Global PCR supply crunch

Pricing for many recycled plastics have decoupled from their virgin counterparts, propelled upward by insufficient supply.

This decoupling has occurred more recently in the United States and Asia, though this trend emerged earlier in Europe, particularly for food-contact recycled polyethylene terephthalate (rPET). That decoupling has been further fueled by rising prices for some postconsumer resins (PCR) that are in insufficient supply to meet the demand that exists, said Mark Victory, senior editor, recycling, at London-based Independent Commodity Intelligence Services (ICIS).

Victory, speaking during the Bureau of International Recycling (BIR) Global eForum Plastics session Nov. 8, said food-grade rPET in Europe has been more expensive than virgin PET since 2012. “That has repeated across all recycled polymers more recently,” he said, adding that pricing for virgin plastics no longer serves as a “price cap” on PCR.

Victory said that starting in 2018, colorless rPET flake has traded above virgin, illustrating how much demand has increased as brand owners have focused on meeting their sustainability targets.

“The business risk of not using rPET is outweighing the cost for using it.” – Mark Victory, senior editor, recycling, ICIS

The relationship between virgin PET pricing and that of rPET has become more volatile as well, he said, particularly in Europe, which “shows just how decoupled those prices have become.” While Victory said the materials are still related, “the supply and demand factors in a specific market are more important” for rPET pricing than virgin PET pricing.

To meet the 2025 target of 25 percent recycled content in PET beverage bottles established by the European Union’s Single-Use Plastics (SUP) Directive, collection volumes must increase by more than one-third, he said. Those volumes must grow by a further 60 percent by the end of 2029 to meet the 30 percent recycled PET target that goes into effect in 2030. Victory said this would require an average growth rate of 4 percent per year and 6 percent per year, respectively. To date, however, the average growth rate for collection has been 2 percent, he said.

However, many brands have set higher recycled-content goals, Victory said, which would necessitate a doubling or quadrupling of the increase in collection required to meet the SUP targets.

Bale shortages also have affected the availability of recycled material. Victory said bale supply has tightened in part because of plastic packaging taxes and consumer pressure driving new interest in recycled content in southern Europe. He added that there also have been changes to input mix because of COVID-19, sorting capacity restrictions and system changes and prebuying for future projects.

BIR Plastics Committee member Sally Houghton with Plastic Recycling Corp. of California, said PET bale prices in that state have tripled over the last couple of years in response to demand. Similar to the EU, California is phasing in recycled-content mandates for beverage packaging, and Houghton wondered if some brands will opt to pay the penalty for not using PCR instead.

However, Victory said brands increasingly are understanding that recycled content is not an option. “The business risk of not using rPET is outweighing the cost for using it.”