Sustainability Efforts in the Chemicals Market are headed in the Right Direction

Steve Katz  

Hi, everybody, and thanks for taking time out of your busy schedule to listen in on our Hilco global smarter perspective podcasts. As returning listeners know by now, I’m your host, Steve Katz. And if this is your first time with us, well, then welcome. We are glad that you could tune in. Today, Kevin Duffy, who is senior director at Hilco valuations is going to join us and he’ll provide us with an update about sustainability efforts in the chemicals market. So Kevin, welcome back to the podcast. I know, I’m anxious to hear what’s been going on from a sustainability perspective. Seems like we just continue to hear a lot of discussion around single use containers and how to solve for that issue. But I know there’s a lot more to it. So I’m gonna let you take us through that topic today. With that said, Why don’t you let me know where you think we should start? What’s what’s a what’s a good way to kind of kick it off on this bigger than life topic?

Kevin Duffy  

Sure, Steve, happy to. First of all, great to be here again. Thanks for inviting me back. Yeah, I think you hit on the natural starting point for our discussion today. And that is our plastics and chemicals, the problem or the solution? Let’s face it. Plastics are really integrated into the daily lives of people around the world. And the slow nature of how plastics degrade over time, has resulted in plastics, filling our landfills and polluting our waters. According to the plastics, pollution, collation. The fact that approximately 40% of plastic items in use today, such as plastic shopping bags are intended for single use purposes, is a big part of the problem. Plastic particles are showing up more and more in the world’s food stream. The good news is that institutions around the world are working on innovative solutions, including new polymer designs, and upcycling processes.

Steve Katz  

Yeah, and I’ve been reading about that, as I’m sure a lot of our listeners have. So clearly, the issue goes beyond just the single use plastics, right? What else in the industry is causing problems? And what’s the industry focused on improving right now? And along with that, I think the remaining question would be, what makes what they’re trying to tackle such a challenge?

Kevin Duffy  

You’re right about that. So for example, there’s the question of how best to tackle the challenge of recycling complex materials founded products such as tires and mattresses. That is one of the issues that remains to be solved. And as a result, millions of pounds of these and other such items continue to build up in trash dumps and landfills worldwide. The majority of plastics produced are created through a process involving extraction of raw materials such as crude oil, natural gas, and coal. These undergo a refining process which transforms them into ethane and propane. When these are treated with heat, they transform ethylene and ethylene and propylene, which in various combinations create different types of polymers. A lot of the focus right now in industry is exploring methodologies for altering the chemistry behind some of the complex materials found in the products that are creating landfill issues. If successful solutions are found, that would make these items recyclable in the future. There’s a research group called Torkelson, for example, which has found several ways to create a new material type called dynamic covalent crosslinks, which would be recyclable. One such method used for this activates the covalent crosslinks found within polyurethane foams to break and reform rapidly during the process of recycling, enabling polymers to be melted and then reshaped into new types of products.

Steve Katz  

And I’m sure that’s just one of dozens of approaches that are being explored. But clearly something like that would go a long way towards solving the problem. And you know, I pulled a statistic when I was preparing for our talk today. And I saw between 2019 and 2020, there were actually an overall decrease in plastics recovered for recycling in the US. Yes, the decrease, which really surprised me. And it said that during that period, plastics recovered for recycling dropped by 5.7%, which equates to some 290 million pounds, I think of material that’s been left in landfills. So that’s pretty disturbing anything.

Kevin Duffy  

Oh, yeah, it really is. Here’s another statistic for you. Of the 40 million tonnes of plastic waste generated in the US in 2021. Only five to 6% are about to million tonnes was actually recycled. That’s why funding and exploration into upcycling solutions is so critical right now, at Northwestern University is another example, there’s a team working on a technique to enhance the effects of an enzyme that breaks down the plastics used to make soda bottles and inexpensive close clothing, commercially called PE T into its fundamental parts. With more and more top universities and large corporate r&d departments actively investing in developing solutions like this, and governments around the world more actively enacting and enforcing sustainability policies, the hope is that the plastics really can be the solution, and not the problem at some point in the not too distant future.

Steve Katz  

So it’s interesting. So do you think things are headed down the right path right now? I mean, there’s a lot of ways that things could flow. But based on what you’re seeing, is this the right approach?

Kevin Duffy  

It’s hard to say what the right path is. And I’m not a scientist. But what what I will say is that clearly, the steps need to be taken, and we have some very smart people and institutions around the country in the world, for that matter, working on it. Progress is definitely being made. So while there’s still a very long way to go, we know that plastics pollution has the potential to be effectively addressed once we can master how to make plastics themselves, the sustainable part of the materials mix. And that’s what these many different ongoing and innovative efforts are focusing on accomplishing. Of course, we have to keep in mind that many factors, including governmental policies, consumer education, feedstock availability, market, acceptance of new technologies and materials, and the speed of investment will all contribute to how long it takes to truly reach a sustainable future.

Steve Katz  

So I’m wondering, I know you work with a lot of different companies in this space, would you be able to give us any specific examples of those that you work with, or that you’re aware of their, you know, making some pretty significant progress in this area?

Kevin Duffy  

Sure. I’ve personally come across some great examples of sustainability. Companies we’ve worked with including Delta plastics and Creighton polymers, among others, are making great strides and should be applauded for their efforts. Delta plastics has a closed loop production and recycling process. They manufacture poly tube, a plastic tube utilized for irrigation in a variety of farming applications, including rice farming, the company collects and recycles the poly tube and other plastics and then makes recycled resin that is primarily consumed to produce more poly tube and then bags and liners. Crate and polymer the other example uses utilizes a pine waste product from a paper manufacturing process is their primary raw material for their pine products business. In their polymer business. They produce highly recyclable product solutions as well as circular, which is a product that utilize utilizes an innovative upcycling manufacturing process. Still, not all companies and efforts are proving successful. Multiple recycled PE T manufacturers have been forced to sell are now closed as a result of tight spreads between the cost of raw materials and the market value of recycled PE T. The resulting thin margins amplified already difficult and costly manufacturing challenges such as inconsistent feed, feedstock quality and supply is significant amount of manual labor, especially rather than removal contaminants and finished product and consistency. And admittedly, there are a lot of different lenses to which to view the level of progress that has been achieved in meeting plastic recycling sustainability goals. Some critics like Greenpeace pulled no punches in their assessment suggesting that efforts is still in its infancy after three decades.

Steve Katz  

Yeah, I’ve seen I’ve seen some of those comments. And they were you know, they were pretty. They were pretty to the point. So I guess, you know, you brought up this idea of unity, looking through the efforts from different lenses. And you presented, I think, a pretty well balanced set of facts in this discussion today. But to close this out, I guess I’d love to know where you come out on the topic based on looking through the lens of an asset valuation professional in the chemicals industry.

Kevin Duffy  

Great. Yes. through that lens. I see challenges that clearly persist today and will continue for some time. But on the flip side, the diligence and valuations were performing as part of our work for chemicals and plastics manufacturers, as well as the was seeking to make investments and acquisitions in the space strongly suggest that efforts are proceeding along the right path. It may take a while. But I think there’s good reason to believe that the ultimate payoff will be much will be a much broader level of sustainability that benefits both the planet and all of us.

Steve Katz  

Well, let’s certainly hope so. Listen, thanks so much for joining us today. Unfortunately, we have hit our time limits. So I’m looking forward to your next update. how can listeners reach you if they have a follow up question or want to contact you regarding issues in their own business?

Kevin Duffy  

Sure, and I look forward to the next podcast as well. Either phone or email or is fine. My phone number is 847-849-2989. And my email address is KDuffy@Hilcoglobal.com. That’s K D U F F Y at Hilco global H I L C O G L O B A L.com.

Steve Katz  

Perfect, perfect. All right, well, thanks again, Kevin. And we look forward to having you back. And as I said, and listeners, I really do encourage you to reach out to Kevin, if your business or business in your portfolio is involved in the chemicals or plastic industry and facing issues right now in this ongoing march towards sustainability. While maintaining profitability, which is a tough balance, he’s a great resource. And his team at Hilco has a wealth of experience and industry data that can really be very helpful. So feel free to reach out. And as always, we hope that this smarter perspective podcast provided you with at least one key takeaway that you can put to good use in your business or share with a colleague or client to help make them that much more successful moving forward. And one final thing. Please remember that you can check out more great podcasts and articles featuring timely insights from Hilco experts at hilcoglobal.com forward slash smarter dash perspectives. So until next time for Hilco global. I’m Steve Katz.