OUTLOOK: US recycled plastics weather mixed demand, new capacity as pivotal year, 2025, approaches

HOUSTON (ICIS)–Although the broader US recycled plastics market has yet to see the full recovery as hoped by this time, there still remain opportunities and challenges through year end.

Market dynamics remain mixed across specific grades of recycled resins, with some witnessing strong order pipelines into 2025, and others sustaining business month to month, pending the broader economic recovery.

US recycled polyethylene terephthalate (R-PET) players must now balance global trade with local demand, while US recycled polyethylene (R-PE) markets see split trends based on material color, as natural recycled resin prices continue to climb and mixed colored material softens.

• US R-PET shielded from imports pending ocean freight rates
• US natural R-HDPE prices stuck in cyclic pattern on tight supply
• Mixed action of brand companies towards 2025 voluntary, regulatory targets

US R-PET Market Outlook

Now that the US is experiencing peak summer season, traditionally this would entail growing supply of polyethylene terephthalate (PET) bottles due to the fact that more bottled beverages are consumed, and thus more bottles are collected in recycling streams.

That being said, June supply remained uncharacteristically tight, potentially attributed to lower bottled beverage consumption due to the high inflationary pressure on consumers.

Supply is now growing, paired with higher temperatures experienced across the country, but it remains to be seen if increased volumes are enough to sway market prices.

Though as domestic supply grows, imported supply of R-PET flake and pellet has shrunk, as US customers limit future orders due to high ocean freight prices, making imports no longer as competitive to domestic pricing.

The US market has seen a barrage of import activity throughout the last 18 months, and though imports are subdued at present, any change to ocean freight rates could reopen the arbitrage opportunity.

But, even if imports do return, the local demand landscape is likely to have changed. Though broader economic conditions may improve through the end of the year, peak season for PET will have already passed.

For some players, particularly on the West Coast or for smaller players, demand is expected to soften as downstream thermoforming and beverage sectors ramp down from peak season.

Demand outlooks remain robust for some larger players, who have found success with brand companies committed to domestic supply and attempting to increase recycled content use by 2025.

Moreover, as some companies strive to increase recycled content, demand is expected to grow through the end of the year to increase the annual average recycled content percentage. If brands are in the process of ramping up recycled content, higher percentages are needed towards the end of the year, in some cases more than the initial goal, to balance out the lower percentages from earlier in the year.

US R-PE Market Outlook

The demand outlook for R-PE is slightly more mixed, with some sustainability-driven grades likely to see robust demand from consumer goods companies through the end of the year, but cost-sensitive grades will continue to battle weak demand on virgin substitution.

Cost-sensitive grades of R-PE are constituted of both mixed-colored or post-industrial material, which do not have the sustainability appeal and are typically used in non-consumer facing applications such as automotive, construction or secondary packaging.

As these end-markets adjust to new 2H2024 economic outlooks, several buyers expect continued flatness in market conditions. Though many note orders are stronger this year in comparison to 2023, overall demand remains softer than expectations.

On the other end of the spectrum, sustainability-driven grades of R-PE – such as natural post-consumer recycled high density polyethylene (R-HDPE) – continue to experience strong demand.

Over the last several months, natural post-consumer R-HDPE pellet prices had been rising on high bale feedstock costs due to systemically short collection rates, paired with growing demand.

The cyclic pattern of the natural R-HDPE market is expected to continue, until once again, the cost premium is unsustainable by the end customer, thus forcing a drop in demand which then crashes bale prices. The market has seen two crashes in the last 3 years.

The State of Brand Commitments on Recycled Plastics

Several major brands in the plastics industry have set significant targets for 2025 to reduce plastic waste and promote a circular economy, though some have extended the timeline to 2030 and refocused priorities, a few of note below.

• PepsiCo initially committed to achieving 100% of packaging being recyclable, compostable, biodegradable, or reusable by 2025 but recently announced they estimate to fall just short of that deliverable.
• Unilever reported successfully using 25% of recycled material in all packaging by 2025 but is not likely to meet the goal of 50% reduction of virgin material and 100% of packaging to be recyclable, compostable or reusable by 2025.
• Coca-Cola has successfully designed all primary packaging to be recyclable but is less than halfway to their 2025 goal of utilizing 25% recycled PET in their bottles which is supported by their new goal to collect and recycle one bottle for each bottle sold by 2030.
• Mars has targeted for 100% of packaging to be recyclable by 2025 but currently reports that 44% of their packaging portfolio is designed for circularity and they have expanded efforts on innovating towards reusability and composability.

Moreover, the U.S. Plastics Pact conducted revisions to their Road Map to 2025 strategic plan after many deliverables were underachieved by members. Continuing targets such as eliminating problematic materials, designing all packaging to be able to contribute to circularity, effectively recycling half of all packaging, and increasing post-consumer recycled content to an average of 30%, a significant revision was created to focus on identifying scalable systems for reusable packaging to coincide with a goal of reducing the use of virgin plastic by 30% across the market.

Despite the fact that voluntary commitments have yielded mixed success, with many companies increasing the amount of recycled content in their products and packaging, but falling short of their ambitious targets, regulation has, and will continue to be a driver of these markets.

Regulation Intensity Grows at US and Global Level

On the world stage, the Global Treaty on Plastic Pollution aims to create legally binding frameworks for international participants to address plastic pollution across the product lifecycle from production to disposal.

Anticipating finalizing the treaty, the fifth session of the Intergovernmental Negotiating Committee in Busan in November 2024 will yield several critical outcomes such as advancing the draft text, setting reduction targets for primary plastics polymers, and establishing legal soundness to ensure effective implementation.

At the state level, California’s  AB 793 currently has a 15% minimum postconsumer recycled (PCR) content mandate on plastic beverage bottles, which is set to increase to 25% in 2025. Similarly, Washington’s SB 5022 will activate  a 15% PCR mandate on plastic household cleaning and personal care containers in 2025.

Pivoting to extended producer responsibility (EPR), Minnesota was the fifth state to sign a packaging EPR scheme into law on 21 May 2024. This signing comes at a time when two states—Oregon and Colorado—are set for their packaging management programs to go into effect in 2025, to be run by the Producer Responsibility Organization (PRO). Both states have chosen the Circular Action Alliance (CAA) as their PRO.

Capacity Expansions Remain Strong Despite Economic Environment

Though announcements for future facilities have slowed, current progress on existing expansions or new plants continues to grow the US recycling footprint. Total recycling capacity in 2024, encompassing both mechanical and chemical processes, reaches approximately 8.4 million tonnes per year.

Mechanical recycling currently dominates, constituting 95% of this total capacity, with anticipated annual growth rates of 3-5%. In contrast, chemical recycling capacity is poised for substantial expansion, projected to grow significantly, surpassing mechanical recycling growth rates. By 2028, chemical recycling is forecasted to experience at least a 400% increase.

The market landscape remains dynamic and evolving. Here are the latest significant announcements from recyclers:

Mechanical recycling:

• • Blue Polymers: Blue Polymers is a joint venture between Republic Services and Ravago, leading an innovative approach by establishing a complex that incorporates a Republic Services Polymer Center adjacent to a Blue Polymers recycling facility. This integrated setup facilitates customizable sorting capabilities aimed at producing high-quality recycled resins tailored for consumer packaging and various applications. Following the successful launch of a comparable complex in Las Vegas, they are preparing to inaugurate another facility in Indianapolis, Indiana by late 2024 which will process both R-PET flake and R-PE and recycled polypropylene (R-PP) pellet.
  • KW Plastics: KW Plastics is expanding its recycling capacities with a sixth line set to add 45,000 tonnes/year, operational in Q3 2024. This expansion underscores their commitment to long-term recycling growth.
  • Circularix: A joint venture of Macquarie Group and HPC Industries, Circularix has established their first recycling plant in Pennsylvania, but have delayed plans for four additional 25,000 tonnes/year plants, the tentative locations being Arizona, Florida, Texas, and the Pacific Northwest.
  • LyondellBasell (LYB)/PreZero: LYB has acquired a mechanical recycling facility in Jurupa Valley, California, which has a recycling capacity of 23,000 tonnes per year. The company has also procured recycling lines from PreZero and secured a lease on the processing facility. This acquisition aligns with LYB’s strategy to enhance the circular economy for plastics and strengthen its commitment to sustainable recycling practices.
  • NOVA Chemicals: NOVA Chemicals has announced a major expansion of its Circular Solutions business with a new mechanical recycling facility in Connersville, Indiana. Scheduled to begin operations by 2025, this facility will process post-consumer plastic films at a commercial scale, aiming to supply over 45,000 tonnes of rPE to the market by 2026. This investment is a critical step toward NOVA Chemicals’ 2030 goal of incorporating 30 percent recycled content into its total polyethylene sales.

Chemical Recycling:

• • Encina On April 18, 2024, Encina confirmed its decision to cancel plans to build what would have been one of the largest chemical recycling plants in the United States, initially slated for Point Township, Pennsylvania. However, following strong opposition from local residents and environmental concerns about toxic emissions and the efficacy of chemical recycling in reducing plastic waste, Encina has opted not to proceed with the project. Despite the setback, Encina remains committed to advancing its recycling technologies in other regions.
  • FreePoint Eco-Systems: FreePoint announced plans to commission two ISCC Plus-certified chemical recycling plants in the United States. The Ohio facility is scheduled to open by end of 2024, followed by a joint venture with Dow in Arizona by mid-2026. These plants will focus on converting local end-of-life plastic waste, with the Arizona facility aiming to produce virgin-like plastics from plastic-waste derived pyrolysis oil.
  • ExxonMobil: ExxonMobil plans to expand its existing advanced recycling plant in Baytown, Texas, with a second unit expected to commence operations in 2025. This expansion is part of ExxonMobil’s strategy to process more than 450,000 tonnes of plastic waste annually, advancing their commitment to sustainability and circular economy initiatives.
  • LyondellBasell (LYB): LyondellBasell has announced potential plans for its first industrial-scale catalytic advanced recycling plant in Houston, Texas, with FID expected in 2025. Using MoReTec technology, the facility will convert post-consumer plastic waste into new plastic materials, with an annual capacity of 100,000 tonnes, marking a significant step towards sustainable plastic manufacturing.

As the US recycled plastics market continues to develop, especially as the landmark year, 2025, approaches, both supply and demand remain top of mind for existing players and new entrants.

Though this growth journey has not been as swift as some expected, many would agree these markets have transformed substantially in the last several years.

Insight article by Emily Friedman, Andrea Bassetti, Corbin Olson and Joshua Dill.