Preserving Value in EU Industrial Materials - A value perspective on the use of steel, plastics and aluminium

The debate on material use and recycling has intensified the last years, not least due to the increased focus on climate change mitigation and on establishing a ‘circular’ economy. So far, the debate has primarily been held in terms of tonnes, cubic metres, and environmental impact. This is all, of course, highly relevant, but a focus on volumes and flows also leaves important questions unanswered. For instance, how big is the quality downgrading effect in different material flows? How much primary materials production can actually be replaced by recycled materials with today’s recycled materials quality?

This report takes a step towards painting a more complete picture, taking an economic value perspective on material flows and assesses Europe’s use of steel, plastics and aluminium in terms of Euros instead of tonnes. The ‘exam questions’ we ask ourselves are: If 100 Euros of raw materials is entered into the European economy, how much economic value is retained after one use cycle? What are the main reasons that material value is lost? How could more value be retained? What business opportunities arise as a result?

The report estimates that today only about 41% of this original material value remains after one use cycle and losses amount to €87 billion per year. In this report, we further detail where and how these losses occur, and what can be done to address them. Key conclusions include:

  • Very different value loss patterns across the different materials. For steel and aluminium, most of the volumes are recycled, but alloying and contamination make the possible uses of the recycled material different from that of virgin materials, whereas for plastics only a small share of the volumes are turned into a new plastic product.
  • Addressing these value losses is likely a major opportunity for Europe, economically, environmentally, and geopolitically. Moving in the direction of increased materials value retention seems very consistent with the EU’s Circular Economy Action Plan, and with the ambition in many Member States to move towards a more circular economy.
  • Policy will need to play a major role if Europe wants to capture more materials value. This report has not analysed in detail what policy interventions are needed for Europe to significantly increase materials value retention. However, it is clear that policy will have to play an important role; the changes required are often too systemic for any single company to capture by itself.

This study was carried out by Material Economics on behalf of Climate-KIC and RE:Source between March 2019 and June 2020. It builds on a previous similar study of the Swedish material system published in 2018 with the support of RE:Source and the Swedish Recycling Industries’ Association.