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War on Plastic Brings Disruption to the Global Packaging Industry

Summary: As the war on plastic picks up pace around the world, manufacturers of some single-use plastic products are bracing for a big hit as the tide turns against them.

Primary plastic production has grown from two million metric tons in 1950 to over 320 million metric tons annually, an amount that’s expected to double in the next 20 years. Packaging is the largest segment, accounting for 40% of plastic usage. Much of that is made up of single-use items that do not get recycled. Researchers say only 9% of plastics get recycled globally. In contrast, the recycling rate is 58% for paper and 70-90% for iron and steel. What’s more, most of the plastic packaging that is recycled is usually converted into a lower-quality plastic that is not recyclable again.

Since so little gets recycled and about 80% ends up in a landfill or the environment, plastic waste is now the source of a major pollution problem, with 8 million tons finding its way into the world’s oceans each year.

It’s becoming such a pressing issue that governments and businesses have stepped up the war on plastic, and are taking the scope of that fight beyond supermarket bags. Single-use plastic utensils, bottles, and food containers are targets going forward.

Death of the Plastic Straw

For starters, there’s a growing movement around the world to end the use of plastic straws. In America, where 20 billion plastic straws are used annually, Seattle in Washington state recently became the first major U.S. city to enact an outright ban on their presence at food service businesses. Establishments that want to serve drinks with straws will have to provide biodegradable alternatives made of compostable plastic or paper. Every incident of non-compliance carries a $250 fine. After serving 22 million plastic straws to it customers in 2017, Alaska Airlines now only offer straws, stirrers and toothpicks made of sustainable marine-friendly materials on all its flights. The Hilton Hotel group has pledged to do the same at all of its 650 properties before the end of 2018. This is a trend that many other companies and cities are likely to adopt.

Across the pond, major UK restaurant chains, including Pizza Express and Wagamama, have already stopped using plastic straws. Even McDonalds, the world’s second-largest fast food chain which uses 1.8 million straws a day in its UK outlets alone, has pledged to switch to paper straws in all 1,361 of its UK and Irish restaurants by 2019. There’s no word yet on when this switch will extend to McDonald’s global empire, but trials are also set to begin in selected restaurants in the US, France and Norway. Scotland’s country-wide ban on plastic straws goes into effect at the end of 2019.

Au Revoir, Single-Use Plastics

Straws are just a start. Europeans produce 25 million tons of plastic waste annually, and less than 30% of it is collected for recycling. Now, the EU is pushing for many single-use plastic products, including straws, cotton buds, and balloon handles to be barred across its 27-member states by 2030, including some types of drink bottles. The Taiwanese government too plans to eliminate single-use plastic straws, bags, utensils and containers by 2030. Ditto for the UK.

Some nations want to get there faster. The Indian state of Maharashtra just imposed a ban against single-use plastic effective immediately, sending Amazon, H&M and their peers into a tailspin. That’s because such a ban sharply raises costs for multinational companies that rely heavily on plastic for packaging, including retailers, beverage makers and sellers of bottled water. But the tide is against them. Prime Minister Narendra Modi is proposing a nation-wide ban of single-use plastic by 2022.

It’s not just governments that are advocating change. A consortium of 25 institutional investors managing more than $1 trillion in assets has demanded that consumer packaged goods giants, Nestle, PepsiCo, Procter & Gamble, and Unilever reduce their use of plastic packaging, and those companies are taking measures to do so. Similarly, at least 87 large retailers, supermarkets, manufacturers, and brands have joined the UK Plastics Pledge initiative to eliminate single-use plastic packaging by 2025. Together, these signatories represent 80% of the plastics sold in UK supermarkets.

In January, bottled water brand Evian said it would produce all its plastic bottles from 100% recycled plastic by the year 2025. DanoneWave and Nestle Waters, the world’s largest bottled-water manufacturers, have partnered with California startup Origin Materials to develop 100% bio-based plastic bottles. Meanwhile, Ikea also announced plans to stop using non-recycled plastic. The world’s largest furniture retailer says all its products will be made from renewable and recycled materials by 2030, up from 60% currently.

The war on plastic is escalating at a time when China has stopped accepting plastic waste from other countries, a decision that is causing plastic to pile up around the globe. Nations that have seen an increase in plastic waste imports since China’s ban ― such as Thailand, Vietnam and Malaysia ― are already looking to enforce bans of their own because they are quickly becoming overburdened. Yet, more plastic continues to be produced and sold globally. The growing stockpiles will only create more impetus for governments to interfere via legislation.

Manufacturers of non-recyclable packaging and utensils are bracing for a big hit as the world increasingly turns to biodegradable plastics. But this is not going to be a quick and easy transition for users either. Some 100,000 tons of bioplastics were produced globally in 2016, and production levels jumped to 800,000 tons last year. Still, there isn’t enough infrastructure or capacity in these materials yet to cut plastic out immediately. Moreover, the switch is not cheap. In the UK for example, plastic straws cost about 10p per thousand, compared to 14-15p for paper alternatives.

Losers

The directives against plastic straws will hurt companies like Tetra Pak – a dominant global supplier, Soyez Freres – Europe’s top plastic straw manufacturer, and China-based Fuling Global (FORK) which supplies about 5 billion straws a year to some of America’s largest fast-food chains. In the broader market, leading producers of plastic packaging & containers will be negatively impacted including Berry Global (BERY), Bemis Company (BMS) and Sealed Air (SEE).

Winners

On the winning side, you have manufacturers of sustainable packaging solutions such as Stora Enso (STERV.HE), US-based Aardvark Straws, UK startup Transcend Packaging, and Huhtamaki (HUH1V.HE), a publicly-traded Finnish company. The latter two have already been contracted to supply paper straws to McDonalds’ restaurants in the UK and Ireland.

Many pure play companies that will benefit or lose in the war on plastics are privately owned. As MRP continues to monitor this disruption, we will try to identify more ways to gain exposure through publicly-traded companies.

We’ve also summarized the following articles related to this topic…

 

Plastic: War on plastic leaves producers clutching at straws

Public pressure is growing on governments to ban single use plastics, and manufacturers are feeling the heat. The British government in April said it planned to ban the sale of single-use plastics including straws. The EU followed suit in late May. Indian Prime Minister Narendra Modi has pledged to make his country free of single-use plastic by 2022.

Some corporations are also taking steps. In the UK and Ireland, McDonald’s has pledged to complete a transition to paper straws by next year and is testing alternatives in France. The Hilton hotel giant in May vowed to remove the offenders from its 650 properties by the end of this year.

There are alternatives to plastic straws, but they are much pricier. The five-star Monte Carlo Palace hotel in Monaco has introduced biodegradable straws. Others are using raw pasta and bamboo sticks.

The US is resisting change, while Europe takes the lead with biodegradable plastics made either from fossil fuels or crops such as potatoes and corn. About 100,000 tonnes of bioplastics were produced in 2016 in the world. Last year, biodegradable plastic production capacity rose to 800,000 tonnes globally. Europe’s top plastic straws manufacturer, Soyez, which is based in France, is uncertain about how to make the transition. Taipei Times

 

Plastic: Amazon, H&M and other multinationals pressing to soften Indian state’s plastic ban

A ban against single-use plastic imposed last week by the state of Maharashtra, home to India’s financial capital of Mumbai, could sharply raise costs for multinational companies that rely heavily on plastic for packaging, such as retailers, beverage makers and sellers of bottled water. Maharashtra’s move comes as Prime Minister Narendra Modi pushes a plan to completely end the use of single-use plastic in India by 2022.

Maharashtra’s plastic ban includes bags, food containers, spoons, forks, glasses and packaging wraps – which the local plastics industry says could cost it up to 150 billion rupees ($2.20 billion) a year and nearly 300,000 jobs.

An e-commerce industry source said that packaging charges comprise about 2-3.5% of fulfilment costs – the price of shipping, delivery and compensating sellers for discounts – and that the use of biodegradable plastic or other alternatives could push these costs higher. Cardboard boxes, for example, could cost nearly a third more than plastic packing.

Since the ban came into force, officials have been raiding shops and restaurants, sometimes accompanied by police, to enforce compliance. Violations could result in penalties of up to 25,000 rupees ($362.49) and jail terms of up to three months. More than 1.3 million rupees in penalties have been collected so far. R

 

Plastic: 4 takeaways from the new Chinese import ban plastics study

Scrap plastic supply is rising: Primary plastic product production has grown from two million metric tons in 1950 to 322 million metric tons in 2015. Only 9% of plastics get recycled globally and 80% ends up in a landfill or in the environment. The Chinese ban creates a sudden influx of materials because China has imported more than 45% of recovered plastics since 1992. The fact that plastic production and use is projected to continue growing means recyclers must find ways to adapt to and process the growing supply or stockpiles will only worsen.

Wealthy countries are disproportionately affected because those countries predominate the scrap plastics trade, constituting 87% of all exports. The top 10 plastics exporters are China/Hong Kong, United States, Japan, Germany, UK, Netherlands, France, Belgium, Canada and Mexico.

Better domestic recycling infrastructure is needed: Recovered material sorters and processors are hesitant to invest in infrastructure upgrades because of hefty up-front capital expenditures and fears of not turning a profit. That has left the plastic exporting countries without an adequate number of domestic markets to fall back on following China’s ban.

Plastic products should be better designed for recyclability: Some processors won’t even attempt to handle plastic packaging because many types don’t hold value when recycled. WasteDive

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