Plastic Recycling Is on the Brink of Collapse

Cheap virgin material, high energy costs and weak demand are pushing plastic recycling in Germany and across Europe to the edge of breakdown. Experts warn that without swift political action, the circular economy itself is at risk of falling apart.

Colourful plastic granualtes — Plastic recycling in Germany and Europe is under massive pressure – falling virgin material prices, high energy costs and weak demand are pushing the sector to the brink of collapse.

Plastic recycling in Germany is in deep crisis — with consequences for the packaging industry and the entire circular economy. Prices for virgin plastics from fossil raw materials have dropped significantly in recent months and now lie well below the production costs of recycled plastics. At the same time, cheap imports and insufficient import controls for both recycled and new polymers are putting additional pressure on domestic recyclers.

How serious the situation has become is illustrated by an assessment from Anna Roeb, plastic recycling specialist at bvse (Federal Association for Secondary Raw Materials and Waste Management). The economic situation of the sector is becoming “increasingly critical.” Many companies are under severe pressure and are filing for insolvency due to weak demand. The result is a shutdown of existing capacities. “We are currently at a turning point, and the competitiveness of the sector is seriously at risk,” says Roeb.

Matthias Giebel, Conslutatn at B+P — Industry expert Matthias Giebel warns that Europe’s plastic recycling sector is nearing collapse.

European Issue

The situation is also escalating across Europe. Matthias Giebel, partner and authorized officer at Berndt+Partner Consultants, points out that the problem is no longer confined to national borders. The estimated revenue of the European plastic recycling sector fell by around 12.5% in 2023 compared to the previous year. Since then, the situation has deteriorated further: “The European plastic recycling industry is on the verge of collapse.”

According to Anna Roeb, the structural causes of the crisis stem from a multitude of interconnected burdens. “There are many factors endangering the plastic recycling sector. In Germany, the main drivers are high energy prices and operating costs. Recyclers are heavily disadvantaged compared to other energy-intensive industries. This urgently needs to change.”

Added to this are very low virgin material prices and cheap imports that directly compete with recyclates. “Furthermore, demand is insufficient because manufacturers do not yet have enough incentives to use recyclates. The necessary political framework is missing.” Although the PPWR will introduce binding recyclate usage quotas, these will not apply — with the exception of PET beverage bottles — until 2030. “This gap must be bridged, otherwise an even greater recyclate shortage threatens,” Roeb warns.

Lack of Incentives for Recyclate Use

In fact, many producers currently rely on cheaper virgin plastics, while recyclates often lose out both in terms of price and technical performance. Demand for recycled plastics is falling noticeably — even in traditional packaging applications. Investments in recycling technologies and innovative packaging solutions are being scaled back, and production and competitiveness are increasingly under pressure.

bvse expert Anna Roeb, consultant for plastic recycling — bvse expert Anna Roeb warns about the escalating pressures on plastic recycling in Germany and across Europe.

Industry should not rely solely on packaging manufacturers to act, emphasizes Giebel. “From our perspective, it is not only the packaging manufacturers who need to act — they must do so together with end users.” If companies do not recognize soon that from 2030 onward there will be a real compliance risk if recyclate quotas are not met — and that demand must rise urgently — “there will simply be no recyclate suppliers left, as many are facing imminent bankruptcy.” There is also a lack of investment by plastics producers in advanced recycling technologies.

To stabilize the market, a combination of demand impulses, cost relief and clear quality and import rules is needed, Roeb adds. Access to an industrial electricity price would be crucial to ease the burden on recyclers. “To remain competitive with virgin materials and imports from abroad, we need reliable standards and import controls,” Roeb says.

Recycling Capacities are Disappearing

The consequences of this economic imbalance are now becoming unmistakably visible. The pressure on the sector is reflected in a growing number of plant closures — especially in traditional recycling countries such as Germany. In the medium term, this could even lead to the relocation of packaging production abroad. The development is dramatic, says Giebel: “By the end of 2025, the region will likely have lost almost one million tonnes of recycling capacity since 2023.” Between January and July 2025 alone, almost as much capacity was lost as in the entire year 2024; by the end of the year, closures could be “three times higher than in 2023.” After years of rapid expansion, forecasts for 2025 indicate zero growth for the first time — a critical setback for the European circular economy. The Netherlands, the United Kingdom and Germany — which still had the highest installed plastic recycling capacity in Europe in 2023 — are particularly affected.

The urgency of political corrective action is also highlighted in an analysis by Plastics Recyclers Europe (PRSE), which Matthias Giebel refers to. According to the PRSE experts, policymakers must “urgently introduce trade and market protection mechanisms, ensure harmonised EPR rules, and strictly enforce third-party certification as well as harmonised penalties for non-compliant materials” in order to stimulate demand for EU recyclates and prevent further plant closures.

These measures must — according to the PRSE — be accompanied by relief for recycling companies, for example through access to affordable, clean energy or a significant reduction in bureaucratic hurdles for obtaining and renewing permits. Stricter customs controls and targeted investment incentives are also considered crucial to restore the competitiveness of Europe’s recycling industry.

The PRSE’s conclusion is unambiguous: “The time to act is now.” A collapse of the European plastics recycling sector — particularly mechanical recycling — would irreversibly undermine the environmental and innovation progress achieved over the past decade and jeopardise both the EU’s climate goals and Europe’s long-term industrial competitiveness.

Author: Alexander Stark, Editor FACHPACK360°