Earlier in the month, we explored how the Strait of Hormuz crisis is pushing up plastic prices. But is the European plastic recycling industry also under pressure, and what might the long-term effects look like for this sector? Mia McLachlan, Carolina Perujo Holland, and Egor Dementev from ICIS tell us more.
Let’s start with a general overview: How are the current global supply chain disruptions impacting plastic prices in Europe?
The escalating US-Iran conflict and resulting interruption of shipping through the Strait of Hormuz have caused unprecedented disruption to global energy and chemical feedstock supply chains. The Middle East comprised 25% of global commodity chemicals and plastics exports in 2025 with key products including 12.5 million tonnes of polyethylene out of nearly 17 million tonnes of polyolefins.
In the polyester chain, Europe was sourcing 33% of paraxylene (PX) and 40% of purified terephthalic acid (PTA) consumption from the Middle East and Asia, highlighting the domestic virgin PET value chain’s exposure to shifting trade flows.
For European recycling markets, the impact will hinge on the duration of the crisis and its influence on virgin availability and pricing, as well as the broader effects of elevated energy costs on production, logistics and consumer spending sentiment.
Now let’s talk about specific materials – start with virgin PET.
Virgin PET prices started to see substantial increases as higher crude oil prices were passed down the value chain, initially impacting PET feedstock costs in influential Asia and then Europe.
Logistics issues due to the disruption in the Strait of Hormuz are impacting PET and feedstock material deliveries, while also driving up freight costs. This supply uncertainty has increased interest for European PET, however previously reduced operating rates, plant closures, unplanned shutdowns and constrained feedstock supply will put pressure on PET availability even as plants look to ramp up production.
How about virgin polyolefins?
The immediate impact on virgin polyolefin markets has been a sharp rise in spot prices, driven by reduced availability of both polymer and feedstock imports from the Middle East. If disruption persists, European supply could tighten further as domestic producers face feedstock sourcing constraints with at least one domestic supplier already declaring force majeure on sales.
What are some of the short-term impacts on rPET markets?
The immediate impact on the rPET market has been so far relatively muted, as the majority of March business concluded by the start of the conflict. The market began 2026 with unseasonably high inventories of PET bales, rPET flakes and pellets, and preforms due to muted underlying consumer demand.
In the nearer term, higher transport costs are expected to be passed down the chain and put upward pressure on rPET prices. However, buyers are likely to push back on sharp feedstock and rPET price increases while supply remains ample across the value chain. The market will look to avoid a repeat of 2022 where price volatility created significant damage to the recycling industry.
Nevertheless, enquiries from cost-sensitive end users, primarily from the sheet and thermoform sector, are growing, driven by uncertainty around virgin PET availability and surging prices. End users without mandated recycled content targets yet in effect previously switched away due to the rPET price premium over PET. Should virgin PET prices remain above rPET for a sustained period of time, cost savings will incentivize more end users to increase the use of rPET in their feedstock mix.
Despite this, any impact is expected to be temporary - limited to the duration of the conflict and the subsequent rebalancing period - after which global virgin overcapacity will likely reassert downward price pressure.
How about for recycled polyolefins?
The impact on recycled polyolefin markets has so far been limited, as substitution dynamics vary by end use. Packaging-grade demand is primarily driven by brand owner sustainability commitments and initial preparation for 2030 mandates, with procurement volumes often planned in line with longer-term strategies. Increasing recyclate content in products generally requires extended testing periods, leaving demand largely decoupled from short-term spikes in virgin prices.
In non-packaging applications, demand is driven by cost savings against virgin, with significant substitution only likely if converters expect the virgin-recycled spread to remain elevated for consecutive months, sufficient to justify the costs of retooling for different feedstocks. Despite this, higher virgin prices may directly influence recyclate pricing by easing competition pressure. This could support recyclers’ margins which have been severely strained in recent years.
Most recently, Europe rPP and rHDPE price spreads have shifted as virgin costs soar. The highlights being packaging grade natural pellet spreads have fallen nearly to zero, while huge cost savings have opened up for any industrial buyers looking at non-packaging grade recycled pellets.
Soaring virgin prices upend recycled pellet-virgin spreads, and post-industrial rPP benefits most from improved substitution demand. Countries with targeted plastics packaging taxes may see stronger moves towards PCR in packaging.
Nevertheless, any impact is expected to be temporary – limited to the duration of the conflict and the subsequent rebalancing period – after which global virgin overcapacity will likely reassert downwards price pressure.
Let’s look to the future now – what might some of the longer-term impacts on recycling markets look like?
The residual effects of elevated energy prices pose downside risks for the European recycling industry. While many recyclers are likely to be insulated in the near term through hedged or fixed annual electricity contracts, ongoing energy price uncertainty may weigh on future negotiations, with those more exposed to spot markets facing more immediate cost pressure. Higher fuel prices also raise logistics costs which could further erode the strained margins that have contributed to multiple bankruptcies across the region.
Sustained high energy prices could additionally heighten cost-of-living pressures, dampening consumer and industrial spending and ultimately constraining total polymer demand across both packaging and construction sectors.
Regardless of any short-term impact from the conflict, weak underlying demand for recyclate remains the principal challenge for the European recycling industry. As the EU looks to balance the priorities of sustainability, security of supply and competitiveness, key policy developments have the potential to significantly disrupt the current trajectory.
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