Home / Industry / Manufacturing /  Empty plastic bottles go from trash to hot commodity

Spot prices for recycled PET have skyrocketed this year. A shortage will make consumer brands’ sustainable packaging pledges more expensive to meet.

The used plastic bottles best known for clogging the world’s oceans are in surprisingly short supply, as consumer brands compete to meet recycling targets.

Spot prices for recycled PET flakes that are made from plastic-bottle waste have almost doubled in Europe since the beginning of the year, data from S&P Global Platts shows. Prices have also increased in the U.S., where environmental rules on packaging are less strict, but not by as much. The cost of food-grade recycled PET has hit $1 a pound, up from around 64 cents before the pandemic, according to the National Association for PET Container Resources (NAPCOR).

Underpinning the surge is skyrocketing demand for recycled plastic from household-name brands that have set voluntary targets to reduce the amount of oil-intensive virgin plastic they use in their packaging. Nestlé, the world’s biggest food company, wants to cut its use of virgin plastic by one-third by 2025. Coca-Cola wants to be using at least 50% recycled material by the end of the decade.

They face stiff competition for resources from other industries. Plastic bottles have been recycled into things such as carpets and takeaway food cartons for years. Now clothing brands are also vying for them. The fashion industry hasn’t yet figured out how to recycle plastic-based garments such as polyester into new clothing at scale, so relies on bottle waste generated by soft-drinks giants to make the fabrics it needs for new sustainable clothing collections.

Tightening environmental laws mean the crunch will probably intensify. By 2025, companies in the European Union will have to use 25% recycled content in new PET drink bottles and minimum quotas are due to be announced for other types of packaging. Only around 5% of packaging in Europe is composed of recycled materials, according to KPMG.

In the U.S., California and Washington State have passed mandatory recycled content quotas for certain types of plastic packaging. Recycled PET became more expensive than virgin PET around 18 months ago and is now priced at a 20% premium as demand increases, according to NAPCOR.

American consumer brands may find it especially tricky to meet their targets. The infrastructure needed to collect plastic waste is less developed in the U.S., where the recycling rate for PET bottles averages around 30%. That compares with 64% in Europe, according to an estimate by the Independent Commodity Intelligence Services. Major investment in household collection and recycling facilities will be needed to improve these rates.

Big plastics manufacturers could benefit from higher prices, but also need to offer recycled products to offset lower demand for virgin material in future. Indorama Ventures, the world’s biggest producer of PET, plans to recycle 50 billion PET bottles every year by 2025. Shares in the Bangkok-based company have increased 70% over the past 12 months.

An expensive battle for scarce supplies of recycled plastic is looming. The big companies being drawn into it are above all trying to cut their carbon footprints, but an additional environmental benefit could be cleaner oceans.

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