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Sep 18, 2023

McKinsey: PET flake demand will far exceed supply by end of decade

Fernandina Beach, Fla. — Demand for PET flake is going to skyrocket during the

Fernandina Beach, Fla. — Demand for PET flake is going to skyrocket during the latter half of this decade, far outstripping forecasted supply, according to consulting firm McKinsey & Co.

This year, 2023, is a tipping point when it comes to recycled PET supply and demand, according to Matthew Seidner, a partner in the firm's Chicago office who spends his days as a leader in the firm's packaging practice.

"Starting with the end of this year and into next year, there will be more demand than there is supply of rPET," Seidner said.

And McKinsey's projection is basing the numbers on 50 percent of the commitments that are out there. If the full 100 percent of commitments are considered, the market is already out of balance.

The consensus among PET recyclers is that demand will outstrip supply because of the sustainability goals that companies have set for 2025 and 2030.

"We need to figure out that supply question," Seidner said at the recent Packaging Conference in Fernandina Beach near Jacksonville organized by polyester industry consultancy SBAcci Inc. "How do we do this in an economical way and make sure that the supply is there? That's a problem we have to figure out from curbside collection to more outside-of-the-deposit-scheme states to having the infrastructure to be able to process."

"Demand for rPET flake will likely remain greater than domestic supply, continuing trends of increased pricing and volatility," Seidner's presentation said.

"Beyond 2023, there will not be sufficient U.S. rPET supply to support both food and beverage fiber demand," the presentation continues. "If current trends continue, rPET flake end-use will shift heavily toward bottle-to-bottle applications."

Statistics presented by McKinsey indicate an estimated demand of 2.02 billion pounds this year, including 48 percent of the total for food and beverage, 44 percent for fiber and 8 percent for other applications. The McKinsey numbers take into account both domestic and imported recycled PET.

By 2030, the McKinsey numbers — which will be in an upcoming study released by the firm — show 70 percent of the projected 4.15 billion pounds of recycled PET flake demand will come from food and beverage, 24 percent from fiber and 5 percent from other categories.

The projections show demand from the fiber industry will hold relatively stable and increase slightly over time. But demand from the food and beverage sector will see dramatic increases for the rest of the decade.

Seidner also shared what he believes are five megatrends that are emerging in packaging.

Sustainability trends, he said, are increasing at every step of the value chain as consumers, brands and governments are all pushing for packaging that addresses areas including recyclability and circularity, post-consumer content and greenhouse gas emissions.

Other packaging trends include electronic commerce, changing consumer preferences, potential economic trouble and labor challenges, and digitalization, Seidner said.

"Sustainability is clearly on everyone's mind. This is from consumers to CPGs to regulators as we've seen. We've been talking about sustainability for a very long time. At least my full 15 years in packaging," he said.

"This time, the arguments around sustainability we are having, to me they feel different," he said. "I think it's different because it's being led by consumers. It's not a cost-savings initiative."

There once was a time in the sustainability discussion that companies thought they could save money by adopting greener practices, but the narrative is being driven by consumer demand these days, the partner said.

Some 90 percent of people surveyed by McKinsey indicate they are willing to spend more for products using sustainable packaging. And 4 -7 percent of the respondents, depending on purchase category, said they are willing to spend 10 percent or more on a product that uses sustainable packaging.

Only 5-9 percent of the respondents, again depending on what they are buying, indicated they are not willing to spend more on an overall purchase just because of sustainable packaging.

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