Sustainability, the new paradigm…

the new European plastic regulations in Packaging and Automotive will change the business model in Europe

  • So far the rules of the game have been simple: offering the best material with the appropriate technical service for the right application at the most competitive price. The game is changing, the new regulations driven by consumer concerns on plastic environmental impact : PPWR, ELV D, FPR, Micro plastics, plastic taxes…. The Packaging and the automotive industries are on the front line, but the other will follow : Appliances, Construction, Medical..  DFR, mandatory PCR content and soon biogenic Carbon content will progressively cover all plastic applications.

New European regulations such as the ELV Directive and the PPWR regulation are shaping up rapidly, they are already changing the plastic business and the competitive landscape in Europe. They will be a threat for the incumbent suppliers if they are lacking agility but also an opportunity for newcomers to grow business, in any case it is a mandate to innovate. 

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Packaging PPWR

  • Packaging is by far the largest plastic market segment with 22 MT/y, more than 50% of the European total plastic demand, therefore the most exposed to consumer protest. It was logically the first industry to be “regulated”. The PPWR (Packaging and Packaging Waste Regulations) includes a large spectrum of specific regulations (delegated acts) from Packaging design, material substitutions, new substances of concern (PFAS, BPA), labelling … PPWR covers all flexible and rigid packaging made of any materials (metal, paper, glass, hood,…) as well as composite packaging mixing different types of materials. But the most striking requirement is without any contest the minimum content of post-consumer recycled material (PCR) by packaging unit.

Over the last 10 years the chemical industry have developed their technology and product strategy to deal with PPWR, but what about the recyclers and compounders, the film converters, the brand owners and even the packaging machine manufacturers, how to develop new business and turn PPWR to your advantage ?

What impact will this have on the plastic packaging industry ?

  • The PPWR will be shifting in Europe between 10 % to 35% of the plastic raw material source used in Packaging (22 Mt/y) from virgin polymers to recycled polymers.

    The Packaging industry has been traditionally sourcing “commodity plastic” with standard specifications, short term contract or spot business. But now, sourcing large quantities of PCR materials will become a challenge for procurement, quality control as well as engineering. As of 2030 up to 35 % of packaging made of PCR source will become “specialty plastic” with diverse specifications (tolerances, transparency, strength, MFI) supplied from multiple recyclers or traders.

  • The PPWR “delegated act” dealing with DFR is still in progress, to be adopted in 2028.Although the PPWR has already defined the level of recyclability on a Packaging unit level (rating A,to E), the details by components ( film, rigid, paper, mix,.. ) is not yet defined. On a packaging unit level the designers will have some freedom to achieve this overall target without necessarily having each component equally recyclable.

  • Using plastic fulfilling the different regulations will become increasingly complex and expensive, customers and brand owners (e.g. Mars, Nestle, Coca-cola, P&G…)   will look for plastic alternative whenever it is, economically and technically possible. 

    In the packaging industry paper is clearly the “challenger” to plastic for flexible packaging such as coated paper films for food packaging or cardboard for rigid packaging. Although the technical requirements, its costs and its PCF ( Product Carbon Footprint) are a limiting factor. See the cross-industry alliance of over 100 members representing the entire lifecycle of fibre-based packaging.

  • the DFR regulations (Design for recycling) will ban some materials used in multilayer design, and favour new material solutions such as BOPE, MDO or BOPP . New smart packaging design will also shift material selections for their functional performances to be used in a mono-material design (barrier, sealing, adhesion, transparencies,…). Polymer PCR availability in quality and quantity will be another factor influencing the material selection, above and beyond its price & performance ratio. For example, we can anticipate this point to be a critical challenge for PP in rigid packaging applications.

  • Within Europe, access to PCR raw material sources will become increasingly strategic. Major chemical corporations back integrated in fossil feed sock will lose the full control of their raw materials and new “plastic suppliers”, controlling PCR source will emerge. 

    In the packaging industry, the film converters or sheet producers will try to purchase their MR PCR content directly from recyclers / compounders, creating new competitors to the major chemical industries. For CR (chemical recycling), the chemical manufacturers who have invested in capacity (LYB, BASF, INEOS,…) will keep a certain control , although still depending on PCR waste to feed their plant,  but new CR technology providers such as ….Neste, Mura technology, or indavers,..may form alliances and emerge as new players in the supply chain to the Chemical industry.

Automotive ELV D

  • has a bad reputation : CO2 emission, high manufacturing energy bill and visible pollution from End of life vehicles. On the other hand, collecting and recycling ELV is relatively easy, in any case easier than packaging and,it has been operating for decades. It was logically the second large plastic industry to be “regulated” by the European commission after Packaging. The ELV directive is at this stage “just” a directive, adopted in July 2023 for all European countries; the amendment process is ongoing and the EU commission vote to turn it into a regulation is not fixed yet ( 2025 ?). Unlike the PPWR , the ELV Directive is relatively focussed : a recycled plastic content of 25% PCR plastic by vehicle, including 6,2% of automotive closed loop PCR content.   

In the Automotive industry, the ELV D is being reviewed and amended, but in any case meeting the plastic PCR content by vehicle will be a great challenge, specifically for the “close loop” ELV source. Some ELV plastics will emerge more “recyclable” than others. ELV plastic sourcing will be short and expensive and become an issue for the OEM to comply. A good technical understanding of the automotive by application segment is critical.

What impact will this have on the Automotive plastic industry ?

  • The automotive industry is sourcing 4,4 Mt of plastics in Europe, mostly specialty plastics with tight specifications that need to be available for the lifetime of the vehicle, ideally globally.

    Automotive OEM and Tier 1 have been using some PIR exclusively for cost reductions reasons, so there is some experience to deal with non-virgin plastic sources (5 to 10% by vehicles). The switch to 20% PCR ( PIR might be included) will nevertheless be a huge challenge for the industry procurement departments: Long term supply safety, quality, cost competitiveness and “stable” price, will be some of the success factors for the recyclers to become suppliers to the automotive industry. 

  • The regulation implementation pace will be slower in automotive than for the packaging industry, therefore Automotive OEM and tiers will need to start their approval process earlier to be ready for 2032 . 

    The technical requirements (heat stability, paintability, aesthetic, impact resistance, odor, aging...) will determine the preferred application segments and respectively the optimum level of PCR quality required. 

    As the ELV target is a weight content, the OEM will focus on the heaviest application and where PCR source are the most available (From other industries source as well as from Automotive ELV). 

    Bumpers, instrument panels, door panels made of PP is the logical place to start but shortages of High quality PP PCR will push the industry to look at other applications such as seats , trunk doors, carpets , spoilers , rear lights and under the hood…

  • This was actually one of the objective of the EU plastic regulations : reduce the usage of plastics in general, the first of the 3R (Reduce, Reuse, Recycle).

    In the automotive industry, there is virtually no alternative to injected moulded Plastic. Metal or wood have been historically replaced by for good reasons. Nevertheless, each application will be scrutinized by the OEM. reducing the amount of plastic by vehicle is a way to reduce the dependency on PCR sources and meeting the ELV regulation at low cost.

  • Reaching 20 or 25% of recycle content by vehicle is opening many different scenarios. Each OEM have a different approach to applications, materials, technology (MR vs CR) and design. But the more “exciting” challenge is in the Closed loop Plastic content of 6,2 % by vehicle. Although PP PCR seems to be the low hanging fruit, the supply / demand balance of ELV PP and its poor quality may actually favour alternative materials. Part manufacturers will need to reach higher hanging fruits ! 

    The “recyclability” of plastics in Automotive will become a new attribute in the inter-polymer competition. PCR availability from other industries is relatively clear (PP from Packaging, ABS from WEEE source, PC from big bottles and sheets), but PCR availability from ELV source remains a challenge. Beside PP almost no other plastic is being recovered from ELV due to contamination and cost to recycle.

  • In the automotive or appliance applications, pre-compounding PCR with Virgin plastic and additives might be the safest solution for technical applications. The formulation expertise will represent a barrier to entry for new commers. Moreover the supply safety from large chemical corporation (LYB, Dupont, Borealis, Ineos, BASF,..) or large compounders such as Avient might protect them from the direct competition of recyclers & compounders. Nevertheless, large compounders with access to PCR should be more competitive and become direct suppliers in specific applications.

    The ELV is only a directive at this stage being amended and the resistance from the automotive lobby is famous, certainly in a crisis period (transition to EV, higher energy costs , Chinese OEM competiton,…).  In any case a ELV regulations will change the game in the coming 10 years and there will be winners and loosers.