Lincoln International examines the market dynamics in the recycled plastics industry.

Recycled Plastics Overview

Recycling of plastic packaging is a dynamic market given the increasing waste volumes following the continuous expansion of plastic packaging volumes and higher recycling rates. According to the European Commission, “Packaging is one of the main users of virgin materials as 40% of plastics and 50% of paper used in the EU is destined for packaging. Without action, the EU would see a further 19% increase in packaging waste by 2030, and for plastic packaging waste even a 46% increase.” From a regulatory perspective, recycling targets are constantly increasing as political decision-makers across the world are pressed to tackle plastic packaging pollution.

Large recycling groups dominate the market, having built or having been associated with building the national recycling infrastructures in their home countries over the past several decades. Benefitting from their legacy market position, these groups actively consolidate the market and can finance the required investments to capture significant market growth.

Infrastructure funds have been well identified and have invested in the sector for many years as these recycling groups perfectly fit their criteria of a large installed base of assets providing recurring revenue streams, a supportive regulatory environment, long-term growing demand and favorable pricing trends for recycled material.

The market is not limited to such large players; meeting the ambitious recycling targets will require the involvement of all stakeholders involved. A vivid ecosystem of innovative companies is active across the value chain from artificial intelligence (AI)-based systems to better sort and collect waste, advanced recycling technologies to increase operating efficiency, material cleaning and preparation solutions to improve processing quality, packaging companies offering circular solutions to specialized advisory firms helping companies in their environmental transition. With the support of early investors and benefit from the favorable market environment, these companies are growing fast and can represent interesting opportunities for strategics willing to acquire new skills or for middle market private equity (PE) firms to take over and support them into their next development stage.

Lincoln Perspective