Plastic packaging companies Amcor Ltd., Berry Global Group Inc., Winpak Ltd. and FP Corp. are among those potentially carrying the most business risk over laws and regulations aimed at taming plastic waste, according to a new analysis by investment bank Jefferies Financial Group.
The report from the New York-based financial firm takes a look at the less understood corporate impact, and it acknowledges a lot of uncertainty over how public worries about waste, recycling and ocean pollution will ultimately play out for companies. But it argues that change is coming.
"In our view, the plastics crisis has the potential to impact companies in a range of different ways," the report said. "It is increasingly clear that the status quo won't continue for much longer and a multitude of varying scenarios are possible."
The 70-page report says bans and taxes are the most likely scenario and estimates they could, over time, push annual growth in the plastic packaging industry from 3-5 percent now to 1 percent or less. It says "hardline bans" and taxes on single-use plastics in that scenario would start around 2023 and extend globally by 2030.
"Jefferies has modeled the medium-term outlook for plastics, and the problem doesn't appear to be improving — it's actually getting worse," it said. "We believe that while the industry is attempting to find solutions, little headway is being made.
"Even if recycling rates were to rise rapidly and reach 50 percent globally, there would still be an environmental issue from leakage," the firm said. "Therefore, the solution will likely involve a combination of changing personal consumption habits and sweeping policy changes."
The report also looks at financial risks to companies in the resin sector and mentions Asia-based firms Indorama Ventures, Formosa Plastics and Sinopec Shanghai as having particular risk because 50 percent or more of each firm's revenues are tied to plastic and more than 25 percent are linked to packaging.
"Sectors that are most resilient include alternative packaging and waste management," it said. "Sectors most at risk are plastic packaging and consumer goods."
Jefferies argued that substantial parts of business for packaging makers Berry, based in Evansville, Ind.; FP of Fukuyama, Japan; and Winnipeg, Manitoba-based Winpak are exposed to plastics concerns and it said Melbourne, Australia-based Amcor is heavily exposed.
"[Amcor] is among the world's largest suppliers of plastic-based flexible packaging and containers," Jefferies said. "We estimate that as much as 85 percent of Amcor's group revenue could be tied to the plastics supply chain."