The cost of virgin PET fell below the cost of recycled PET (R-PET) in mid-2019 for the first time since 2008 (when S&P Global Platts first began assessing flake prices). While the demand for recycled plastics will increase over the long term, due in part to European Union initiatives to increase the recyclability and recycled content of packaging, unfavorable economics will test the market’s commitment to sustainability, explain S&P Global’s Luke Milner and Benjamin Brooks in the article, Europe’s plastic recycling drive pits consumer demand against economic realities.

If the current dynamics continue long-term, converters may look at switching from buying flake to less expensive virgin resin. However, Milner and Brooks point out that for bottle producers, “it may prove difficult to reverse big brands’ decisions of increased recycled content, set to last over many decades, just because of poor economics over a relatively short time frame.”

Initiatives in Europe to increase the use of recycled plastic in bottles include deposit return schemes and switching from colored to clear plastic. The authors conclude, “Despite these unfavorable economics, the industry remains positive about complying with recycled contents legislation, driving sustainability initiatives and building on current recycling rates.”