Original by Dr. Steve Wong
August 14, 2023
Given the continuous decline in prices of prime virgin materials last year, recycled plastic has been following suit with a downward trend. Prices have now dropped to a point where production costs exceed market prices. Numerous recycling facilities are grappling to sustain operations; some have shuttered, while others remain temporarily closed, awaiting market improvement before resuming production. A few have downsized production lines in hopes of weathering the situation until conditions improve.
Historically, Southeast Asia served as a central recycling hub. However, the Basel Convention’s amendment, which restricted the transboundary movement of waste—specifically the export of plastic waste to non-OECD countries—has reshaped the market landscape. Many developed nations have become participants and invested in recycling due to this amendment. With backing from stakeholders including governments and brand owners, certain recycled materials were once sold at a premium ranging from 50% to 200% above prices of prime virgin materials. As this movement lacks legal binding, the recent collapse in prime prices has disrupted the dynamics of utilizing recycled content. Oversupply, economic factors, and political influences have driven brand owners to decrease their usage of recycled materials, favoring prime virgin materials for cost reduction and enhanced competitiveness. Ultimately, there is a concern that the use of recycled materials is only a “slogan and gimmick ” rather than legally obligatory.
Notably, European Union countries are slated to mandate the use of recycled plastics, particularly in PET bottles for packaging, by 2025. However, detailed information and implementation methods have yet to be disclosed. Many conglomerates are heavily investing in recycling facilities to comply with the forthcoming regulations. While prime virgin material prices soared, recycled materials experienced a similar surge, emerging as lucrative secondary materials. Yet, with subsequent drops in raw material prices, the commitment to a circular economy and sustainable development seemingly evaporated, becoming mere market slogans. This highlights the prioritization of economic gains over environmental protection, and the voluntary use of recycled materials lacks a binding commitment, vulnerable to the allure of cheaper prime virgin materials. What’s truly necessary is the mandatory utilization of recycled materials to invigorate the promising recycling industry.
Discussions surrounding carbon credits and the promotion of recycled materials have gained traction in the market. However, the challenge lies in determining who bears the associated costs and how to implement these concepts across diverse countries. While businesses shutter daily, fresh entrants continue to join the recycling industry. The inner workings and profitability of the industry remain enigmatic to many. It is my belief that only a fraction of the truth has been grasped.
In the current sluggish market conditions, the industry is pinning its hopes on whether and how European Union countries will enforce mandatory recycled material usage. This stands as a beacon of hope for our industry during these challenging times.