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Use of recycled plastic must increase – Challenges and opportunities in a changing market
Recycled materials are commodities and have a fluctuating value. This is a truth well know by everyone who trades in the market. The recent ecological challenges caused by post-consumer plastics have resulted in countless headlines about the extent of the disaster. It doesn’t help the situation that the demand for those exact plastics are in an ever-low – and thus affecting also the recycling market.
In this blog we look closer into the case of poly-ethylene terephthalate – the material your soda and water bottles are made from.
PET prices are low – but why?
Poly-ethylene terephthalate, or PET, is one of the most used plastics in the consumer market and constitutes up to 55% of the recycled plastics market. In an article from last year, A. Tison Keel sums up the economics of PET trade. According to him PET was in high demand while packaging of beverages and food was changing from glass and tin to more durable and lighter plastic. Combined with the explosion of bottled water market, both virgin and recycled PET were bringing in decent profits. But now the markets in North-America and Europe are mature, and at the same time the demand is flatlining. This has resulted in a situation where on global scale there is a 30% overcapacity in virgin PET production.
It is not only the demand side that affects prices. In the case of PET it is also the supply side, which adds to the injury, A. Tison Keel writes. The raw materials for PET have collapsed in price: there is an overcapacity in the production of purified terephthalic acid (PTA) in Asia, which constitutes up to 85% of PET raw material cost, and the crude oil prices have remained low. Cheap imports from Asia have affected the price of virgin PET even further.
Meanwhile, the collection and processing costs of recycled PET have remained at the same level as before. This has led to a situation, where the recycled PET has lost any price advantage it used to have.
As a cherry on the cake of overcapacity, hundreds of millions of tons of recycled plastic are missing a final destination because China has closed its borders for non-industrial recycled plastic imports earlier this year.
There is hope for recycled PET
Due to the ecological damage caused by consumer PET, there is a growing demand for recycled PET products in the consumer market. The European Parliament has also set goals for the future of recycled plastics. The Parliament wants at least 10 million tons of recycled plastics used in production by 2025. Another EU goal is that all plastic must be reusable or recyclable by 2030. There are also large projects for plastic processing facilities, including the Lyondellbasell-SUEZ project near Maastricht in Netherlands. Markets tend to balance out, and public support for recycling is going to help the situation.
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