Tomra says recyclers delay investment despite looming EU deadlines

• EU's Packaging and Packaging Waste Regulation requires all packaging to be recyclable by 2030, necessitating at least a doubling of Europe's plastics recycling capacity
• High financing costs, economic uncertainty, and doubts about sustained plastic prices are causing recyclers to delay investment decisions, with recovery unlikely before 2027
• Investment would need to accelerate by around 2028 for recyclers to meet the 2030 deadline, while Tomra relies on stronger aluminium and metals demand to support its recycling division in the interim

Summary

Key Company & Sector:

Norway's Tomra Systems, a leading supplier of recycling equipment, is experiencing prolonged market weakness in Europe's plastics recycling sector despite approaching EU regulatory deadlines.

Main Challenge:

European plastics recycling companies are delaying investment decisions due to high financing costs, economic uncertainty, and skepticism about sustained plastic prices. This hesitation persists even though EU Packaging and Packaging Waste Regulation requires all packaging to be recyclable by 2030—a mandate that necessitates at least doubling current recycling capacity.

Timeline & Outlook:

• Tomra expects no plastics market recovery in 2024, with uncertainty extending potentially through 2027
• CEO Tove Andersen stated investment must accelerate by approximately 2028 to meet the 2030 deadline
• The company maintains "the demand will come," but timing remains unclear

Market Dynamics:

Recent oil price increases have elevated both virgin and recycled plastic prices, improving recyclers' cash generation. However, this hasn't translated into equipment orders, as recyclers demand proof of price sustainability before committing to new facilities.

Company Response:

Tomra is implementing cost-cutting measures to protect profitability during the downturn. The company's recycling division is receiving partial support from stronger demand in aluminum and metals sorting, offsetting plastics weakness.

Implications:

The delayed investment cycle creates risk that Europe may struggle to meet 2030 recycling mandates, while Tomra faces near-term revenue pressure despite strong long-term growth fundamentals in the ESG-driven recycling sector.