Recycling capacity in Europe should be ramping up to meet the demands of impending EU regulations around increasing the amount of recycled plastic in packaging, auto parts and other products. Instead, the industry has seen a wave of recycling plant closures: over 300,000 tonnes/year of recycling capacity closed in 2024, and at least as much again in 2025.
Several factors have converged to create significant challenges for recyclers. Sustained global overcapacity in ethylene production has lowered virgin polymer prices, while high energy prices have pushed up recycling costs in Europe. Meanwhile, government policies intended to offset some of the price premium and encourage manufacturers to incorporate more recycled material in their packaging have not kept pace with the price differentials, making it cost-effective to just use virgin polymer and pay the penalties. There are also suggestions from within the industry that some virgin polymer imports are being fraudulently passed off as recycled material, further undercutting domestic recyclers.
The story is similar in the US, where recent increases in recycling capacity, supported by state policies and their customers’ commitments to using recycled material in packaging, have foundered after brands walked back on those commitments as recyclers struggled to compete with low virgin polymer prices. World leaders’ inability to agree a plastics treaty – and to commit to capping virgin polymer production in particular – further prolongs pressure on recyclers.
Low demand for most recycled materials means firms cannot justify investing in new facilities – and in some cases even continuing to operate their existing ones. But there are also issues with supply of plastic waste for recycling. In the UK, companies have various options for dealing with their plastic packaging waste, including incineration for energy generation, or exporting it for recycling elsewhere. The UK exports half its plastic waste, increasingly to non-OECD countries including Indonesia. Because of concerns around the fate of exported waste, the EU has now banned exports to non-OECD countries.
Reducing exports could provide more consistent feedstock supplies for domestic recyclers – although at the same time there is a need to reduce the contamination in waste supply streams. Food residues, inks, labels and improperly sorted materials all make the recycling process more challenging (and hence expensive) as well as making it harder to produce higher grades of plastic that are most in demand, such as for food packaging.
In the UK and Europe, there are policy measures under discussion that may go some way to addressing some of these aspects, but whether they can be implemented soon enough to stimulate a reversal in recyclers’ fortunes is unclear.
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