Price Pressure: Recycling Industry in Crisis

The recycling industry is facing significant challenges with regard to post-consumer recyclates (PCR). Although awareness of sustainable materials management is now firmly anchored in society and industry, recyclers are struggling with the problem of effectively placing their post-consumer recyclate on the market. A key factor fuelling this crisis is the fact that virgin materials are usually offered at a lower price than recycled materials. This discrepancy leads to an economic imbalance, which manifests itself in the closure of the first recycling plants. But time is pressing: As part of the EU Directive on Packaging and Packaging Waste (PWWR) the EU has set a quota for the use of recyclates in plastic packaging, with the aim of achieving a recyclate content of 30% by 2030. Consumers also want more sustainable packaging and for their recyclables collected in the Yellow Bag to be turned back into new packaging.

However, the reality of plastics recycling is more complex. Recycling often ends in the form of downcycling, whereby the recycled plastics are used for lower-quality products. This is also confirmed by Tilmann Rothhammer,  General Manager Customer Service und Supply Chain at Coca-Cola Europacific Partners Germany: “When it comes to rPET, the beverage industry in Germany faces an enormous challenge. Almost 98% of non-returnable PET bottles are returned via the deposit system. However, a large proportion of the valuable PET material is not turned back into bottles, but into packaging for cleaning products, cosmetics or textiles — in other words, it is recycled, but in fact downcycled. This material is irretrievably lost for use in drinks bottles.” The Group can claim that it was the first beverage company in the world to use recycled material in a disposable PET bottle over 30 years ago. “Since then, we have researched and promoted the use of recycled PET in our bottles together with partners. In 2015, we introduced the first single-use PET deposit bottle made entirely from recycled material in Germany, and since 2021 all our beverage bottles up to a size of 0.5 litres have been made from rPET.”

Like other brand manufacturers, the beverage producer is faced with the problem of only being able to use food-grade rPET from the deposit system. Danone is therefore also faced with a dilemma. “The situation is very complex — on the one hand, PET bottle recyclers in particular are currently struggling with sales challenges and full warehouses, while on the other hand, the PPWR is just around the corner. As a result, the demand for food-grade recycled PET will increase in the future,” explains Michael Stumpf, Circular Packaging Manager at Danone DACH.

Recycling Technology is Available

For a long time, immature recycling technology was an obstacle to the use of recyclates in many types of packaging. However, considerable progress has now been made in this area, which can prevent downcycling. Numerous research and development initiatives such as those of Werner&Merz have contributed to this. But Henkel has also accelerated progress in recycling technology. “Henkel is working together with partners in the circular economy to improve recyclate quality, which also enables us to use more recycled materials. Among other things, there have been significant technological advances and innovations in the recycling industry in recent years, e.g. in the washing of flakes, NIR sorting technology and decontamination. The use of object recognition with artificial intelligence also opens up new potential in the circular economy,” explains Sebastian Hinz, Head of External Communications at Henkel.

Unfavourable Framework Conditions

Market conditions are the main reason for the current imbalance in the recyclate business. “Increased costs for recyclates compared to virgin material are having a negative impact on the attractiveness of recycled material, leading to a decline in production and limiting stock levels. Some companies have even had to close their recycling plants as a result”, stated bvse Vice President Dr Herbert Snell in December 2023. The structural problem obviously lies in the fact that recyclates are not used when virgin material is cheaper, said Snell, adding: “In the second quarter of this year alone, the amount of PET imported into the EU increased by 20% compared to the previous year because virgin PET from abroad is cheaper.”

Sebastian Hinz is aware of the difficult situation recyclers are in: “We can see that some market players have reduced their recyclate volumes, possibly due to the tense economic environment." However, Hinz emphasises that recyclate is generally more expensive than virgin plastic. "That's why long-term partnerships with companies from the circular economy are important to us and part of our strategy. This also helps to cushion the sometimes sharp fluctuations in the price of recyclate.”

Against this backdrop, brand owners and recyclers largely agree that only better legal framework conditions can create a positive market environment for PCR in the long term. “The necessary incentives must be put in place that target the entire value chain in order to drive investment in recycling capacities and technological developments. To this end, strengthening recycling and recyclate utilisation targets, promoting design-for-recycling and overcoming remaining challenges in waste management, e.g. the quality of raw materials made available for recycling, such as from the dual systems, must be at the top of the political agenda,” demands bvse Vice President Snell, for example.

Bernd Büsing, Head of Packaging at Nestlé Germany, also confirms: “Experience in recent years has shown that the market alone cannot regulate the issue of recyclates and most likely will not in the future. The recycling industry needs planning security for necessary and overdue investments. This includes stable prices and sustained demand for the products. Regulatory framework conditions are a suitable means of achieving this, for example by guaranteeing stable demand through statutory minimum utilisation quotas.”