Supply issues, virgin competitiveness impact North American PCR use growth

As the 2025 deadline for sustainability goals approaches, the lack of supply of post-consumer resin (PCR), coupled with the cost attractiveness of virgin materials, has hindered progress toward key recycling objectives, according to market participants and recent reports from major plastics recycling pacts in the US and Canada.

The US Plastics Pact (USPP) 2023-24 Impact Report indicated that although the use of recycled content saw a slight increase to 11% across packaging portfolios in 2023, up from 9.4% in 2022, it still falls short of the 30% target established for 2025.

"Limited supply of high-quality postconsumer recycled content is a key constraint in progress," the report, released Dec. 17, said. "PCR suitable for packaging materials is usually more expensive than virgin resin. Policy is necessary to ensure the long-term, stable demand needed to drive investments to effectively capture and recycle plastic."

USPP's signatories, known as activators, are responsible for 33% of all plastic packaging in scope by weight in the U.S. In 2020, they initially committed to four targets to be achieved by 2025: 1. Eliminate problematic plastic packaging by 2025; 2. Make 100% of packaging reusable, recyclable, or compostable; 3. Recycle or compost 50% of plastic packaging; and 4. Achieve 30% recycled or responsibly sourced biobased content.

Platts, part of S&P Global Commodity Insights, last assessed recycled high-density polyethylene natural pellets at 125 cents/lb FOB Chicago on Jan. 13, up 51 cents/lb from Jan. 2, 2024. Virgin blowmolding-grade HDPE was last assessed at $860/mt (39 cents/lb) FAS Houston on Jan. 13, down $11/mt (0.50 cent/lb) since Jan. 2, 2024.

Platts assessed recycled polyethylene terephthalate food-grade pellets at 73.50 cents/lb FOB Los Angeles on Jan. 13, up 6.5 cents/lb from Jan. 2, 2024. Virgin PET bottle grade was last assessed at $1,279/mt (58 cents/lb) DDP USWC on Jan. 8, up $89/mt (4 cents/lb) from Jan. 10, 2024.

Platts data shows that the price spreads between recycled and virgin materials for both plastics are currently near their highest values recorded since 2022, deterring marginal buyers from opting for recycled materials.

In June 2024, the USPP released its updated plan, Roadmap 2.0, which extended some existing 2025 target deadlines to 2030 and introduced new targets. Implementation of Roadmap 2.0 is scheduled to begin in January 2026.

Consequently, optimism for sustained pricing and demand for recycled materials in 2025 in the US has been tempered by skepticism regarding companies' commitment to sustainability, especially following Coca Cola's postponement of its targets to 2035.

"Companies are waiting to see consumer's reaction to prices and their thoughts; Coca-Cola competitors can gain an advantage if they don't back down on their mandates," a source said.

Market participants have echoed the report's findings, emphasizing that increased regulation and accountability are crucial for enhancing collection activities and maintaining steady downstream demand, regardless of the pricing premium associated with virgin materials.

Extended Producer Responsibility (EPR) policies have emerged as a means to incentivize improved recycling initiatives. In 2024, Minnesota became the fifth US state to adopt a packaging EPR law; however, further efforts are still needed, according to sources.

Neighbour to the North sees decreasing PCR usage

Canada's USPP counterpart, the Canada Plastics Pact (CPP), disclosed similar trends in its 2023-24 Impact Report released Dec. 19.

According to the report, the overall usage of PCR material declined by 2 percentage points from 2022, resulting in a total of 10% in 2023. The amount of plastic packaging sourced from recycled material also decreased from 33,170 mt in 2022 to 21,313 mt in 2023.

"This decline may be attributed to several factors, including limited access to an adequate supply of PCR, the higher cost of recycled content compared to virgin resin, or fewer signatories -- particularly those with historically higher PCR usage -- responding to this question during the 2023-24 Impact Report data collection," the report explained.

CPP is a member of the Ellen MacArthur Foundation's Global Plastics Pact network. Since 2021, its approximately 100 partners have committed to four 2025 targets that align closely with those of the USPP.

In the Dec. 19 statement, however, CPP acknowledged that progress "has been slower than anticipated."