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SMEs

How the recycling industry is organised in a MS depends significantly upon government rules and regulations, and varies from an integrated system (such as that in Germany) to decentralised schemes (such as in France).

Many of these firms are relatively small. Reclaimers tend to be the smallest of the enterprises involved, even though they are at the heart of the recycling process, and reprocessing firms are typically SMEs in the range of 5,000 - 20,000 tonnes per annum (2005 data).102 _{The size of the companies involved at different stages of the recycling} chain can be partly explained by the diversity of polymers and products, especially in comparison to other products like steel and aluminium, which results in a high degree of niche specialisation. Also, the investment necessary to launch a company in the recycling area appears relatively small.

However, due to their size, SMEs can experience difficulty maintaining profitability, considering the instability and volatility of recycled plastic prices. The larger size of the enterprises involved in virgin plastic production means that they are better able to smooth out profits and losses. The costs of collecting, sorting and transporting plastic waste to reprocessors can exceed revenue generated by the sale of the resulting recovered plastic waste. This can be supported to a certain extent by some form of subsidy or other financial contributions such as the payments made by national Green Dot organisms103_.

Market size and concentration

In Germany, some reprocessing SMEs report that their larger supplier (Green dot Sytems) have in the last years reduced the standard contract duration of supply of plastic waste from 1 to 2 years to a few months. This is probably a market strategy to adjust prices in the current market conditions of rising oil and virgin polymer prices. The consequence is that it becomes more and more difficult for these SMEs to sign long-

101 Pers. comm. with the National Association of Recyclers in Hungaria, based on 2009 and 2010 data 102 Ingham A., 2005. OECD study “Improving recycling markets, chapter 3

103 Green Dot is a producer responsibility system in the field of packaging. In each of the 27 Member States, organisms are founded by the business and industry community to assume industry’s packaging waste take-back and recovery obligations.

term contracts of delivery of their product (pellets, flakes, regranulates, agglomerates) when there is so much uncertainty about the input. A growing number of such SMEs are closing down, or are being bought/overtaken by e.g. Green dot Sytems, which then expand vertically their activity from the collection and sorting of packaging plastics, to the manufacture of the higher value-added regranulates, and the direct supply to converters.

Around 3,000 companies in Europe are active in the mechanical plastics recycling industry meaning that they use machines to shred, grind, wash, regenerate and/or compound104_{. About 80% of the total volumes that are mechanically recycled are,} however, processed by less than 100 companies, so elements of the market are more concentrated.

Most companies specialise in specific fields of the waste plastic stream, doing for

example only PVC waste and others doing only PET bottles104_{. However, some companies} have links with either larger plastic converter groups or waste collection companies.

Comparison of virgin and recovered plastic market structure

Recovered plastics markets are still small and immature in comparison with the size of the market for virgin plastics. Currently, recovered plastics prices are not determined by production costs as they would be in an efficient market. Instead, recovered plastics prices are linked to the price of virgin plastics in the long run.

The fact that the supply of recovered plastic is not directly linked to demand indicates that the recovered plastic market is not self-standing, and may depend on variations in the virgin plastic market. Other factors preventing the maturation of the market are potentially the lack of sufficient supply or capacity. Plastic recyclers frequently suffer from a lack of plastic waste supply, especially since in some countries such as the UK, a large share of the waste plastic generated is not collected (and/or sorted) for recycling in the EU, but is exported to the Far East105_.

Only some markets are well-established. This is the case of recycled PET used in fibre (e.g. carpets, clothing and strapping), and of HDPE used in various applications

End-user perception106

The use of recycled plastics by consumers is restricted by a negative perception of the quality of this material, affecting the development of recycled plastics market. However, this impact is lessened when the recycled plastic enters as an intermediate good, end- users being less aware (or not at all) of its presence.

The information chain and consumer perception play an important part in the

achievement of a mature market for recycled plastics. As long as the information chain remains incomplete, and in the absence of market signals influencing consumers’ perception, the market evolution will be slowed down. It has been detected that some

104 Life Project APPRICOD, Guide ‘Towards Sustainable Plastic Construction and Demolition Waste Management in Europe’

105 EUPR, 2010, How to increase the mechanical recycling of post-user plastics, Strategy paper, p17, available at:

www.plasticsrecyclers.eu/uploads/media/eupr/HowIncreaseRecycling/1265184667EUPR_How_To_Increase_Pl astics_Recycling_FINAL_low.pdf

recyclers are still unaware that REACH/CLP exempts waste from some requirements such as registration, but not all. Foremost are the need of thorough characterisation of the output in order to check if the material is hazardous or not, and the need to

communicate down the supply chain the presence of any hazardous substance. Beyond their perception, but also fed by the lack of compliance of some recyclers as mentioned above, buyers may be wary of entering the market because they do not have full information about the quality of the final product manufactured from recycled materials. In efficient markets such information is diffused effectively as market

participants monitor the choices of other agents. However, for new products there may be significant lags before diffusion of information is clearly established.

Additionally, in the absence of market signals which reflect the benefits of recyclability, product design will be inefficient. Such problems may be particularly important in the plastic packaging area.

To control this instability, some recyclers have called for legislative changes such as the introduction of a minimum required percentage of recycled material in PET bottles. This could help the market to grow in maturity by ensuring outlets and hence increase

demand and modify consumer perception. It is worth noting that some big companies producing drinking bottles have already started to implement this requirement and incorporate a large fraction of recycled PET in their production process107_.

An initiative geared towards establishing confidence in the supply chain is the project EuCertPlast, aiming at creating a European certification for post-consumer plastics recyclers towards the European Standard EN 15343:2007. The project aims also at encouraging environmental compliance, particularly focusing on the process for traceability and assessment of conformity and recycled content of recycled plastics.

According to the information collected and presented above, it seems there is still need for a better communication of the obligations for recyclers under REACH, herewith providing accurate information of the chemical composition of marketed substances and products, and how these obligations are made operational by the industry.