Editorial: Argus launches pyrolysis oil assessments

Europe's pyrolysis industry is continuing to develop. Several plants have started up, with others close to being able to supply limited volumes — through established partnerships, contractual arrangements and small spot deals. Argus this week launched plastic-based pyrolysis oil prices in Argus Recycled Polymers, which can provide an important reference for the industry as it develops.

Advancing pyrolysis technology and the chemical recycling supply chain to commercial scale presents challenges, and there are critics, but many believe this will grow to be a major part of creating a sustainable plastics industry.

There remains strong demand downstream for virgin-like recycled polymers, particularly as mandates for recycled content in technically demanding applications move closer. And associated industry is developing, with feedstock sorting plants being developed and on-purpose pyrolysis oil upgrading capacity due to come on line in the Netherlands this year and Finland in 2025.

Movable feast

An array of market participants, observers and potential investors has stated the need for regular, reliable and credible reference prices for pyrolysis oil.

Following consultations, Argus has launched assessments of two categories of plastic-based pyrolysis oil — ‘cracker-grade' that can be blended with virgin material as a feedstock for some petrochemical steam crackers, and ‘refinery-grade' that requires upgrading before it is suitable for the petrochemicals chain.

The largest differences between the categories are final boiling point and contamination levels — particularly of chlorides, oxygenates and nitrogenates, for which indicative values are laid out in our methodology. In practice, acceptable levels are different for different steam crackers and refineries, and universally-recognised specification categories will take time to emerge.

Similarly, liquidity in the market's early stages will be limited. There are only a few commercial-scale plants, and the cost of bringing capacity to market means most early developers have long-term deals with offtakers to cover most or all initial volumes. The price structure of these agreements might vary significantly from case to case and could be influenced by a number of factors — not least because in many cases agreements were made well before the capacity was built.

This combination of factors leads to opacity, heightening the need for a price reference, but also presenting a challenge to its creation. Yet spot offers and transactions are already being reported, and we expect liquidity to increase as more capacity comes on line and the capabilities of recyclers and quality requirements of offtakers become more standardised.

Argus will therefore remain in constant contact with market participants and consider regular updates to our definitions and assessment process to provide a clear and accurate picture of the market as it develops. Credible price references can help to support market development. More transparency will help to highlight import price signals and foster confidence in business decisions and investments throughout the value chain — from waste feedstock providers to base chemical providers, polymer producers and end-users.