EU regulations boost demand for tire-derived pyrolysis oil in chemical recycling

The difference in prices is predominantly attributable to two factors – higher availability of tire-derived pyrolysis oil and impurity levels.

Existing regulation has meant that currently refinery-based buyers typically represent the top end of the tire-based pyrolysis oil price range and automotive buyers the low-end, leading to a preference for producers to target the refinery sector.

Nevertheless, the EU’s proposed ELV (end-of-life vehicles) Regulation could change this, and has been proposed as a replacement for the current ELV Directive.

The redraft of the ELV regulation remains at an early stage of its legislative journey. Nevertheless, it proposes ambitious minimum recycled content targets in new vehicles, with part of that target needing to be met through the incorporation of material from end-of-life vehicles.

The European Parliament Committee on the Environment, Climate and Food Safety and the Committee on Internal Market and Consumer Protection have proposed a series of amendments to the European Commission’s draft revision. This would appear to include the allowance of tire-derived pyrolysis oil to count toward mandated recycled content targets.

The proposed timeframe for the recycled content mandates is just six years after the ELV regulation enters into force. This is a very short timeframe for implementation in terms of car design, and could see demand from the automotive sector ramp up.

Meanwhile, there are significant headwinds to growth of the global pyrolysis oil market. These include:

● Lack of sufficient waste infrastructure;

● Long commissioning and permitting timeframes on new plants;

● A challenging financing environment reducing investment.

This is likely to mean the market remains structurally short in the mid-term, while intensifying legislation could push demand substantially higher.

Whether these headwinds can be overcome in time to meet rising need for material remains an open question mark.