maintenance & tax

Pyrolysis drives the overall growth of Technical and economic improvements in
feedstock recycling/ thermolysis development the feedstock recycling/ thermolysis
and is well-positioned for commercial-scale process over the last few years have driven
operations, with up to 400,000 tonnes per investment costs down to average at
year of input capacity US$2700/tonne.
Utility costs consume 47% of the total
operating cost underpinned by high electricity
and natural gas utilization in the cracking and
hydrotreatment process

Source: Wood Mackenzie Chemicals 10

Technology status update woodmac.com

Chemical depolymerisation
Chemical depolymerisation shows the most promise in tackling the plastic waste challenge of
providing food-grade recycled contents by producing virgin-quality plastic monomers
Status of projects Cost considerations
20 8,000 100%

US$/tonne of capacity
15 15
Number of projects

15

10 4,000 50%

0 0 0%
Proof of Pilot / Early Commercial Investment cost Operating cost
Concept / Lab Commercial ramp-up

Glycolysis Hydrolysis Bale feedstock Catalyst & chemicals

Methanolysis Enzymatic depoly. Cost range Feedstock rec. Solvent pur. Utilities Labour
Total Maintenance & tax

Glycolysis, primarily used to break down PET
waste into BHET, drives the growth of the
chemical depolymerisation development;
current glycolysis projects can process up to
100,000 tonnes of input waste annually
The variety of technology maturity and Catalyst & chemicals make up 73% of the
process under the chemical total operating cost, driven by the use of
depolymerisation results in a wide range of reagents (glycol, methanol, alkaline) and
required investment cost ranging from enzymes to break down waste into its
US$1000 – 7000/tonne monomer components

Source: Wood Mackenzie Chemicals 11

Technology status update woodmac.com

Solvent purification
While still lagging behind other technologies, solvent purification provides the quickest path
for plastic waste to re-enter the value chain at a higher quality than mechanical recycling
Status of projects Cost considerations
5 6,000 100%
4

US$/tonne of capacity
Number of projects

3
2 3,000 50%
2
1
1

0 0 0%
Proof of Pilot / Early Commercial Investment cost Operating cost
Concept / Lab Commercial ramp-up

Froth flotation Bale feedstock Catalyst & chemicals

Selective dissolution Cost range Feedstock rec. Chemical depoly. Utilities Labour
Supercritical fluid extraction
Total Maintenance & tax

Supercritical fluid extraction leads the solvent
purification development by converting PP
waste back into polymers without high energy
or chemical reactions involved; announced
supercritical fluid extraction projects have an
average input capacity of 50,000 tonnes
Source: Wood Mackenzie Chemicals
Being a novel technology, solvent
purification bears a higher investment cost
compared to other technologies; it has the
potential to lower costs once it is proven to
be scalable
A combination of bale feedstocks and catalyst
& chemicals costs contribute to over 82% of
the total operating cost, which is underpinned
by the waste types and the solvent to dissolve
and precipitate waste back into polymers
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Challenges & opportunities

Feedstock sourcing | Brand commitments | Regulatory positions

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Challenges & opportunities woodmac.com

Systemic challenges around chemical

recycling need to be addressed to enable
viable, large-scale implementation
One of the largest challenges is the access to
sufficient bale feedstocks
A gap between bale supply and demand has existed
since China’s National Sword policy was enacted in
2015 and was heightened by constraints in waste
collection and transportation during the pandemic

Improved collection and MRF infrastructure are

critical to driving wider arrays of plastic waste to be
processed by different chemical recycling technologies

Funds from environmental legislation, such as

extended producer responsibility (EPR) and plastic
levies, could be leveraged to support the development
of collection, sortation and recycling systems

Source: Wood Mackenzie 14

Challenges & opportunities woodmac.com

Chemical recycling commercialisation is supported by several major

FMCG brands as a way to boost available recycled content
While the timeline towards commercialisation may miss 2025 targets, chemical recycling
should help fill the gap by providing high-quality contents to meet brands’ targets
Major FMCG brand progress towards 2025 plastics targets

% PCR by weight of global Total Plastic Packaging Demand Chemical Recycling

plastic packaging Investments / Partnerships
2020 Demand (kt) 2018-19 growth (%)
gr3n
The Coca-Cola Company 25% 2,961 0.4% Ioniqa
Equipolymer

PepsiCo 25% 2,350 0.0% Carbios

Carbios
30%
Nestlé 1,267 -9.9% Enval
gr3n
50%
Danone 717 -2.4% Eastman

25% Ioniqa
Unilever 690 0.0% gr3n
2020 2025 Target
CreaCycle
Source: Ellen MacArthur Foundation 2021 Progress Report; *WWF 2021 Transparency Report; Wood Mackenzie Analysis; company websites 15
Challenge & opportunities woodmac.com

Regulations hold a critical role in reducing the barrier of entry for

chemical recycling and fostering collaborations across key stakeholders
Consistent policies and collective acceptance will be key factors driving chemical recycling
implementations around the world
Europe
• EU Waste Framework
Directive accepts chemical
recycling under the ‘recycling’
definition only if its output returns
to the plastic value chain
• EC authorized plastics generated
from the feedstock recycling for
food-contact use (282/2008/EC)

North America
• 18 U.S. states have passed laws
exempting chemical recycling from
solid waste & recycling laws
• EPA is considering regulating
pyrolysis and gasification under the
federal Clean Air Act
Source: Wood Mackenzie Chemicals
Middle East
• Chemical recycling is aligned
with Saudi Vision 2030 objectives
to improve waste management
and municipal recycling
Northeast Asia
• South Korean Ministry of Food and
Drug Safety allows chemically-
recycled PET for food-contact
materials (2020-43)
• Japan’s Containers & Packaging
Recycling Law set a minimum
yield for each chemical recycling
technology to recycle plastic
containers and packaging
• China’s Green Industrial
Development program encourages
chemical recycling applications
to recycle low-value plastic waste
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Path forward

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Path forward woodmac.com

Chemical recycling demonstrates a lot of potential to enable the plastic

packaging industry achieving circularity
Accessible feedstock, expanding brand support, and consistent regulations across
geographies are keys for chemical recycling to overcome barriers and accelerate adoption
Global plastic packaging waste outlook  Wood Mackenzie expects waste allocation for chemical
recycling to experience an accelerated growth at 14.8% CAGR
200
CAGR over the forecast period, capturing over 13 million tonnes of
2020-2040 plastic packaging waste by 2040.
 Whilst most chemical recycling technologies are developed in
14.8%
Europe and North America, there is an urgent call to deploy
million tonnes

chemical recycling in emerging economies such as Asia and

4.3% Africa, as those regions are anticipated to lead packaging
100 demand growth.
2.3%
 Various chemical recycling processes are established to tackle
different challenges in plastic waste management. Looking
2.0%
forward, the development of these technologies will depend on:
» Strong regulatory support to unlock financial resources and create
1.5% demand markets,
0
» Collaboration amongst plastic producers, brands, and waste
2020 2025 2030 2035 2040 management companies to provide sufficient feedstocks to meet
chemical recycling needs,
Mismanaged Landfill Incineration
» Transparency and traceability to ensure chemically-recycled
Mechanical Recycling Chemical Recycling materials are re-entering the plastic value chain and displacing
virgin material requirements in a variety of applications.
Source: Wood Mackenzie’s Circular Plastic Packaging Report 2022 18
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Wood Mackenzie can help navigate through the chemical recycling

development and provide strategic insight to your business

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To purchase the Recycled PET Service, please email us at chemicals@woodmac.com

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Circular Plastic Packaging Report

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• What happens next with legislation and brand commitments?

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To purchase the ‘Circular Plastic Packaging’ Report, please email us at chemicals@woodmac.com

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