By Sven Siepen, Oliver Herweg, Ralph Mair and Dragos Popa

Used in all walks of life, plastic is inexpensive and possesses superior functional properties that make it difficult to substitute. A growing global population and ever wider use of plastics will drive demand for plastic even higher in the years ahead. The downside, however, is that the existing mountains of plastic waste will grow with this demand – from 372 Megatons in 2023 to 510 Megatons by mid-century. To tackle the issue of rising demand and corresponding plastic waste, chemical recycling will need to play a pivotal role.

1. Drivers of plastic waste recycling and outlook

One of the few effective levers to mitigate this serious sustainability issue is to recycle plastic. Recycling diminishes the burden on the environment, but also gradually reduces the need for new virgin materials. Yet although recycling has been around for a long time, it is still the case that only about 12 % of global plastic waste actually gets recycled.

To combat the alarming pace of global warming and accommodate growing consumer awareness, governments are tightening up their regulation, even as players in some key industries (such as FCMG) voluntarily self-regulate. As a result of these measures, the global recycling share is expected to almost double to 20 % by 2030 and rise as high as 45 % by 2050. Since more plastic will be in circulation going forward, plastic waste fed into the recycling chain is projected to increase from 44 MT in 2023 to 85 MT in 2030 and 230 MT in 2050 – a compound annual growth rate of almost 6% between 2023 and 2050. Volume growth will be faster in APAC and North America than in Europe, though developing economies will also see dynamic growth, with African countries leading the way.

These projections for plastic waste to be processed for recycling will open up huge opportunities for those suppliers that can provide suitable recycling technologies and related equipment.

2. How chemical recycling compares with other technologies

Chemical recycling is one of three basic categories of technology currently deployed to reuse and recycle plastic waste. The three technologies are:

1. Waste-to-X applications
   Which reuse plastic waste as a backfill material pressed and molded together with binders to produce everything from construction materials to furniture. These technologies currently account for roughly 20 % of installed global plastic recycling capacity and are particularly common in developing countries.
2. Mechanical recycling
   Which is especially well suited to pre-sorted rigid and flexible plastic waste with limited contamination. Well established in developed countries, mechanical recycling can be used economically for both small and large-scale plants and today provides around 75 % of global recycling capacity.
3. Chemical recycling
   Which has the advantage that it can process most types of plastic materials (except PVC), with some even capable to recycle heavily contaminated waste. It also delivers high-quality recyclates. Currently handling only about 3 % of total global plastic recycling, however, this technology still faces a number of major challenges:

• Per kiloton of input material, the capital expenditure needed for this "process technology" is about four times that of mechanical recycling.
• Lower yields (50-60 %) than mechanical recycling (70 %) mean that chemical recycling must be deployed at scale if it is to be economically viable. The first industrial scale plant for chemical recycling are therefore designed for waste input capacities of 50-100 kt of plastic waste. Larger systems that are currently being planned therefore require volumes of waste that are only available in very densely populated areas.
• Chemical recycling processes (especially pyrolysis) are energy-intensive, generate substantial greenhouse gas (GHG) emissions. Also, the need to transport waste feedstock over larger distances to ensure the necessary plant input volumes adds to the overall GHG footprint of this technology.
• Almost 60 % of total global plastic waste is made up of rigid plastics that can typically be recycled more economically by mechanical means. However, it must be taken into account that plasticizers and additives are not removed and the quality suffers as a result.

On the upside, chemical recycling provides high-quality output materials from feedstock that cannot be processed by mechanical methods. It also helps producers to substitute virgin materials that would be subject to charges under the EU’s Emissions Trading System (ETS).

Importantly, in terms of regulation, output materials from chemical recycling will soon be recognized as "recyclates" in the EU and other places, further paving the way for chemical recycling as vital technology in combatting plastic waste.

In light of the above developments, global plant (input) capacity for plastic recycling is projected to increase from 63 MT in 2023 to 115 MT in 2030 and 290 MT in 2050. As overall processing capacity thus expands by more than 400 %, chemical recycling should see its share of this market rise from a modest 2 MT or so in 2023 to 20 MT in 2030 and 70 MT in 2050. Average annual plant capacity growth rates should thus be roughly 35 % through 2030, easing back to 7 % between 2030 and 2050. In other words, chemical recycling’s share of global waste input capacity should grow from about 3 % today to almost 25 % in 2050.

3. Different chemical recycling process technologies – How do they compare?

There are many different chemical recycling processes that essentially break down into thermochemical, depolymerization and solvent-based technologies. Depending on the process type, outputs range from pyrolysis oil to synthesis gas (syngas), monomers and polymers.

Thermochemical recycling can process the widest range of polymer types, including bulk materials such as PE and PP. In contrast, depolymerization and solvolysis technologies focus on materials such as polyester and polyamids. The latter are built around chemically active, oxygen and nitrogen-containing polymers that can be cracked under milder conditions with less energy input.

Pyrolysis technology can process most types of (even heavily contaminated) polymers and fibers, so it is expected to occupy a 65 % share of the chemical recycling market in 2050. Depolymerization technologies are projected to capture a 15 % share by 2050 due to their more narrow material focus – although this focus does include PET, which is a major and widely used commodity.

4. Medium to long-term capital expenditure projections for chemical recycling

From a global perspective, medium to long-term moves to expand chemical recycling capacity between now and 2050 will require cumulative capital expenditure of an estimated EUR 130 billion. This figure breaks down into annual investments totaling around EUR 6 billion through 2030, followed by EUR 6-8 billion per year for the following decade (through 2040) and then edging down to EUR 4-6 billion a year through 2050.

Looking at the regional breakdown, almost 40% of capital investment in chemical recycling will take place in Asia Pacific, followed by North America and Europe. In other developing countries, this investment dynamic is projected to peak in the period between 2040 and 2050.

Needless to say, these numbers point to very substantial business opportunities for engineering, procurement and construction firms (EPCs) in the role of technology integrators, but also for suppliers of key equipment. In a typical pyrolysis plant, for example, the process equipment needed for a pyrolysis reactor (15%), catalysis reactor (15%) and distillation (25%) constitutes the highest-value components, though these are flanked by countless other elements such as extruders, pumps, heat exchangers, instrumentation and control systems.

5. Market players' current strategies in chemical recycling

The spectrum of industrial players currently involved in chemical recycling is very varied indeed, ranging from technology providers to large chemical, oil and gas multinationals to waste management players, private investors, plant EPCs and equipment providers.

Especially remarkable is the very large number of start-up companies that have developed proprietary technologies to effectively and economically process plastic waste. Both the variety of polymers and – even more so – the multiplicity of process variants in chemical recycling are driving the emergence of large numbers of new technology providers around the globe.

Several hundred pilot systems have already been installed around the globe, and initial industrial-scale plants are due to go on-line. In addition, EU regulatory processes are too now in their final stages, it is fair to say that the industrialization of chemical recycling is reaching a tipping point.

On the other hand, many proprietary recycling technologies are still in their infancy. Capital expenditure requirements are thus high, as are risks around which technologies will ultimately prevail. There are also concerns about economic viability and, especially, doubts about the supply of feedstock in large volumes. Accordingly, the strategies pursued by the different market stakeholders are so far focused on partnering intensively to gain access to technologies, share risks and put each other’s strengths to good use.
Here are just a few examples:

1. Chemical- or O&G players teaming-up with technology providers to get access to
   proprietary process technologies for the plastic feedstock of particular interest
   (e.g., Dow/Mura, Shell/Agilyx).
2. Chemical- or O&G players with own technologies joining with waste management
   players to secure feedstock supply (e.g., Evonik/Remondis, Eastman/Interzero).
3. Technology providers partnering with EPCs and/or equipment OEMs who can provide complementary technologies or support marketing and licensing of new technologies through their global networks (e.g., Versalis/Technip, Garbo/Saipem).
4. EPCs and equipment OEMs collaborating with chemical/O&G players and joining
   forces in development of new process technologies (e.g., Nextchem/Eni, Sulzer Chemtech/BASF).
5. Chemical/O&G corporates, EPCs and Equipment OEMs investing into technology providers to get access to their technologies or position as preferred implementation partner for new projects (e.g., Borealis/Renasci, KBR/Mura, Sulzer Chemtech/ Fuenix).

Initial cases are also emerging of EPCs and equipment OEMs starting to build up and operate their own recycling plants as demonstrators or even as fully-fledged recycling operations. Their objectives in doing so are to further develop technologies and capture attractive profit contributions from these operations (e.g., Sulzer Chemtech and Nextchem).

6. Strategic questions facing EPCs and equipment suppliers

Looking to participate in the projected growth in chemical recycling outlined above, engineering, procurement and construction firms and equipment suppliers alike need to map out a clear strategy for their next moves. Answering the following questions will be helpful and enlightening to any player considering entering this lucrative market space or broadening their existing engagement:

• Which of our existing technologies and capabilities can we build on to secure entry to the chemical recycling market?
• Based on these technologies and capabilities, which of the different chemical recycling process variants can we target? Are we looking more at volume applications (such as mixed waste) or rather at niche applications (such as pre-sorted and advanced plastics)?
• Which of our technology and capability gaps do we need to close? Can we do so internally, or do we need to team up with an external technology provider?
• Which technology partners in chemical recycling could help close our technology gaps? Are they available? And if so, what cooperation model would best serve our interests?
• Do we have access to key stakeholders/operators who are in the forefront of proactively pushing chemical recycling? On which technologies are they focused, and do they fit in with our target technologies?
• What type of business model do we want to pursue in chemical recycling? Do we see ourselves as an EPC contractor? An equipment supplier? A project developer? Or do we want to operate our own plants?
• What other networks and partnerships do we need to establish to enable this business model (e.g., a foothold in the waste management ecosystem)?
• Above and beyond these strategic questions, and given the many factors that will influence and shape this emerging market, EPCs and equipment suppliers must carefully monitor not only future regulatory changes around plastic use, waste management, recycling and import/export trade flows, but also trends in ETS and recyclate prices as important drivers of recycling investments.
• Based on our in-depth insights into global decarbonization, plastic waste management, recycling and the global process plant engineering and equipment industries, Roland Berger would welcome the opportunity to talk to you about defining and implementing your strategy for chemical recycling.