Many of last year's underlying challenges for the plastic recycling industry are likely to carry forward into 2025, although recyclers can take some positives from policy developments and normalised consumer price inflation.
One of the most widely felt challenges for recyclers around the world in 2024 was the ready availability of competitively priced virgin polymer to their customers, which eroded demand and pricing power. This is unlikely to change significantly in 2025 for PET, PE or PP. Growing production capacity — particularly in Asia — is pushing more virgin material into the market, and limp economic growth is preventing today's various geopolitical uncertainties from buoying underlying petrochemical feedstock costs, which are underpinned by crude.
Notwithstanding continued growth in India, purchasing managers' index (PMI) data show a range between stagnation and contraction in the major economies. Argus' base case for the coming years — assuming there is no severe deflation in China and that incoming US president Donald Trump does not deliver the harsher protectionist policies hinted at during his campaign — points to steady but sub-par economic growth, led by Asia and the US. But GDP projections see the eurozone struggling to attain 1pc growth in 2025.
Globally, consumer price inflation remains above the 10 year average, but it has normalised since 2022-23, which should help to sustain the demand recovery that major fast-moving consumer goods (FMCG) companies — the largest buyers of packaging-quality recyclates — reported in 2024. Many European and US recyclers reported rising demand for rHDPE BM grades in the second half of 2024. But headwinds persist for construction, another important sector for recycling, with no market expectations of a near-term uptick in Europe, and US Federal Reserve statements flagging slower than previously expected interest rate cuts in 2025 having the potential to deter building activity.
The effects of policy developments also remain to be seen. India and the EU are both introducing mandatory recycled content for PET beverage bottles — and more plastic packaging types in India's case — this year. But in the case of the EU the target percentage is not far above what market participants estimate was already achieved in 2024, and uncertainty over enforcement mechanisms could dampen the impact. A shift towards more complicated certification requirements for imported recyclates might also limit the benefit for overseas suppliers.
On a smaller scale, California's mandatory recycled content for PET beverage bottles has risen to 25pc this year from 20pc. And deposit return schemes have launched in Austria and Poland, which should increase feedstock availability for local recyclers. But other potential policy changes that could affect the recycling industry remain unresolved. These include an EU decision on mass balance rules for chemical recycling, China's potential acceptance of rPET for food-contact applications — mooted for some time by market participants without any official announcements — and an outcome to UN plastic treaty negotiations, although an agreement to fully satisfy recyclers already appears unlikely.
The direction of travel in legislation — and a broad expectation that the economic picture will gradually brighten — should help the recycling industry in the long term. But it would be unrealistic to expect a sudden turnaround in 2025, given that last year's pressures have yet to relent.