Chemical Conversations: PETCORE EUROPE - Recycled Polymers

hello everyone and welcome to this chemicals conversation podcast for argus recycle polymers brought to you by argus media I am Chloe Kinna and I'm the editor for the Argus Recycle Polymers reports. And I'm joined today by Antonello Chiotti, the president of Petcore Europe. Antonello, welcome back and thank you again for joining us. We're really looking forward to joining you at the Petcore Europe Annual Conference that's held in Brussels over the 4th and 5th of February.

But before that, we really wanted to take this opportunity, as we did last year, to take a look back on the previous year and more importantly, hear about your outlook for the year ahead for Recycle PET and the Virgin PET market in Europe. so for 2024 there's another challenging year for the european pt markets and particularly the recycling markets in europe as a whole maybe you could give us a little bit of a summary of how you saw things yeah

As you said, 2024 was a sort of peculiar year. We were expecting somehow to come to an end the discussion on the PPWR. Keep in mind that by January 25, so now, the SUP, the single-use plastic directive, is starting to have its own effects.

But what is the problem? The problem is that the two legislations are not aligned each other in the sense that we see the SUPD talking, since this is a directive, by the way this was expected, the SUP is talking to each member state, applying specific target as average for the country. while the PPEWR is talking related to the brains.

So it's clear that the target that you have in the SUP are not aligned or not totally aligned with the target that we have in the PPWR. And I want to be more specific. For example, regarding the 25 recycling content, apart from the fact that we don't know yet if the chemical recycling is counted in the recycling content, while the SUP is asking to have an average 25% minimum recycling content in the bottle per country in the PPWR that is a regulation and as such.

implemented as it is, there are the brands that are entitled that they are forced to reach the minimum target by size and by size of the bottle. So you have to have a 25% in all the half liter bottle. in all the one little bottle and so on. You cannot somehow blend the size of the bottles and to have 25% in general applied as recycled content. You need to be very specific.

So this is what's happening from the legislation point of view, and the situation is still cloudy. Also, by the way, because if you don't achieve a single brand, the 25% target, at present there is no penalty for the ones that do not behave. So, on one side there is a strong push. On the other side, there is no penalty. By applying the 25% minimum, you have extra cost and the market is a little bit in a very cloudy situation, as I said.

because the situation that there is no penalty is then impacting how the brands are actually adding the 25 percent and we have to go back when in 2019 the SUP was approved, the main target was to increase collection in Europe and the usage of recycling content in Europe.

What's happening now with such a, let's say, a hazy situation where we are here? This is happening that brands are reluctant to add because there is this gap in terms of costs and second there is an opening from the brands of a huge influx imports of this recycled material from outside of Europe. And this, we come to a structural problem that Europe has. If we compare the cost of collection...

In Europe, with the constant collection we have in Egypt, in India, in China, in any other countries of the Far East, there is an order of 10 times that is differentiating European cost that is around 500 euro per tonne and the cost in this other country that is less than 50 euro. So, since the collection...

is the first step, is the first brick that you have in the construction of the total cost of recycling material. It's clear that European recyclers cannot compete with material that is produced outside of Europe because even with their most sophisticated technology they cannot close the gap between the collection costs.

it's outside of europe and the election costs that's what is in europe so this is very so why market was in a way requiring the demand was much lower and is much lower than expected and the demand is mainly satisfied by material coming from outside of Europe.

okay interesting and i know you contributed to a q a that we've published in the recycled polymers report this week as well and in that you kind of shared your views around these topics and discussed how the lack of the clarity in terms of the penalties around the legislation is kind of impacting maybe limiting the impact of that legislation really in terms of demand for the market as well

I wondered if you had any kind of idea on what the kind of possibilities would be for consequences or penalties if those targets aren't achieved. Is there any kind of direction that's been given? from the Commission. But the Commission clearly is going to open a procedure of inflection versus the countries that are not. matching the target. But what we are trying to propose to the Commission is first of all a proper harmonization between the SUP and the PPWR.

And second, we are cooperating with the JRC, that is the technical arm. of the Commission to define a proper procedure, a proper definition, a proper characterization of the products that should come from outside of Europe playing the same level field. Otherwise, we give too much disadvantage to the European manufacturers. And mainly we are focusing on two of the main requests that we have in Europe. So the first one...

is that the bottles should come from a differentiated collection. Second, that through the chain of custody, we should be able to prove that somehow the The collection is focusing on 95% of bottles that are coming from waste that were produced during...

uh food content products okay i'm talking about those extra collection costs for europe maybe can we delve into that a little bit deeper like Could you try and explain why the costs are so much higher for collection in Europe? Is there a reason for that? Yes. The reason is that We do not have street pickers that basically go around and try to pick whatever waste has a value, as is happening in certain countries.

In Europe we don't have street pickers as it happens to be the case outside of Europe where there is people extremely poor that goes around in the street to try to grab whatever. as a value from wasters on on the contrary here we have multi-utility companies that have their own organization that's sending their own trucks that are collecting this waste. The waste then is sorted out by specialized sorting centers. Everything is more automized, but everything is also more expensive.

okay that makes sense and do you think that have for the importers having to comply with the eu standards and the certifications to the same level as what the european recyclers are will this increase the costs for importers and help level the playing field at all? But in a way, the more that equalizes the cost, what we are aiming at is to have the same rules respected everywhere.

so separate collection also there and the proper sorting of a vault to be totally sure that what you're collecting has been containing only food material. This, and we are very much concerned about the impact on monias, non-intended other substances, by having bottles that do not come from this kind of collections. Okay.

Okay and is there anything in your opinion that can be done to bring the European costs down or support the European recyclers a little bit more? To reduce costs in Europe is very difficult and this is a structural question that we have for the future we see somehow that the new administration in the states seems to take a distance from the green deal if this happens situation for europe will become even worse because we cannot think that only europe is going strongly

quickly versus the Green Deal. We have to be very much harmonized on a global level. Europe cannot support alone the burden of the Green Deal, otherwise it will push. the European manufacturers to delocalize outside of Europe. The situation is unfortunately clear.

for this year in particular with the implementation of the single-use plastics directive coming in and we're heading towards that packaging and packaging waste regulation in 2030 as well we're hearing various announcements of deposit return schemes coming into play and new extended producer responsibility policies as well how do you think these will impact the market? Is that going to help us towards these goals? Sure. First of all, let me say that we are in favor of whatever means is used.

that could increase collection because you don't have recycling if you don't have collection. So whatever it comes, we are supporting it. a concern in the sense that to apply DRS when you start from scratch is something when you start from halfway of a target is something different. Let me be more clear on this case. In Germany, we have been extremely successful because we started in the 90s.

And since then, the DRS has been accepted and was a fantastic process that allowed the market to collect more than 90%. So well done. Now, let's go to the extreme. Let's take the situation of Italy. In Italy, with the carb side, we already reached 75% in 2024. we have good chances to reach the target in 2025. But the CARB side has a certain cost. The DRS alone is expected only being the investment required

in terms of DRS machine, proper maintenance, proper collection. In this case, increasing the cost. And just to give a figure. Only by having enough DRS machines in the country, you need to invest roughly €2 billion. So it's clear that the DRS will help. in the case of Italy, to increase by roughly 15 percentage points the collection, but will have a cost of 2 billion. So does this make sense at this point?

to invest so much to gain 15 percent or do we have some other means it's clear that i live we live up to the industry we live up to the politicians to take the decisions but this is our role to highlight the concerns that we have and this is for countries like Italy and France a very big concern we will see now how Spain is going to cope with these requests because lately the Madrid Parliament has signed a law, a royal decree by which it's foreseen

that in almost 18 months, that will be extremely short time, also Spain will move to the RS. And it will be challenging, particularly for recyclers, I think, to pass on those feedstock costs. from increased collection. Correct, imagine now there is already quite a wide gap between Europe and whatever is outside of Europe, we have to pay attention that this gap is not increasing even more.

by increasing the cost of collection. And as well I think the gap with virgin PET also needs to be addressed because we've seen as the virgin prices came down at the end of last year and the recycle prices stayed relatively stable a huge differentiation between recycled pet flake or pet food grade and the virgin market and in some cases outside of the bottle sector some substitution back to virgin for cost-saving activities

challenging economic time at the moment. It is and as you as you said Chloe this is coming directly from the cost structure of virgin and the cost structure of recycling virgin is mainly let's say linked to the oil price and we are living in a in an era that were oil price all in all

is quite cheap. While on recycling, you are basing your costs on a fixed cost, because the cost of collection is fixed, the impact of oil prices is minimal, and also the sorting cost is somehow a sort of fixed cost, because even there, even if in this case the cost of energy has a major impact, but all in all the combination of the two are somehow...

delinked from the fluctuation of the oil prices and i also just wanted to ask you as well on some sectors outside of the bottle market if possible and to see if you anticipate any developments in maybe trade the trade trade market or fiber recycling at all what's your outlook for the coming years to reply to this question is very relevant is not so easy because a lot depends on how the institutions are going to reply to the demands coming from us and how quick are they going to take action.

But it's clear that at present, trays are moving back as much as they can to Virgil because the cost, as you said, is roughly 30% lower. And the same is happening for the textile part. Keep in mind that textiles are suffering also. Another impact that is linked somehow to the SUP. Through the SUP, the brands are required to have a first right of refusal on the bottle collected.

But at this point, if they have first right of refusal, the textile, the trace producer... are late in the list, are second in the list, and they run the risk of not... finding any volume available for them or if we find it at a very high price. So also this should... be considered by the institution. We need to have a sort of holistic view, because if you look only two models, only two...

to bottlers and we run the risk of forgetting or pushing out of business in terms of recycling, trays and textile. By the way, since the textile is next in terms of target from the institutions in terms of EPR schemes, we have opened up Petcore to the textile applications in the sense PETCOR will maintain a strong focus on PET packaging, but is opening up also a branch.

on pet textile because at the end of the day we are talking about polyester and the commission with us is talking about polyester in general not only pet packaging yeah of course and as that supply gets more directed into bottle to bottle exactly as you're saying there's going to need to be some outlets for material that is being downgraded so possibly into other applications but also those maybe closing the loop on those materials as well so looking for textile to textile or for tray to tray

Correct. Is that what you said, Chloe? I cannot add anything. EPR schemes are needed also in textile. So if you want circularity, the first being... is to have an EPR system, because EPR system can grant the proper collection. If instead, leave somehow to the market, this is coming.

very slowly and generally not at the target that are expected in terms of time and volume from these situations. And another important part of the puzzle, I guess, is the chemical recycling. And you kind of touched on this a little bit earlier. little bit in the q a that we published as well um and i just wondered for pt to polymerization

How does the current economic kind of atmosphere affect the development of the technology? Are you seeing any further challenges to the scaling up of the technologies to commercial scale? Let me start with a bit of historical reference. The company I represent introduced a grade containing chemical recycling added recycling content in 19, 2009, so 15 years ago. Theoretically, in practice.

This technology is considered by the Commission as novel technology. This tells us how slow the politicians react. to the industry we have been on the market since 15 years the technology used is considered novel technology and the situation is so critical for us that we even wrote to to the president of the EU Commission, Ursula von der Leyen, requiring some support because we are discussing about how to position these new technologies.

But we don't know yet when and how this will be approved regardless of the increasing number of data supplied and the fact Some large companies were ready to invest. I just mentioned Eastman in France with an investment of roughly 2 billion euros, but are postponing. the investment because there is no clarity. You run the risk of investing a lot, of producing something, then there's no market and this doesn't work.

The industry needs clarity, needs a fast decision and this is one of the reasons why we're inviting at our conference on the 4th and 5th of February. for DGs, via DG Grow, DG Trade, DG Envy and DG Sante, just to hear from them how we can remove the blocks that we have in our activities. Yeah, that communication with the EU Commission is really, really key for the market, isn't it? It's key also because the resources that the Commission has.

are not endless in the sense that they need, now there is a clear lack of resources and they have to refer to the industry to get some clarity. in some of the decisions taken because, as you say in English, the devil is in the details and if you don't look, especially at the technical details, you run the risk of causing a lot of troubles.

yeah i guess finally i wanted to see if you could maybe summarize a little bit on your outlook for what the rest of the year looks like in 2025 for pt It doesn't seem like you have very high hopes. Obviously, more headwinds are coming and there's still a challenging situation.

Well, you said I am a very positive person, so I hope that through the interactions that we have with the institution we would be able to move fast in the direction of having harmonization between the different legislation we have and that through also to the clear positioning of the Draghi report, the Commission could take fast actions to protect European manufacturers.

Great. Well, that's fantastic. And thank you so much for your time, Antonello. Unfortunately, even though there's still lots to discuss. um that's all we've got time for today but we really look forward to joining you and continuing our discussions at the pet core event in february so thank you again okay thanks so much for all your questions and i hope to see many of the value chain actors at our conference in Brussels. Right.

thank you everyone so much for listening we hope you found it useful and insightful and to find out more about Argus recycled polymers and any of the other Argus chemical products please visit us at www.argusmedia.com dot com forward slash chemical