Our study concluded that there was currently an estimated 3800 plastic recyclers across the EU. Western European countries had a higher proportion of plastic recycler, than when compared to Eastern Europe. Based on the European Commission plastic recycling targets, around 12,000 European plastic recyclers will be required by 2025.
We found that there were two distinct types of recyclers across the European Union, and this was consistent across the European Supply chain, however with a different ratio of recycler types in different EU states. The first type of recycler identified was an independent recycler. These independent recyclers were highly specialised in a particular type of plastic, buying, or collecting plastic from distinct sources. They would remove a certain ‘value’ from the waste plastic, and sell the remaining plastic onto a 2nd processor. The 2nd processor would then remove their value and pass onto a 3rd. There could be many different layers in the chain as value was removed. In all cases these processors would then sell the ‘value’ plastic to a compounder, who would pelletise the plastic before selling onto a manufacturer. This complicated supply chain was heavily interwoven and highly specialised.
In central Europe, we found the minority of recyclers followed this supply chain, whereas in Northern, Eastern and Southern Europe this was the most common type of supply chain. This supply chain however created numerous issues when introducing a new technology, which we studied in depth.
The first of these was a fear of supply chain disruption. It was considered that our technology was ‘disruptive’ and a key consideration before purchasing was the question “what happens when my supplier buys this?”. There was a real fear from these recyclers that the ‘value’ would already be taken out of the material before it was sold to them by someone further up the value chain. This would render their business obsolete.
The 2nd concern was the ability to sell the volume of material created. Their demand was purely driven by the compounders, who, in turn, were lead by market manufacturing demand. As such, a large, sudden increase in the availability of recycled material is unlikely to be felt immediately by the manufacturers. This would lead to an oversupply into the compounders, who would reduce the price they pay for the recycled plastic. There is therefore likely to be a ‘disruptive’ period while prices and supply/demand stabilise. In the long run it was discovered that this ‘over supply’ would lead to recyclers taking lower value plastic, which currently goes to landfill, and extracting the value from this. The NET affect was a lower cost feedstock for plastic manufacturers in Europe, and a reduction on plastic going to landfill. However, it would take a period of 6 – 12 months for the supply chains to balance themselves, and therefore incentives would have to be offered to convince these recyclers in the interim period.
Coupled with the supply chain issues, these recyclers were highly secretive about their processes, and it would be unlikely they would advertise their use of a new technology (which they would want to keep to themselves). This would therefore make promoting the technology more difficult, and uptake slower.
The 2nd type of recycler, most common in central Europe, was a ‘vertically integrated’ recycler. This is a recycler who was taking a plastic waste stream from source, either from a post industrial or post consumer stream. This recycler therefore had a secure supply of plastic, and was not susceptible to someone further up the supply chain purchasing new technology. The recycler would remove all the value from the plastic (all that is commercially viable) and discard the rest (usually for EFW). The value plastic was then either moulded into a new product, or more commonly pelletised or compounded. This pellet was then made available to local manufacturers to use in their own products.
It was found that within these recyclers there was a real drive for quality of end product, and maximising the value they could remove from the plastic (as there is a cost of disposing of any discarded plastic).
Following our understanding of the supply chain, we looked at different possible business models for selling the technology within the European Union. We considered a diverse range of supply chains, with the 3 main ones under consideration being a Franchise model, An equipment sales model, or a Joint Venture/Partnership.
The Pro’s and Con’s of each was established and the models put to a number of recyclers, agents and manufacturers across the European Union. We worked very closely with recyclers in Spain, Belgium and Lithuania who gave us their views on the different models. There was a clear preference, from both types of recyclers, to purchase equipment directly from a manufacturer or agent. Very few recyclers were interested in a Franchise model, and in deed, while it would return the highest value for Impact Laboratories Ltd, and number of recyclers were not interested in operating in that manner. This was partly due to the secrecy demanded by recycler group A and the ability to control the value output material.
As such, our attention turned to whether we could set up as an equipment manufacturer ourselves, or whether we would be better off in a joint venture, either for the whole business or part of it. It was found there was a clear benefit to manufacturing in the UK (or Germany) over other EU nations, and therefore it was decided to keep all manufacturing within the UK. It was also found that the reputation of a manufacturer was important, and therefore it would be more beneficial to either partner, or subcontract the manufacturer of the equipment. A number of UK manufacturers were spoken too and prices obtained for building a certain design of the technology, allowing us to factor in the cost of setting up demonstration units.
The study then went on to consider a possible method of selling into these two supply chains, and how to mitigate the risks and concerns. A key point to consider was the depth of market penetration that could be achieved with different models. Based on an organic growth model, and tied in with the concerns of supply chain disruption, it was found that the likely hood was that sales would be slow until year 3, as a key concern across the whole of Europe and the supply chain was the commercial viability of the technology and its technical ability to perform as intended. Once recyclers had seen the benefits of the technology working there would likely be a large rush for them.
Ways to mitigate this were considered, with a proposal to provide commercially working demonstration plants across key European locations. These locations would enable Impact Laboratories Ltd to market the technology directly to local recyclers in a working environment. It was found that targeting recyclers who were vertically integrated would be the ideal solution, as this would ensure the technology was ‘viewable’ to all and that there would be minimal risk of losing a feedstock (leading to the plants not functioning). An analysis of the European plastics market was revisited and the individual countries grouped into regions where the most exposure to the technology could be gathered from. This, coupled with the contacts made during this feasibility study allowed Impact to set approximate locations for six demonstration units, which would expose the technology to 95% of the European plastics market. It is expected that each unit will need to run for minimum of 6 months before that unit will generate sales.
Following this a study was performed to value the technology for a recycler, and look into the value that could be obtained from a plastic feedstock. It was concluded that the payback period is likely to be 10 months, based on conservative value output figures, and save 2000 tonnes of plastic per year, per unit from landfill in the EU.
Finally a project plan was created for a 24 month period to take the technology from its current stage ‘TRL 7’ and move it to a full commercially available technology. This included estimated project costs of €1.5M to build, commission and set up a sales network for the technology throughout Europe.
