INTERVIEW: Neste addresses path for growth in chemical recycling amid challenges

Finnish oil and renewables refining company Neste continues to advocate for the potential of chemical recycling as a critical component in working toward the circularity of materials, despite cost and regulatory challenges.

In a recent interview with Platts, part of S&P Global Commodity Insights, Maiju Helin, director of the Polymers and Chemicals Unit at Neste, discussed the company's strategic focus and the evolving landscape of the chemical recycling industry.

In February, Neste announced a strategic realignment to prioritize renewable diesel and sustainable aviation fuel, while continuing its commitment to renewable polymers and chemicals.

"Neste continues to provide renewable and recycled, in addition to our fossil feedstock, and we are ready to support the market when the market is ready for growth," Helin said.

Supply, demand and pricing challenges

The lack of price parity between renewable, recycled and fossil-based materials remains a barrier to increasing demand for products manufactured with these alternative feedstocks in Europe. "If there were a price parity between the alternative solutions against fossil, we would be on a totally different scale and ballpark," Helin said, highlighting the challenge posed by differing cost structures.

Fossil fuels often do not account for their environmental costs, making it difficult for alternatives to compete. Helin emphasized the need to scale up solutions, noting that "the cost structure of the renewable and circular products is quite different" from fossil-based counterparts. While scaling up can reduce the price gap, the distinct fundamentals of these solutions present challenges in reaching parity with traditional materials.

The growth in chemical recycling supply, such as pyrolysis oil, has been slower than anticipated. However, optimism remains for future capacity increases, supported by facilities, such as the upcoming upgrading facility in Porvoo.

The demand for renewable solutions is strongest in the road transport and aviation sectors, where early adopters are leading the way in emission reduction, while other industries show more limited demand. Nonetheless, Helin described the market as "kind of two-fold, with the voluntary market and the upcoming mandatory market." Sustainability-minded companies are leading the adoption of renewable and circular solutions, e.g., in packaging and electronics.

Regulatory environment

Europe's regulatory environment presents both opportunities and challenges for the chemical recycling industry. The EU has set ambitious targets through directives such as the Single-Use Plastic Directive and the Packaging and Packaging Waste Regulation, but concerns persist about their effective implementation.

Current draft regulations related to mass balance accounting for recycled content pose a risk, excluding existing refineries from contributing to sustainability targets, which may hinder the competitiveness of chemical recycling, Helin said.

"The current rules put complementarity between chemical recycling and mechanical recycling at risk because, factually, it's making them compete for the same raw material and clean plastic waste streams," Helin said, emphasizing the need for technology-neutral regulations that allow for the inclusion of existing infrastructure.

A balanced integration of recycling methods is crucial for efficient recycling and meeting recycled content targets, Helin said. Mechanical recycling, while cost-effective, has limitations in raw material purity and end-product quality. Chemical recycling can handle difficult-to-recycle waste streams and produce virgin-like products, complementing mechanical methods, she said.

To foster growth, regulations should facilitate diverse recycling methods and promote innovation, leveraging the strengths of each method to contribute to recycling goals and drive a reduction in plastic waste, Helin said.

Future outlook and industry developments

The future outlook for chemical recycling is optimistic, driven by rising consumer demand for better alternatives to virgin fossil materials and potential regulatory support, Helin said. She expressed confidence in the industry's growth, highlighting that the three approaches to improving the sustainability of material -- mechanical recycling, chemical recycling, and renewables -- are complementary to one another.

Scaling up chemical recycling technologies is crucial for enhancing production capacities and reducing costs, thereby making alternative solutions more competitive, Helin said. Integrating renewable solutions with existing methods offers potential for improved efficiency and environmental impact, she said.

"Neste continues to be involved in the polymers and chemicals market, and we stand firm with our capability and capacity to serve the increasing market demand," Helin said. She expressed optimism that as more companies work toward their sustainability targets, the industry will experience stronger market conditions and wider adoption of renewable and recycled alternative practices across various sectors.