Business Philosophy-Why the recycling industry in developed countries is facing its biggest challenge ever

In recent years, our recycling industry has presented the general public with the misconception that it is an up-and-coming industry with much room for development. However, the industry believes quite the opposite—it is facing unprecedented challenges. Many businesses and factories currently face situations where their income is insufficient to cover expenses, leading to debt restructuring and some even bankruptcy.


Recently, I communicated with some leaders in the PET bottle recycling industry who are also very concerned about the current situation because raw material prices are relatively low. Despite many brand companies advertising on different occasions about how they support environmental protection and the circular economy and how their products use green and recycled materials, the reality is that these companies have very high requirements for the physical and chemical properties of recycled materials, which are generally difficult to meet. The biggest competitor for recycled pellets is the surplus production capacity of prime material and its low price. The sluggish sales of recycled pellets are due to the selling prices being well below production costs.


Currently, the production costs in Europe, America, and other developed countries are high. Besides high wages and rents, factories also invest a lot of money in building environmental facilities and purchasing advanced equipment from Europe and America, resulting in their production costs being twice or even three times that of developing countries. For example, to recycle PET bottles from municipal recyclable bins in Europe and America, they need to be sorted by type. PET bottles are automatically separated from many waste materials by spectral sorting. After baling, they are sent to specialized recycling plants, where they undergo deep processing, crushing, and cleaning. Then, they are made into granules or flakes, which are then transported to factories to produce products. Such a process costs more than one thousand euros per ton, while the current price of new materials hovers at or below one thousand euros per ton.


On the contrary, production costs in Asia, Turkey, Africa, and other countries are lower. Therefore, they export recycled materials to countries in Europe and America with mandatory use policies, giving them a specific price advantage. However, due to high costs, this undermines the competitiveness of local recycling industries in Europe and America. It is a profitable and potential market for developing countries. Still, the local recycling industries in Europe and America face a double blow from competitively priced prime materials and cheap imported recycled materials. Currently, many developed and developing countries in Europe and America are legislating to promote using recycled materials. However, things have not gone as planned, and the expected results have yet to be achieved. Many factories have invested a lot of resources but still need to see premium-priced orders for recycled materials. Some factories have spent a lot of money on certification, but in reality, most of the standards introduced by certification companies are just money-making gimmicks.


It’s hard to say when our industry will see a bright future because there are too many uncertainties.


Original by Dr. Steve Wong

March 18, 2024

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