Southeast Asian R-PET producers pivot to US as European demand wanes

Southeast Asian recycled polyethylene terephthalate producers are redirecting exports away from Europe toward the US amid regulatory uncertainty, several recyclers with knowledge of the matter said in the week to Nov. 4.

European demand falls

"Demand has tapered quite a bit as far as Europe is concerned ... there is so much confusion over regulations," one Indonesian recycler said, referring to the EU's recent implementation of the Packaging and Packaging Waste Regulations.

Market participants said that under the updated PPWR, they are required to undergo additional layers of due diligence and bureaucracy, on top of meeting the existing traceability certification requirements.

"There are loads of paperwork required from European customers looking to import recycled material ... it is too much trouble, so they prefer not to import now," a second Indonesian recycler said, adding that "PPWR and SUPD (Single-Use Plastics Directive) are trouble for Asian-origin [recycled] material."

"We are also looking at the possibility of brand owners cutting back on sustainability goals and recycled content commitments in Europe," the first Indonesian recycler said.

The comments came as recycled-content requirements and claims faced greater scrutiny in Europe. Coca-Cola, Nestlé and Danone recently committed to exclude certain virgin PET production scraps and off-cuts from recycled-content claims on bottles, following an Oct. 22 European Commission announcement.

Meanwhile, lower European import demand also reflected improving economics for domestic R-PET. Falling European flake values and a widening discount to virgin PET have renewed converter interest in locally produced material, while market participants said there have been fewer bookings of Asian-origin R-PET recently as European suppliers become more competitive.

US inquiries rise

Southeast Asian recyclers said the demand outlook for the US market was stronger.

Despite few deals being concluded in recent months due to the high freight costs, Thai and Indonesian PET recyclers cited a healthier number of inquiries from US customers.

"The mood [in the US market] seems to be quite positive as far as recycling and sustainability is concerned," the first Indonesian recycler said, citing growing discussions about sustainability in recent months amid the geopolitical tensions in the Middle East.

US buyers have started to view the investment in recycled material as a practical diversification strategy, rather than mere environmental, social and governance commitments, amid soaring prices and supply limitations in virgin markets, the sources said.

According to US market participants, virgin PET prices have risen considerably despite stable demand on gains in upstream markets.

The US virgin PET price reached $1,808/metric ton on Oct. 28, the highest since October 2022, data from Platts, part of S&P Global Energy, showed.

"Brand owners are facing the pressure to pass down the cost of upstream crude ... so people are looking at cheaper options, and with recycled plastics prices at par with or slightly lower than virgin prices, there is some impetus for recycled adoption," the first Indonesian recycler said.

However, US sources said transitioning to recycled content was neither fast nor easy as domestic capacity to process recycled material remains insufficient.

Some sources said they see opportunities in applications where the switch can be made more easily, such as packaging and film.

Nonetheless, there is sustained long-term interest in the recycled market, reflected in the recent acquisition of some processing facilities in California and government support through postconsumer recycled (PCR) material incentives that have helped stimulate activity in the region, US sources said.

A second Indonesian recycler said there was growing demand among US customers for recycled material certified by the Association for Plastic Recyclers.

Southeast Asian recyclers said they were uncertain whether these shifts in R-PET trade flows would persist over the long term.

"There are so many changes happening right now that you cannot plan for the long term," the first Indonesian recycler said.