US PET and aromatics markets face major restructuring if plastics recycling goals met by 2030

Meeting current US recycled plastics content goals by 2030 would significantly alter the region's PET resin and upstream aromatics markets, according to a recent analysis from Wood Mackenzie.

“Impact would be most felt in the PET resin market, with less of an effect on the upstream purified terephthalic acid (PTA) and paraxylene (PX) markets - although the influence would still be significant. Hitting brands’ sustainability goals would require significantly less virgin PET resin, resulting in less PTA and PX needed to make virgin PET (VPET). Older and less efficient PET resin, PTA and PX plants would need to be closed in order to maintain balanced markets and operating rates. Monitoring industry progress towards these goals will be crucial for all US polyester chain players too," said Dr. Michael Bermish, Wood Mackenzie Chemicals Principal Analyst.

Recycled PET bottles required to meet brand recycling targets

Scenario #1 - RPET required to hit CSD and water PET bottles targets only

Wood Mackenzie's analysis estimates the amount of PET bottles required to meet the 25% recycled PET (RPET) content goal for carbonated soft drink (CSD) and PET water bottles is equivalent to 1.5 Mt in 2025 and 2.2 Mt in 2030. This would require an additional 0.4 Mt of PET bottles collected by 2025 and an additional 0.9 Mt of PET bottles collected by 2030. This is a 38% increase in PET bottle collections by 2025 and a 78% increase in PET bottle collection by 2030, as compared to our current base-line forecast. The country’s recycling rate would need to sit at 45% by 2025 and 60% by 2030.

Scenario #2 - RPET required to meet target for all beverage PET bottles

The amount of PET bottles needed to meet the 25% recycled content goal for all beverage PET bottles is 1.7 Mt in 2025 and 2.9 Mt in 2030. In this scenario, current sustainability goals would require an additional 0.6 Mt of PET bottles collected and a 53% recycling rate by 2025. An additional 1.6Mt of PET bottles would need to be collected, with a 78% recycling rate, by 2030. This is a 137% increase in PET bottle collections by 2025 and a 209% increase in PET bottle collection by 2030, as compared to our current base-line forecast.

What if recycled content goals are achieved?

"Both scenarios suggest the current amount of PET bottles collected - on a tonnage basis - will fall far short of what is needed to meet the ambitious recycling goals set by many brands.

"Clearly, a large gap exists between existing corporate sustainability goals and the current state of the US RPET market. Our previous analysis, undertaken earlier this year, found that up to $3 billion in additional capital investment would be required to achieve current US recycled plastics content goals by 2030. Nevertheless, major brand owners are committed to fulfilling these commitments in the face of consumer backlash," added Dr. Bermish.

Impact on US VPET market

By meeting PET recycled sustainability goals, we expect the greatest impact to be on the US VPET market. Based on our analysis, lost US VPET production would be substantial by 2030.

In our first scenario, where RPET content goals are only met for CSD and PET water bottles, US VPET production would decline by 0.4 Mt by 2025 and 0.9 Mt by 2030. With these assumptions in our base-line analysis, lost virgin PET resin production to RPET usage would equal 8% of total capacity in 2025 and rise to 19% by 2030. The loss of nearly 0.9 Mt of virgin PET resin production by the end of the next decade would be equivalent to nearly one Corpus Christi-sized plant, or two or more older legacy PET resin plants.

In scenario #2, where content goals are met for all beverage bottles packaged in PET, US VPET production would decline by 0.6 Mt by 2025 and 1.6 Mt by 2030. Lost PET resin production to RPET usage would equal 13% of total capacity in 2025 and rise to 33% in 2030. The loss of nearly 1.6 Mt of virgin PET resin production by the end of the next decade would be equivalent to one Corpus Christi-sized plant, plus one to two legacy PET resin plants. In this scenario, approximately a third of total US PET resin capacity would be replaced by RPET, resulting in a drastic change in the composition of the VPET resin industry.

“All VPET producers would also need to be major PET recyclers in order to survive this transition. We’ve seen some activity in this space already, with Indorama's acquisition of Custom Polymers, DAK Americas' acquisition of Perpetual Solutions and FENC's acquisition of Phoenix Technologies. In addition, chemical recycling is also a route that virgin PET resin producers are taking by introducing clean flake at the front-end of the polymerisation process. This, in fact, may offset the decline in asset utilisation rates due to a greater use of RPET by downstream converters.

Impact on the US PTA market

“To make one tonne of PET resin requires approximately 0.84 tonnes of PTA and 0.35 tonnes of monoethylene glycol (MEG). The effects of meeting the content sustainability goals and displacing VPET in PET packaging are significant, however they would be somewhat less intensive than the impact seen in the VPET market segment. Lost US PTA production would also be substantial by 2030,” said Dr. Bermish.

In scenario #1, US VPET production would decline by 0.4 Mt by 2025 and 0.9 Mt by 2030. This translates to a PTA production loss of 0.3 Mt by 2025 and 0.8 Mt by 2030. Lost PTA production would equal 7% of total capacity in 2025 and rise to 17% in 2030. The loss of nearly 0.8 Mt of PTA production by the end of next decade would be equivalent to one large PTA production line in the US. This would likely result in significant US PTA capacity rationalisation over the next decade.

For scenario #2, US VPET production would decline by 0.6 Mt by 2025 and 1.6 Mt by 2030. This translates into a PTA production loss of 0.5 Mt by 2025 and 1.3 Mt by 2030. Lost PTA production to RPET usage would equal 12% of total capacity in 2025 and rise to 30% in 2030. The loss of 1.3 Mt of PTA production by the end of next decade would be equivalent to output at the new Corpus Christi PTA plant. Nearly a third of total US PTA capacity would be replaced, resulting in a major restructuring of the industry.

Impact on the US PX market

To make one tonne of PET resin requires approximately 0.57 tonnes of PX. Based on Wood Mackenzie’s research, lost US PX production would also be substantial by 2030.

US VPET production would decline by 0.4 Mt by 2025 and 0.9 Mt by 2030 in scenario #1. This translates to a PX production loss of 0.2 Mt by 2025 and 0.5 Mt by 2030. Lost PX production would equal 6% of total capacity in 2025 and rise to 15% in 2030. The loss of approximately 0.5 Mt of PX production by the end of the next decade would be equivalent to one large PX production line in the US. Some PX capacity would likely be closed.

In the second scenario, US VPET production would decline by 0.6 Mt by 2025 and 1.6 Mt by 2030. This translates into a PX production loss of 0.4 Mt by 2025 and 0.9 Mt by 2030. Lost PTA production to RPET usage would equal 11% of total capacity in 2025 and rise to 27% in 2030. The loss of 0.9 Mt of PX production by the end of the next decade would be equivalent to one PX plant - similar to what is at Decatur Alabama (Indorama) - or two smaller, older plants. In this scenario, over a quarter of total US PX capacity would be replaced.