Amidst geopolitical tensions, soaring prices and evolving legislation, what is the current outlook for the PET industry?
Matt Tudball, Senior Editor for Recycling at ICIS, gives his comprehensive view on the PET market’s status in light of the war in Iran, the demands of EU regulations, the challenges facing tray-to-tray recycling, and much more, with additional reporting from Carolina Perujo Holland.
I think it’d be useful to frame this discussion with a general overview: where is the European PET industry in 2026?
Both the PET and rPET industry came into 2026 expecting more of an uneventful and underwhelming year, coming off the back of sizeable drops in prices and demand in 2025. But the Iran war changed the market dynamics from March, with tight supply and panic buying seeing PET prices spike, which in turn saw a big pull on rPET flake demand from the sheet and thermoforming sector. This demand for rPET flake was significant because much of the sheet and thermoform sector had moved away from rPET in the previous two years, substituting rPET with the then-lower-priced virgin PET.
As of June, market dynamics have changed again and the panic buying from March and April has subsided as stocks have been replenished and virgin PET prices have started to fall. From the recycling side, feedstock post-consumer PET bottle bale availability is increasing as more bottles are consumed (in line with the season) and entering the recycling stream, and the war-related demand from the sheet and thermoforming sector has eased.
How are tray-to-tray recycling solutions and systems developing, what are the main challenges standing in the way of wider adoption, and how could these challenges be solved?
Probably the two main challenges are access to good-quality feedstock and the willingness to invest to make tray-to-tray recycling both scalable and economically viable.
The PET bottle recycling market is well established and many years ahead of the tray sector, plus there has generally been more public awareness around the need to recycle PET bottles due to their presence in the environment and legislation such as the Single Use Plastics Directive (SUPD) that has put focus on the bottles more than the trays. Therefore, there also needs to be greater awareness for consumers on the need and ability to recycle PET trays.
There is also the make-up of the trays which can be multi-material and multi-layer, and this requires different and specific technologies to be able to delaminate, decontaminate and recycle at a suitable scale to encourage investment.
The Iran War did see some improvement in tray-bale prices, with a couple of companies who collect both mono- and multi-layer trays seeing higher levels of interest, and in some cases, higher prices for tray bales, but it’s not yet clear if that upward trend will sustain.
Plus, it is worth noting that both the PET and rPET markets saw fairly poor demand in 2025 across Europe due to the cost-of-living crisis that started post-Covid, so for many organisations the focus is on cost-savings rather than sustainability and the adoption of recycled content – especially if there is no regulatory obligation to do it.
But we do continue to see advances in collection and sorting for trays as well as quality of output. There are also new capacities coming online, such as Veolia’s dedicated tray recycling facility in the UK, which will bring around 20k tonnes/year installed capacity to the market.
PET is exactly the sort of material that could benefit from the PPWR due to comparatively high collection and recycling rates, but what are the potential challenges for PET in terms of the stipulations of the PPWR?
If we look outside of the beverage sector for PET, then there are some challenges when it comes to the PPWR. For instance, we get a lot of questions about what impact the Deposit Return Schemes (DRS) mandated under the PPWR for countries that have a collection rate below 90% by 2029 will have on waste collection.
PET bottles are often seen as the most valuable source of waste for rPET because of the current 25% rPET target under the SUPD, but with those bottles being removed from the waste collection, how does the value of the remaining fractions increase to ensure they are sorted and processed?
Hopefully the answer is that PPWR will drive this, as we do see more investment in the tray-to-tray recycling business as mentioned, but this does seem to be an underlying concern from some market participants.
There is also the issue of the novel technology status of the functional barrier used in trays where a layer of PCR material is sandwiched between two layers of virgin PET – known as an A-B-A structure.
The PPWR currently only acknowledges mechanical recycling of PET bottles as a suitable technology, meaning all other technologies have to go through the lengthy and costly process of proving that the technology is safe enough to comply with European Food Safety Authority (EFSA) requirements and to move from the ‘novel’ to ‘suitable’ technologies list.
And while the EU currently has sufficient mechanical recycling capacity to meet the 2030 targets for contact-sensitive applications outside PET bottles (which have their own PPWR targets), when we look out to 2040, Europe falls short.
ICIS estimates that around 1.7 million tonnes/year by 2030 and over 3.9 million tonnes/year by 2040 of rPET will be required by EU domestic producers to meet mandated minimum recycled content targets set by the PPWR.
Of this, approximately 1.5 million tonnes/year by 2030 and roughly 3.5 million tonnes/year by 2040 will be required for contact sensitive applications only, the main end market for PET in Europe.
We do not see sufficient domestic mechanical recycling capacity to meet the 2040 targets for rPET based on current expected production levels.
In recent years, we’ve seen a surge in plant closures and insolvencies within the recycling industry. What does the situation currently look like, and how much have things changed over the past few years?
The risk of closures is a major concern for recyclers across Europe and will continue throughout 2026. This could, however, present an opportunity for consolidation, as capacities taken offline could be acquired by other operators in the future, but perhaps not in the immediate term.
Between 2024 and 2025, the ICIS Mechanical Recycling Supply Tracker identified 22 sites that closed operations or announced their closures. Of this total, the PET recycling market saw four projects announcing closures, representing around a fifth of the total recycling capacity lost.
Simultaneously, new mechanical recycling capacities were added in 2025 and announced for 2026-2027. The European PET recycling market is expected to see six projects increase the region’s recycling capabilities during this period, equating to more than double the capacities lost.
This shows that there is appetite for expansion in this market, and industry is still looking to improve domestic capabilities to meet upcoming recycling targets.
At the last PETCORE event Packaging Europe attended, there was plenty of talk around the need for the EU to legislate against cheap imports and an “unlevel playing field”. Where are things currently at with this?
This is a very interesting question and one we at ICIS frequently get asked, both from EU-based companies and those based outside the EU.
Many recyclers and converters we speak to believe recycled content should come from within the EU in order for the Union to be truly circular, but that comes with a cost. Europe is at a disadvantage globally in terms of both its feedstock bale prices as well as the cost of production. Other regions like Asia and Africa have much lower energy and labour costs, for example, which result in a lower-priced but still high-quality recycled material.
It’s probably easier to look at the current example of imports against the SUPD, as we don’t yet know the status of imports under the PPWR until the Commission publishes the methodology for calculating recycled content for 2030, which is expected to come out at the end of this year.
In February 2026, the Commission published a draft Implementing Act to amend the current SUPD text, part of which addresses the use of imported material counting towards the 25% mandated rPET content target in PET bottles.
In this draft text, published on the Commission’s Comitology Register, it states under Article 1 (1):
‘recycled plastic’ means plastic which was post-consumer plastic waste before recycling, and which has been produced by recycling (including sorting), as defined in Article 3, point (17), of Directive 2008/98/EC and including sorting, in the Union. As of 21 November 2027, it shall also cover post-consumer plastic waste that has been recycled (including sorted) in:
(a) a third country to which the OECD decision applies, unless the assessment carried out and decision adopted pursuant to Article 45(5) and (6) of Regulation (EU) 2024/1157 concludes that it does not fulfil the requirements of environmentally sound management of plastic waste;
(b) a third country with which the Union has concluded agreements or arrangements to ensure that the recycled plastic is obtained from post-consumer plastic waste that has been treated in each relevant installation in a manner equivalent to EU standards related to human health and environmental protection requirements under Union legislation, in particular in Directive 2008/98/EC and Regulation (EU) 2025/40, as relevant.
So with the publication of the Decision, the Commission has given a date from which imported rPET recycled outside of the EU can count towards the mandatory 25% target.
However, at the time of writing, ICIS understands that the draft Implementing Decision has not been published in the Official Journal of the European Union, which means this change to the SUPD has not yet come into law.
The draft Implementing Decision even states: “This Decision shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.” One other indicator that this draft has not yet come into law is that Implementing Decision (EU) 2023/2683, which will be replaced by the Implementing Act, is still in force on the Commission website.
Despite the lack of clarity on the status of imports, this is a clear step by the Commission to ensure that at least 25% of the recycled content in the PET bottle is coming from the EU over this period. But if you are producing a bottle from 100% rPET, the remaining 75% PCR content could come from outside the EU, as long as it is in line with other regulations such as 2022/1616 on the use of recycled plastics intended to come into contact with food.
Ultimately it will likely be the decision of the end-use customer – the beverage brand or FMCG – as to whether or not they want to stick with EU-only PCR or if they are happy to incorporate both EU and non-EU origin material. Already there are brands in the sheet and thermoforming using non-EU origin material after they have done their due diligence and satisfied their internal requirements that the required documentation meets the Commission’s requirements in their view.
Whether or not the Commission adopts this approach with the PPWR by setting out a time period before imports can count towards the mandated targets remains to be seen.
The Iran War/Hormuz Crisis has had a major impact on chemical prices, with PET being no exception. Hypothetically speaking, if the crisis was resolved today and the Strait was reopened immediately, how long would it take for PET markets to go back to normal?
As of the start of June, it is likely to take until at least the end of the year before we see things settle down after the war, and this is true for many major petrochemical markets, not just PET.
We have already seen virgin polymer prices start to drop in May and June as the panic buying has eased, but there is still a long way for them to fall before they get close to the pre-war levels.
For PET in particular, there are a lot of questions within the European PET and rPET markets about the longer-term impact on feedstocks such as MEG and PTA in terms of both prices and availability. A sizeable portion of Europe’s PTA and PET comes from Asia so any further disruption to trade routes or rises in fuel or freight costs could push that impact further back into 2027.
There is also the question about inflationary impact on demand levels in Europe, too. Countries like the Netherlands and the United Kingdom have warned that inflation will hit during the summer and could last for several months, but this will likely differ from country to country across the region.
Some are concerned that higher fuel and energy costs as well as rises in food prices will slow consumer spending during the second half of the year, but others anticipate limited or no impact for the PET market as consumers may spend more on smaller items like food and drink at the expense of larger items like electronics, white goods, cars and travel, for example.
So it’s quite hard to predict just how long it will take for markets to return to ‘normal’, but I would expect we will be talking about the war-related impact for at least another six months, if not longer.
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