The circular economy comes at a cost.
From food to face cream and car seats, there’s growing interest in recycled plastics and packaging among brand owners but they have yet get their heads around the fact it’s going to cost more, according to Dow CEO Jim Fitterling.
“They all want more supply, faster, and the challenge is making sure it’s cost competitive. They just don’t have a blank check to write for these materials,” Fitterling said.
Dow is picking its battles, making low-cost bets to provide recycled materials that are accessible and at the right quality. It’s scaling up chemical recycling that breaks down waste plastic previously destined for incineration or landfill back into their molecular elements to produce cracker-ready feedstock ready for virgin-grade polymers. Among the projects on the go, it’s signed-off on a second such plant in the Netherlands capable of processing 20,000 tons of waste plastic and it wants to be collecting 1 million tons of the stuff by 2030.
The same goes for silicones, used in personal-care products, and polyurethane for car seats. After launching its RENUVA PU-foam chemical recycling project last year in France, Fitterling said he’s seeing strong demand in the automotive sector.
Those impatient for a seismic shift to the circular economy will have to make do with the current flood of incremental announcements coming from the chemical industry in the hope that, together, they amount to something meaningful. It’s estimated only 9% of the plastic out there has been recycled, and the chemical industry isn’t about to charge out in front on this one.
Besides, the world’s love affair with the material is far from over. This year alone should see an extra 8 million tons in PE capacity this year, and operating rates at existing plants remain high. On a call with analysts and investors, Fitterling eased concerns on where all that additional output will go, saying economic growth will mean it gets absorbed. Dow is budgeting for 4% GDP growth in the US in 2022, and 5-6% in China. As a rule of thumb, for every 1% in GDP growth, you need 2 to 3 new world scale PE plants to come on line, he added.
“Our expectation is that’s not going to change,” Fitterling said. “We see strong demand across all the sectors for plastic products. That’s what’s driving it.”