The economic climate in which Europe currently finds itself cannot be described as positive. The economy is stumbling for various reasons, with both structural and short-term factors playing a role. High energy prices continue to plague businesses, leading to elevated production costs, writes Henk Alssema, VITA Plastics (NLD), President of the BIR Plastics Division, in the BIR report. 

Furthermore, the transition to green energy and sustainable business models requires significant investment but yields little profit in the short term. Additionally, the monetary policy of the central banks has had a considerable impact on the current situation. 

Although the European Central Bank is currently lowering interest rates, the substantial rate hikes implemented to combat inflation have applied considerable pressure and have resulted in lower levels of investment. Many European countries are faced with an ageing population and a shrinking workforce, leading to labour shortages. This makes it harder for companies to grow and drives up wages, which ultimately fuels inflation. 

Political uncertainties in the world, such as the conflict in Ukraine and tensions in the Middle East, are also influencing current developments. Furthermore, the divided policies on migration, climate change and collaboration within the EU create uncertainty for businesses and consumers, leading to a negative impact on the development of the European economy. 

In summary, the manufacturing industry in Europe is struggling, which in turn affects our recycling industry. Demand for recycled materials remains under pressure and those who hoped for a recovery after the summer break have been disappointed. Even worse, it seems the market may deteriorate further as we head towards the end of the year. Prices, margins and sales are under immense pressure, sentiment is poor and the tonnages currently being traded are low. 

Owing to these low margins and poor sales, many recycling companies are facing difficulties. Inventories are rising and profits are almost non-existent, leading companies into liquidity issues. Additionally, prices of new materials remain low, further pressurizing the prices of recycled material. If sentiment does not change soon, this could put an end to the operations of many recycling companies within Europe, resulting in the failure to meet sustainability goals. 

More and more companies in the chemical recycling sector are reassessing their ambitions. Several reasons can be cited for this, with a significant factor being the uncertainty surrounding regulations and environmental standards which play a crucial role in corporate decision-making. Additionally, many organizations face challenges such as the availability of suitable feedstock, rising technology costs and the complexity of the recycling process itself. This has led many companies to re-evaluate their strategies and set more realistic timelines and goals. 

Shell is among those companies to have decided to scale back its chemical recycling ambitions in expectation of a shortage of suitable feedstock. Slow technological progress and uncertainty about regulations are also influencing the company’s thinking. As a result, Shell has concluded that its goal of chemically recycling 1 million tons of plastic waste into pyrolysis oil annually by 2025 is not achievable. This is evident from Shell’s sustainability report for 2023. 

Middle East 

Sharing insights into the Middle East market, Mahmoud Al Sharif, Sharif Metals Group DMCC (ARE), Board Member of the BIR Plastics Division, says, compared to the previous quarter, recycled plastic prices in the Middle East have generally seen slight increases owing to rising demand for sustainable materials, improved collection/recycling efforts and fluctuating virgin plastic prices. However, regional variations can exist based on local supply chains and market conditions. 

There is generally a growing emphasis on sustainability and circular economy practices. While prices may vary by plastic type and region, the overall trend suggests a gradual upward movement. 

Emirates Biotech will begin commercial operations in early 2025 and intends to start construction of its first PLA production plant in the UAE before 2026. And in a plastic waste management project launched in Saudi Arabia, a joint venture involving SIRC aims to process 3 million tonnes of municipal solid waste per year - 35% of which will be converted into sustainable substitute fuels and 14% will be recycled. 

On a global basis, a lot of work continues to go into scaling up chemical recycling as complementary to mechanical recycling in the drive towards circularity in the plastics industry. The aim of directing plastics away from landfill aligns with the targets set out in Middle Eastern countries’ plans. 

Developments are being supported by polymer producers’ need to offer products compatible with voluntary targets and impending legislative requirements on their customers. 

Asia and Eastern Europe 

In his comment, Max Craipeau, Greencore Resources Limited (CHN), Board Member of the BIR Plastics Division, says the anticipated rPET demand uptrend towards the year-end holidays has not materialized. September showed no significant increase in demand and this trend is likely to continue for the remainder of the year. Challenging macro-economic conditions, especially the persistent weakness of the US dollar, have further hindered buying interest for Asian exports. India’s rPET prices have seen fresh drops to present tough competition for South East Asian cargoes, particularly as Indian bottle-grade flakes are trading significantly lower than those from South East Asia. This has made it difficult for South East Asian producers to stimulate interest from pelletizers and converters, both locally and in deep-sea markets such as Europe and North America. 

South East Asia continues to face tight feedstock availability owing to both seasonal monsoon disruption and high production costs. The wide price gap between virgin and rPET as a result of insufficient feedstock has led brand owners to limit their sustainability requirements, as there are no legal obligations driving demand. South East Asian producers are struggling to remain competitive, with Indian producers securing more favourable spot and term negotiations with European and North American buyers. 

Although shipping costs from South East Asia to Europe and the US Gulf have stabilized, the impact has not been sufficient to stimulate trade. While no longer on the rise, freight rates remain high and continue to weigh on the competitiveness of South East Asian exports. Benefitting from both lower production and freight costs, Indian exports continue to outperform South East Asian cargoes in global markets. 

Meanwhile, Eastern Europe’s rPET market has been slow to rebound after the summer holiday period, with only a gradual recovery apparent by mid-September. Bale supply is increasing as post-summer peak bottle consumption feeds into the recycling chain. However, regional variations persist owing to inconsistent temperatures across Europe, leading to fluctuating availability in different areas. Prices for rPET have remained broadly stable across Europe, although there have been some reports of distress, non-repeatable prices within the chain. 

Substitution back to virgin PET is becoming increasingly common, driven by the comparatively lower prices for virgin material. However, there are signs of increased buying interest from the bottle-to-bottle sector in anticipation of the 25% recycled content mandate under the EU’s Single-Use Plastic Directive coming into effect from January 2025. Views on the impact of this regulation remain divided, with uncertainty lingering over the penalties for non-compliance.