High inflation, cost of living crisis and reduced consumer confidence weighed on the global recycled PET market in 2023, raising the cost of goods for businesses and hitting consumer spending.
But, while demand in all regions fell below expectations this year, there is still optimism that legislation mandating recycled content, voluntary commitments from large global brand owners and a more favourable price comparison with virgin PET resin could drive an improvement in 2024.
Argus' regional analysts give their views below of the specific factors impacting their local markets.
Europe
At the beginning of the year some market players, such as SMEs or thermoforming packaging producers, readdressed sustainability commitments and recycled content targets following record high prices in the previous year.
This move away from recycled content weakened the value chain and reduced demand, lower prices and squeezed recyclers margins plagued the European rPET market for most of 2023.
Market participants have been cautious and focused throughout the year on managing inventory levels. Availability of bale and flake and food grade material was plentiful and, in some cases, participants became oversupplied and there was a need to destock material, so prices fell rapidly.
But rPET prices stabilised in the third quarter. An increase in virgin prices supported rPET prices and market sentiment improved, particularly for colourless flake sold into the sheet packaging sector, where converters typically use recycled flake to save money versus virgin PET.
This has led to a slight recovery in demand, prices stabilised and European recycler margins have improved towards the end of the year. Recyclers believe that prices across the value chain have bottomed out in 2023, and price increases in 2024 are likely as voluntary and mandatory legislative target dates to increase recycled content in plastic packaging approach. The EU Directive on Single-Use Plastics (SUP) sets out an obligation for PET bottles to include 25pc recycled content by 2025.
At the recent Plastics Recyclers Europe (PRE) Annual Members Meeting there was debate and clarification indicating that post-consumer material will have to originate from within the EU to be calculated towards the recycled content targets. This would offset some concerns about imports.
US
Weak demand was the largest story among recyclers in 2023. Despite some increasing usage of rPET among some large brands like Coca-Cola, and a 15pc mandate for rPET in California, flake producers and reprocessors often found themselves frustrated by a lacklustre order intake.
Additionally, domestic producers constantly competed against lower pricing from east Asian importers this year, even on FDA grade plastic, which in previous years was extremely difficult to get hold of for importers. Weak worldwide demand led many importers to sell more of their material into US markets.
Despite a great deal of fluctuation for PET bale prices on the US west coast this year, led mostly by weak demand and seasonal collection rates, west coast rPET pellet prices remained remarkably flat during the second half of the year, largely as a result of price pressure from rPET importers and weak demand that made it difficult to justify any price increases.
But, despite the negative mood this year, there remain concerns from NGOs and brands that supply for rPET could soon not be enough to keep up with demand. Unlike Europe, there are no imminent mandatory recycled content requirements on a national level, but legislation is gradually tightening on a state-by-state basis, and major brands will want to continue progress towards their voluntary commitments to use more recycled plastic.
Southeast Asia
For southeast Asian recyclers 2023 proved to be a challenging year. Many regional recyclers are targeted towards exports, particularly to western economies, but weak demand from Europe and the US persisted throughout the summer months until mid-December. As a result, many recyclers looked towards selling rPET domestically, but the lack of regulation around recycled content usage resulted in limited success.
Towards the end of the year, many reprocessors reduced operating rates, and some suggested that they had "written the year off". But there was more optimism for 2024, when SUP in Europe and similar mandatory minimum recycled content targets for Indian packaging will be coming closer. Commitments from FMCGs to use a pre-determined amount of recycled content by 2025 is also expected to drive demand for southeast Asian rPET, both domestically and in the export markets.
Many recyclers feel the development of regulation on recyclates and implementation of EPR schemes is necessary to safeguard the industry from years like this one. The sentiment is the Asian rPET market has the potential to become the largest globally once the correct legal frameworks and collection infrastructures are in place.
Northeast Asia
Northeast Asian enterprises are expanding rPET capacities to meet the upcoming surge in demand, despite a slower-than-expected year in 2023.
Most of the rPET producers believe that consumption, particularly in the EU, will see significant growth in the coming years because of the forthcoming SUP directive regulations. Leading rPET producers were actively applying for EFSA or FDA certifications to increase their export volume in the future. And Chinese producers, such as Zhenjiang Ceville, Incom Resources Recovery (Tianjin) Co and Zhejiang Jiaren announced expansion plans, although the EU's anti-dumping investigation against China's PET announced this March has created great uncertainty.
Even in the absence of strong export demand, and with rPET still not allowed for food contact application in China, robust demand from fibre and other segments should continue to support the Chinese market. Consumption of flake increased in 2023, and several new joiners started to produce flake in the second half of this year to meet downstream demand.
The expected growth in demand has also attracted Korean companies to invest more in rPET business. Lotte Chemical decided to revamp existing Ulsan production lines to have the capability to produce rPET, and launched a new ecofriendly brand of "ecoseed", aiming to supply 1mnt of ecofriendly product by 2030. SK Chemical bought Guangdong Shuye's BHET and rPET units to strengthen its recycle plastic business, and SK Geo Centric bought 10pc stakes of Incom Resources Recovery (Tianjin) Co to expand rPET business in China.
