Report

RaboResearch: Demand for recycled plastic set to grow in US and EU markets

2024-07-31 1:52 min Facts & Figures, Sustainability & Circular Economy

Rabobank Utrecht, Netherlands

Recycling and the use of recycled content have become key aspects of sustainability in plastic packaging in the US and the European Union. According to a recent RaboResearch report, the demand for recycled polymers has grown in both regions and is expected to continue to rise in the coming years. This growth is primarily driven by state regulation and company pledges in the US and EU-level regulation in the European Union.

Europe leads, the US to follow

Europe is the frontrunner in the global post-consumer recycled content (PCR) market, commanding over half of PCR consumption. The region is poised to maintain its lead, with the US trailing closely. The food and beverage sector, responsible for two-thirds of PCR usage in 2021, is set to expand its demand for sustainable packaging through 2026.

In the EU, regulatory frameworks are the catalysts for increased recycled content demand. To satisfy this demand, substantial investment in collection and recycling infrastructure is imperative.

Company commitments in the US slowed by several challenges

Despite abundant corporate promises to integrate PCR into their products, actual implementation in the US has been slow. Challenges such as cost, limited availability, and product quality concerns have hindered progress. According to RaboResearch: “Many companies are recalibrating their commitments, now focusing on carbon emissions reduction or extending packaging goals by about five years in most cases. Progress has been made, but the value, scale, purity, and consistency of PCR resins have not yet reached the levels needed for higher adoption rates.”

FDA greenlights new PCR sources

The FDA’s issuance of “letters of no objection” has broadened the approved sources for PCR, potentially easing the supply constraints in the US. However, there is a looming supply-demand gap for recycled PET (rPET), with consumption possibly outpacing supply growth by a significant margin. “Without additional actions, this could potentially lead to a future supply-demand imbalance of rPET in the market. Solutions like extended producer responsibility schemes and deposit refund schemes are proving effective in bolstering high-quality plastic collection for recycling,” according to RaboResearch.

Production capacity grows amid tepid demand for recycled plastics

Europe, second only to Asia in recycled plastics production, has seen an 18% share of total production in recycled plastics, and the volumes have steadily grown in the past years. Despite a 17% capacity growth in 2021, economic headwinds have reduced demand, leaving recyclers underutilized. The EU’s Packaging and Packaging Waste Regulation’s (PPWR) recycled content targets could provide the much-needed push for recyclers.

Increased investment required to meet quotas

The PPWR’s ambitious targets necessitate equally ambitious investments in collection and recycling infrastructure. According to RaboResearch, to meet the 2030 goals, Europe must triple its recycled plastic production from 2021 levels. Polypropylene and polyethylene need a nearly fivefold increase, while recycled PET volumes must double, with stringent targets for food-grade PET by 2040.

The PPWR mandates improve collection and sorting systems and prioritize recyclate access for applications that achieve greater circularity, such as closed-loop bottle systems. Investments must also consider the growing demand for recycled content in other sectors, like automotive, to mitigate interindustry competition.