Brazil's rPET market confronts feedstock challenges amid promising policies

Uncertainties and hopefulness continue to cloud the Brazilian rPET market as regulatory changes and new circular economy policies emerge. Brazil's waste import controls have not yet been updated following recent legislation banning such imports, while the launch of the National Circular Economy Plan by mid-2025 aims to accelerate progress towards a circular economy.

Post-consumer polyethylene terephthalate bottle bales prices surged throughout 2024 as recyclers grappled with insufficient feedstock supply. The impending 2025 sustainability targets, combined with Brazil's diversified downstream outflows for rPET resin, have contributed to sustained demand in the market.

Preforms and bottles account for 29% of rPET applications in Brazil, while the textiles industry represents 24%, according to the Brazilian Association of PET Industry (Abipet). Additional applications include 17% in reels and thermoforming, 13% in chemicals, and 11% in strapping tapes.

Market prices have softened since late 2024 parallel to discussions of potential raw supply limits, but levels remain elevated. The announced expansions of the recycling capacity set for 2025 will boost Brazil's post-consumer PET resin capacity by 10%.

Platts, part of S&P Global Commodity Insights, last assessed clear bottle bales (95/5) at Real 5.60/kg DDP Sao Paulo on Feb. 25, up Real 1.20/kg from Aug. 12, 2024, when the assessment was launched.

Competitively priced virgin resin further complicates the situation by capping downstream recycled material prices.

The absence of mandates for post-consumer recycled content helps hinder the local market's global appeal, as most buyers prefer cheaper virgin material.

The price spread between recycled and virgin PET resin has recently surged in Brazil and currently ranks among the highest in the world.

With major brand owners' targets being global, companies can adapt their resin mix and regional strategies based on cost efficiency and local regulatory requirements. Sources note that the current environment in the Brazilian market is not very attractive to end-buyers.

Circular economy policies bring hope

The Brazilian National Circular Economy Forum launched the National Circular Economy Plan on Feb. 14 to transition from a linear production model to a circular economy. This plan is essential for executing the National Circular Economy Strategy (ENEC), initiated by President Luiz Inácio Lula da Silva in June 2024.

The Forum, established in September 2024, includes 36 representatives from Brazil's government, business, and civil society to advise on the implementation of ENEC.

Participants in Brazil's recycled polymers markets are closely monitoring the plan, anticipating a mandate for minimum recycled content. This requirement could reduce demand elasticity due to the elevated prices of recycled plastics compared to virgin.

One of the proposed actions within the plan is to "encourage the use of secondary materials in the industrial production process by establishing a percentage for the use of secondary materials."

"The current government has a significant social concern for scrap collectors," a major collector said. "However, it is ineffective to create policies to assist collectors if they do not also support the entire supply chain."

The plan complements Brazil's most significant and longstanding legislation, the 2010 National Solid Waste Policy (PNRS). PNRS serves as the foundation for Brazil's Extended Producer Responsibility policies, which require producers to manage their products throughout their life cycle, including disposal.

However, market participants indicate that the government has limited enforcement and oversight regarding tracking progress in these initiatives.

Rising reliance on imported feedstock faces ambiguous legislation

The industry is increasingly sourcing imported post-consumer recycled PET flakes from Asia and Latin America due to their cost-effectiveness and superior quality. This trend has pressured domestic prices downward.

Platts last assessed recycled PET clear flakes at Real 9.80/kg DDP São Paulo on Feb. 25. FOB Southeast Asia clear flakes were last assessed at $850/mt (Real 5/kg).

A December 2024 regulation allows plastic waste imports for recycling, but it hasn't been updated to reflect a new law prohibiting solid waste imports, including plastics.

This has led to varying interpretations by customs inspectors of whether flakes are categorized as waste. While some recyclers continue to import materials successfully, others are facing blocked shipments at ports.

With flake imports at a 20% discount compared to domestic material, local sellers are dealing with squeezed margins.

If the updated regulation bans plastic scrap imports but allows processed PET scrap, it could restrict value-adding opportunities for the local recycling industry. Still, flake imports have become crucial for recyclers to secure feedstock, and sources warn a ban on these imports could significantly slow down the local recycling sector.