Recycled PET in SE Asian and Indian F&B Packaging

Environmental and climate change issues are putting pressure on governments and corporates to come up with sustainability strategies. For global F&B companies, packaging sustainability is also becoming critical, with most of the leading companies announcing rPET usage targets by 2025/2030 (see Table 1). This will drive the demand for food-grade rPET across the world.

Southeast Asian¹ and Indian governments are increasingly concerned about the environmental challenges due to the lack of plastic disposal systems. Ocean pollution has become a major challenge in the region. Eight out of the top 20 polluting rivers globally – in terms of plastic input to the ocean and thereby causing ocean pollution – are in Southeast Asia and India (Lebreton, 2017). Some of the governments have started initiatives to combat this problem. Maharashtra state in India, for example, has started a buy-back scheme for returning used PET bottles, ranging between INR 1 and INR 2 (USD 0.013-0.016) per bottle, dependent on volume size. Indonesia joined the Global Plastic Action Partnership (GPAP) under the World Economic Forum in 2019 and has committed to double recycling capacity by 2025. Vietnam also joined GPAP (in 2020).

Challenges

Lack of Formal Collection Systems

Formal PET collection through recyclers is extremely low (~2% in Southeast Asia and <5% in India). The informal sector dominates collection, and is driven by a network of rag-pickers/waste collectors and junk shops/dealers. The price of post-consumer material is insufficient to incentivise formal collection.

Most of the countries in Southeast Asia have low rates of PET collection – on average 26% for the region. India performs relatively well with a collection rate of 70% (see Figure 1). The lack of professional collection and source separation, however, leads to poor access to recyclable material. The collected used PET bottles are mixed with non-recyclable materials, leading to high contamination levels, in turn creating challenges in manufacturing food-grade rPET.

Lack of Technologies to Manufacture Food-Grade rPET

Current rPET off-takers are largely apparel companies who have committed targets to use rPET. The rPET industry is set up to cater to this segment. There have been no incentives for recyclers to invest in sophisticated/expensive technologies for food-grade rPET, especially as some countries have not (yet) allowed the use of rPET for F&B packaging. For example, India does not allow the use of rPET for beverages.

The prospects for chemical recycling have remained limited due to its high project costs. However, the industry expects governments to pass regulations that support food-grade rPET usage in India and Southeast Asia.

Competition With Virgin PET

The targets global F&B companies have set will grow rPET demand but competition from lower-priced virgin PET will remain a major growth barrier in the region. The decrease in virgin PET prices, experienced during Covid-19 in 2020, can limit the use of rPET by many companies, particularly those with no targets to use rPET.

Food-Grade rPET Demand Could Grow 10- to 15-fold by 2030 in Southeast Asia and India

PET consumption for F&B PET bottles manufactured in India and Southeast Asia is currently ~1.9m metric tons, with both India and Southeast Asia consuming almost similar volumes (see Figures 2 and 3). In terms of the number of units, as per GlobalData, PET bottle consumption in beverages is estimated to be 68.8bn units in 2019 combined for the regions, and is expected to grow to 85.3bn units by 2024, at a 4.4% CAGR (see Figure 4). Packaged water is the largest segment (at 44%) for PET usage in the region (see Figure 5).

Food-grade rPET demand in both Southeast Asia and India is currently quite low, with current estimates between 30,000 to 50,000 metric tons/year. Considering the targets global F&B companies have set, as per the GA circular report, a conservative estimate of 25% food-grade rPET adoption by 2030 in Southeast Asia will create demand of 380,000 metric tons/year by 2030 (see Figure 6), a 15-fold increase in 10 years. Forecasting demand for India is difficult considering the regulations, but if the government allows rPET use in beverages, food-grade rPET demand can potentially grow tenfold by 2030.

Outlook

Food-grade rPET demand will potentially increase by 10 to 15-fold in both India and Southeast Asia by 2030 – almost solely driven by the packaging sustainability targets set by global F&B companies. This will drive investments in collection/recycling capacities in the region. At the same time, the supply of quality feedstock for food-grade rPET will remain a limiting factor.

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¹ Southeast Asia: Indonesia, Malaysia, Thailand, Vietnam, Philippines and Myanmar