Recycled plastics on the rise

The downward price trend of the last two years has been flipped into reverse by the Middle East conflict. Demand for recycled plastics is increasing rapidly and is currently structurally exceeding supply. Meanwhile, prices have headed sharply higher, albeit not to the same extent as virgin materials.

Geopolitical tensions in the Middle East have rapidly turned the plastics market upside down. After two years characterised by low prices and an abundance of cheap imported virgin material, the situation has now reversed. Prices for materials such as PP, HDPE, LDPE, HIPS, ABS and PET have surged dramatically in a short period of time, with virgin grades in many cases more than doubling in price.

One point must be made clear: these price developments are the result of a deeply concerning and tragic situation. The conflict has a profound human impact and once again highlights the vulnerability of global supply chains. At the same time, it is evident that these disruptions are having a direct effect on the plastics industry.

Whereas end producers previously relied heavily on low-cost virgin materials from abroad, a clear shift is now emerging. Demand for recycled plastics is increasing rapidly. Companies that once felt comfortable with their procurement strategies are now actively seeking alternatives closer to home.

Although price increases for recyclates have been less extreme than those for virgin materials, gains of 20% to 30% are no longer uncommon. More importantly, demand is currently structurally exceeding supply. This imbalance is being intensified by growing uncertainty in the market, leading many companies to stockpile raw materials and thus driving prices even higher.

What is clear is that end producers have woken up, with their focus shifting towards security of supply. This is translating into a growing willingness to enter into long-term agreements for the purchase of European recycled materials.

The market is clearly shifting, and recyclates are once again in the spotlight. The key question, however, is for how long. Will this shift prove structural, or is it yet another short-lived surge driven by crisis?

Even if the conflict were to be resolved in the short term, analysts expect the market to remain disrupted for an extended period. It may take up to a year for supply chains to stabilise and for price levels to normalise.

At the same time, new European regulations on the export of plastic waste are coming into force, as outlined in the revised EU Waste Shipment Regulation. These restrictions on exporting waste streams outside Europe will result in more material remaining within European borders for recycling. Fundamentally, this is a positive development as these volumes are essential to meet rising demand.

However, this also presents a challenge. The European recycling sector has seen a significant reduction in capacity over recent years owing to bankruptcies and consolidation. Scaling up production to meet current demand is therefore far from straightforward.

In late April, a group of some 138 international companies sent a letter to the European Commission calling for a delay and revision of parts of the Packaging and Packaging Waste Regulation (PPWR). The companies pointed to uncertainties and implementation risks, particularly regarding the mandatory use of recycled content. At the same time, this lobbying effort highlights the core issue within the current market: as long as structural obligations are lacking or weakened, demand for recyclates remains dependent on external factors such as raw material prices and geopolitical developments rather than being driven by consistent and predictable policy.

It is widely acknowledged that, while further clarification of regulations may be necessary, the current moment calls for consistent and stable policy. Without clear and enforceable frameworks, the sector will remain cyclical and vulnerable whereas investments in recycling capacity require long-term certainty.