OPIS Insights

The recycled plastics market today sits at the intersection of commodity economics, environmental policy and social equity. Tariffs, while designed to shield domestic interests, often disrupt the delicate global trade flows of recycled materials—particularly in Asia, the world’s largest processing hub and exporter of recycled content. From the “economics of waste” perspective, tariffs are not just trade instruments, but signals of how value is being redistributed across borders, sectors and stakeholders.

For Alvaro Aguilar–founder & data lead of Ekologis, head of business development with Polindo Utama, and head of collection center operations with Prevented Ocean Plastic Southeast Asia–this period is a transition from linear value extraction to circular value optimization. In an interview with OPIS, he discusses the challenges as well as the opportunities: greater traceability, digital-led compliance, localized social impact and new tools to unlock global financial incentives.

OPIS: What is the current state of the recycled plastics market?

Aguilar: Over the past 12 months, the recycled plastics market has become increasingly volatile. Prices for recycled polyethylene terephthalate or rPET—particularly clear flakes suitable for food-grade or high-end packaging—have fallen sharply, in some cases approaching parity with virgin PET. This is due to a combination of oversupply in the virgin market, fluctuating oil prices and conservative buying behavior among brands waiting to “time the bottom.”

Recycled polyethylene and polypropylene or rPE and rPP markets have followed different dynamics—fragmented, localized and heavily influenced by energy prices, collection inefficiencies, and the absence of robust traceability. Food-grade rPE/ rPP is still niche and high-cost, with very limited production capacity globally.

But about the real scarcity lies not in material shortages or plastic waste but in verified, traceable, socially and environmentally accountable recycled content. In that sense, availability is not a physical constraint—it’s a system constraint.

From my perspective, the most important shift hasn’t been price, but trust. Buyers are no longer just asking “how much?” or “how clean?”—they’re asking: “can I prove where this came from?” and “can I use this to meet compliance or circularity reporting?”

So while the market may appear depressed on the surface, I see an important transition taking place: from commodity pricing to data-anchored value creation. Those who can provide physical material alongside digital traceability, compliance documentation and social impact proof will ultimately define the new pricing benchmarks for the industry.

OPIS: Which sectors are driving demand? Is food grade gaining traction?

Aguilar: Demand today is led primarily by the fast-moving consumer goods and packaging sectors, especially those under strict regulatory pressure in Europe and the U.S. There’s a consistent pull for rPET, particularly clear food-grade, driven by bottle-to-bottle circularity targets and brand commitments to recycled content percentages.

Yes, food-grade applications are gaining traction—but it’s not just about material quality. It’s about documentation, compliance, and digital traceability. In markets like the EU, even a high-quality flake is irrelevant if it can’t meet European traceability and migration standards.

Beyond food, we’re seeing emerging interest from non-food segments—home care, cosmetics, textiles—looking for traceable content to support compliance reporting, not just product specs.
The real driver isn’t polymer, it’s proof —proof of origin, proof of processing, proof of compliance. Sectors that can’t afford reputational or regulatory risk are moving toward pre-verified, impact-documented recycled content.

In my experience across both upstream and downstream markets, there’s a clear shift happening: buyers are not just sourcing plastic—they’re sourcing assurance. And that assurance isn’t just embedded in the flake; it’s embedded in the data that travels with it.

OPIS: How are tariffs affecting your business or the broader market?

Aguilar: From what I see, these tariffs are causing more disruption than protection—especially for recycled plastics that come with traceability, certifications and social impact built in.

The problem isn’t just the tariffs themselves—it’s the lack of distinction in how recycled materials are classified and valued. In many countries, recycled plastics still share the same Hamonized System (HS) code as virgin plastics, despite having completely different value chains, environmental profiles and compliance burdens. It’s like comparing apples with oranges—and then taxing them the same way.

This misclassification reveals a deeper issue: the value of recycled materials is still not fully perceived or understood by policymakers. When traceable, ethically sourced recycled content is treated the same as oil-derived virgin plastic, it discourages the very investments we need to build a circular economy. As a result, shipments get delayed, buyers hesitate and exporters are squeezed. Ultimately, small processors and first collectors are the ones most affected, as operations slow or prices collapse.

From an economics of waste perspective, these policies misprice externalities and misallocate value. They punish those working to embed transparency, carbon savings and social inclusion into plastic flows—while rewarding opacity and volume.

So no, I don’t believe this current tariff environment is helping the market evolve. If anything, it’s slowing down the transition toward traceable, accountable and equitable recycling systems.

OPIS: Are importers shifting sourcing strategies in response to tariffs?

Aguilar: Yes, importers are rethinking their sourcing strategies—but not in the simplistic sense of moving away from Asia entirely. What I’m observing is a risk-balancing approach, where buyers diversify within Asia and complement that with emerging sources from Africa or Latin America.

But the reality is: alternatives are limited. Southeast Asia still offers the largest concentration of collection capacity, processing experience and operational infrastructure. So even when buyers want to shift, they quickly realize that few regions can provide the volume, quality and traceability needed to meet current regulatory and impact-driven expectations.

What’s really changing isn’t just where buyers source from—but what they prioritize.

We’re seeing a move from price arbitrage to traceability arbitrage. Buyers want compliance-ready material: pre-audited, fully documented, and low risk in terms of social and environmental reporting.

That’s creating a new class of preferred suppliers—those who have invested in systems, not just stock; those who can prove material origin, segregation, certification status and social impact. Because today, risk isn’t just in the quality of the flake—it’s in the lack of documentation behind it.

So yes, sourcing is shifting—but the shift is toward transparency and assurance, not away from Asia. In many ways, the ability to deliver verified data has become more valuable than the shipping lane itself.

OPIS: Have tariffs changed the price spread between virgin and recycled?

Aguilar: The spread between virgin and recycled resins has become increasingly unstable—and tariffs have added distortion rather than clarity. In some corridors, tariffs have narrowed the spread, especially when virgin prices dropped sharply due to oil market movements or oversupply, while recycled processors couldn’t afford to follow those drops because of their fixed operating and compliance costs.

In other markets, tariffs have widened the spread, particularly when recycled content imports are penalized at higher rates, making locally sourced virgin resin artificially more competitive, even if it carries a heavier environmental footprint.

But either way, the pricing relationship is broken.

Recycled materials carry external benefits—lower emissions, social impact, landfill diversion, traceability—but tariffs ignore these. From an economics of waste standpoint, this is a textbook case of mispriced externalities: the real value of recycled resins isn’t being reflected in how they’re taxed or traded.

At the operational level, what I’ve seen is that traceable, certified recycled materials—which require investment in sorting, social premiums, and auditing—are getting crowded out by unverified virgin resin when the spread compresses. Buyers freeze or delay orders, waiting for “the bottom”, and collection networks start collapsing under the pressure.

Instead of letting the market reward quality and compliance, tariffs are making it harder to sustain long-term, inclusive and verifiable supply chains. And in that environment, traceability becomes a luxury, not a standard.

That’s why I believe the real solution isn’t just to monitor the spread—but to redefine how we value recycled materials in the first place.

OPIS: Have tariffs affected access to food-grade recycled plastics?

Aguilar: Yes, absolutely. Tariffs—and more broadly, trade barriers—have created additional friction in the availability and pricing of food-grade recycled plastics, particularly for markets with strict regulatory standards like the EU and the U.S.

These are not generic materials—they require controlled sourcing, advanced processing, and certifications such as the European Food Safety Authority compliance or the U.S. Food and Drug Agency’s No-Objection Letters. They also require traceability systems that go beyond batch quality—buyers now ask: Where was it collected? How was it handled? Who touched it?

But the problem is: tariffs don’t recognize any of that. They often treat food-grade recycled plastics the same way they treat industrial virgin resins—same HS codes, same duties. It doesn’t matter if the material is traceable, audited or linked to community-based collection programs. This lack of distinction increases landed costs for compliant materials and reward shortcuts.

I’ve seen buyers stall or cancel orders, not because the quality was lacking—but because tariff exposure made the deal too risky. Others revert to domestic virgin options, even if it contradicts their impact-driven and circularity targets. It’s a case of compliance losing out to cost—due to policy misalignment.

From an economic perspective, this shows how the value of compliance is not yet internalized in trade policy. Food-grade rPET that diverts waste, reduces carbon and supports ethical sourcing should be treated as a high-integrity material, not penalized for crossing borders.

If we want to scale food-grade recycling globally, we need trade mechanisms that reward traceability and verified impact—not just polymer purity.

OPIS: What policy changes or trade frameworks could stabilize the market?

Aguilar: We need to shift from policies that treat recycled plastics as commodities—to frameworks that recognize the verified impact embedded in them.

Today, most trade policies are blind to traceability, compliance and social value. Whether a plastic flake is certified, community-collected, or carbon-reducing rarely affects how it’s taxed or treated at borders. That has to change.

We need a new category of trade recognition—what I’d call impact-verified materials. These are recycled plastics that meet not just technical specs, but also social, environmental and traceability criteria, such as impact-driven buyers, social certifications, ethical-transparent supply chains or carbon impact disclosures.

Governments and trade bodies should create differentiated tariff structures, where materials that meet these standards enjoy economic benefits.

We also need harmonized definitions. Right now, different regions classify the same recycled material differently, creating confusion, manipulation and delays. If we want global circularity, we need shared language across borders.

More broadly, policy frameworks should enable the flow of global financial—directly into traceable collection systems—people, especially those involving the informal sector.

We already have the tools. Impact can be tracked. Value can be documented. What’s missing is the political will to rewire trade systems to reflect actual circular value—not just volume or origin.

And at the root of it all, we have to acknowledge something deeper: that the waste problem is not primarily an environmental or technical one—it’s economic.

Waste exists because the system allows value to be lost, ignored or externalized. It’s a market failure. And that’s why the solution isn’t just better collection or more recycling—it’s understanding the economics of waste. Until we redesign the economic signals, we’ll keep treating symptoms instead of solving the disease.

OPIS: Is the current tariff-driven environment sustainable?

Aguilar: No, I don’t believe the current tariff-driven market is sustainable—economically, environmentally or socially.

Tariffs are being applied in a way that treats recycled plastic as a generic material, with no recognition of its traceability, embedded impact or compliance cost. When these tariffs hit, they don’t just slow trade—they destabilize investment in infrastructure, stall brand commitments, and create downstream volatility across the entire supply chain

In many cases, it’s not the “cheap recycler from Asia” who’s undercutting the system. The real competitor is virgin resin—produced at scale, with integrated logistics, often subsidized or tax-exempt, and now benefiting from overcapacity.

Meanwhile, compliant recyclers carry extra burdens—certifications, segregation, social premiums, documentation—and still face the same or higher tariffs.

So instead of rewarding transparency and effort, the system is rewarding speed, scale and opacity. That’s not sustainable.

And it’s not just recycled content that suffers. Communities and ecosystems lose, too. When traceable, socially inclusive materials are pushed out of the market, so are the livelihoods of the people who collect, sort and process them. The system reverts to volume-based extraction instead of value-based circularity.

From a “wastenomics” lens, this is a clear signal: we’re applying 20th-century trade logic to a 21st-century sustainability challenge.

A recycled plastic shipment that carries traceability, social premiums, and environmental impact is not a commodity—it’s a verified asset. But as long as tariffs ignore this embedded value, the system will remain fragile and reactive.

We urgently need to evolve as an industry—from a system of price-only transactions to a model of value creation and fair distribution. That means ensuring the people and systems generating real environmental and social impact are not just recognized—but economically rewarded.

Until that happens, this model won’t hold. And circularity will remain more of a slogan than a functioning economic reality.

OPIS: Where are the biggest risks and opportunities in the next 12–18 months?

Aguilar: We’re at an inflection point. The next 12–18 months will test whether this industry matures into a transparent, impact-driven system—or slides back into low-cost, high-volume habits.

The biggest risk is continuing to treat recycled materials as commodities while the world expects compliance, sustainability reporting and traceability.

There’s also a risk that the growing overcapacity in virgin production, will push recycled content further to the margins. In a price-only system, that’s devastating. In a value-based system, that’s an opportunity to differentiate.

And that’s where the opportunity lies — for platforms and systems that offer digitally verified, impact-linked recycled content. Material that’s traceable, audited and tied to real environmental and social outcomes is already becoming a requirement—not just a marketing claim.

For those who can provide compliance-ready, impact-documented supply chains, there’s access to global financial incentives.

From my perspective, the real opportunity is to stop thinking about “plastic” and start thinking about data-carrying, value-storing material flows. That’s what I’m focused on: building infrastructure where the traceability itself becomes an asset, and where value is fairly distributed back to the people and systems who make circularity real.

If we succeed in that, we don’t just survive the volatility—we reshape the economics of the industry entirely.