Deep dive: Chemical recycling & advanced sorting — the fastest-moving subsegments to watch

Asia-Pacific generates over 200 million tonnes of plastic waste annually, yet less than 9% enters any recycling stream—mechanical or chemical. By 2025, the region's chemical recycling capacity is projected to reach 2.8 million tonnes per year, representing a 340% increase from 2022 baseline levels. This explosive growth trajectory, coupled with regulatory tailwinds from Extended Producer Responsibility (EPR) mandates rolling out across Japan, South Korea, India, and Australia, positions chemical recycling and advanced sorting as the fastest-moving subsegments within the circular economy investment landscape. For investors seeking exposure to plastics circularity, understanding which KPIs separate viable projects from stranded assets has never been more critical.

Why It Matters

The global chemical recycling market reached USD 11.2 billion in 2024 and is forecasted to exceed USD 28 billion by 2030, with Asia-Pacific commanding approximately 38% of that growth. Unlike mechanical recycling—which degrades polymer chains with each processing cycle and struggles with contaminated or mixed-plastic feedstocks—chemical recycling breaks polymers back to monomers or hydrocarbon intermediates, enabling theoretically infinite recycling loops for materials that would otherwise be incinerated or landfilled.

The urgency in Asia-Pacific stems from three converging forces. First, China's National Sword policy (2018) and subsequent import restrictions redirected millions of tonnes of plastic waste back to source countries, exposing infrastructure gaps across Southeast Asia. Second, brand owners including Unilever, Nestlé, and P&G have committed to 25-50% recycled content targets by 2025-2030, creating unprecedented demand for food-grade recycled polymers that only chemical recycling can reliably supply. Third, EPR legislation now covers 62% of Asia-Pacific's population, with fee modulation increasingly linked to recyclability and recycled content—creating direct financial incentives for brands to source chemically recycled materials.

The 2024-2025 investment cycle has seen over USD 4.2 billion deployed into chemical recycling projects across the region, with Japan's Ministry of Economy, Trade and Industry (METI) allocating JPY 150 billion (approximately USD 1 billion) through 2030 for domestic capacity expansion. South Korea's Ministry of Environment has mandated that 30% of PET bottles contain recycled content by 2030, with pyrolysis-derived feedstocks explicitly qualifying. These policy signals have de-risked first-of-kind projects and attracted institutional capital at scale.

Key Concepts

Chemical Recycling: An umbrella term encompassing multiple thermochemical and solvent-based processes that depolymerize plastics into monomers, oligomers, or hydrocarbon feedstocks. The three dominant pathways are pyrolysis (thermal decomposition at 300-700°C in oxygen-free environments), gasification (conversion to syngas at >700°C), and solvolysis (selective dissolution using solvents to recover specific polymers). Each pathway exhibits distinct feedstock tolerances, yield profiles, and CAPEX/OPEX structures. Benchmark yield rates for pyrolysis range from 60-80% liquid output by mass, though only 50-70% of that liquid typically qualifies as naphtha-equivalent feedstock suitable for steam cracker integration.

Advanced Sorting: Refers to sensor-based and AI-driven technologies that identify and separate plastics by polymer type, color, and contamination level at throughputs exceeding 10 tonnes per hour. Near-infrared (NIR) spectroscopy remains the workhorse technology, but hyperspectral imaging, laser-induced breakdown spectroscopy (LIBS), and digital watermarking are emerging as critical enablers for chemical recycling feedstock preparation. Sorting purity thresholds of >95% single-polymer content are typically required to achieve economically viable chemical recycling yields.

Material Recovery Rate: The percentage of input feedstock mass that exits the process as usable product—whether monomers, pyrolysis oil, or recycled pellets. For chemical recycling, "good" material recovery rates range from 70-85% for solvolysis (targeting specific polymers like PET or PS) and 55-75% for pyrolysis (handling mixed polyolefins). Rates below 50% generally indicate suboptimal feedstock quality or process inefficiencies that erode unit economics.

Recycled Content Certification: Third-party verification that a product contains a specified percentage of recycled material. Mass balance chain of custody (per ISCC PLUS or REDcert² standards) has emerged as the dominant certification approach for chemical recycling, allowing recycled content claims to be allocated across a company's product portfolio proportional to certified input volumes. Asia-Pacific adoption of mass balance certification grew 180% year-over-year from 2023 to 2024, with over 340 facilities now certified across the region.

OPEX (Operating Expenditure): The ongoing costs to run a chemical recycling facility, including feedstock procurement, energy, catalysts, labor, and waste disposal. OPEX benchmarks for pyrolysis facilities in Asia-Pacific range from USD 350-550 per tonne of feedstock processed, with energy costs representing 40-55% of total OPEX. Facilities achieving OPEX <USD 400/tonne typically benefit from captive feedstock supply, co-location with petrochemical complexes, or access to subsidized natural gas.

What's Working and What Isn't

What's Working

Integrated petrochemical partnerships represent the clearest success pattern. BASF's ChemCycling project has established partnerships with multiple Asian plastic converters, with certified circular polymers now incorporated into packaging for regional brands. The integration model—where pyrolysis oil feeds directly into existing steam crackers—eliminates the need for standalone monomer purification, reducing CAPEX by 30-40% compared to merchant facilities. In Japan, Mitsui Chemicals' collaboration with Microwave Chemical Co. demonstrates how co-location with existing infrastructure can achieve positive unit economics at sub-50,000 tonne/year scale.

Solvolysis for mono-material streams has achieved commercial viability for specific polymers. South Korea's SK Chemicals operates the world's largest PET glycolysis facility in Ulsan, processing 60,000 tonnes annually of post-consumer PET bottles into bis(2-hydroxyethyl) terephthalate (BHET) monomer. The closed-loop approach—partnering with Coca-Cola Korea and local municipalities for bottle collection—ensures consistent feedstock quality and has achieved material recovery rates exceeding 85%. Similar approaches are scaling in Japan, where Jeplan's BRING Technology processes polyester textiles at its Kitakyushu facility.

AI-powered sorting achieving >98% purity is transforming feedstock economics. AMP Robotics' installations across Japanese and Australian MRFs (Materials Recovery Facilities) demonstrate that AI vision systems can identify and sort 80+ material categories at 70-120 picks per minute—double the speed and significantly higher accuracy than human sorters. In Thailand, Wongpanit Group's adoption of NIR sorting across its network of 2,000+ collection centers has increased polyolefin purity from 72% to 94%, directly improving pyrolysis yields and reducing feedstock costs.

Digital watermarking for traceability is gaining traction as brands demand verifiable recycled content. The HolyGrail 2.0 consortium, with participation from over 160 companies including Asian packaging converters, has completed pilots in Australia demonstrating that imperceptible digital watermarks enable accurate sorting at industrial scale. Recovery rates for target polymers increased 23% in pilot implementations compared to conventional NIR-only sorting.

What Isn't Working

Merchant pyrolysis facilities without offtake agreements are struggling. The 2024 market saw at least six Asia-Pacific pyrolysis projects stall at the commissioning phase due to inability to secure buyers for pyrolysis oil at prices sufficient to cover operating costs. Without integration into petrochemical supply chains or long-term offtake contracts, pyrolysis oil competes directly with virgin naphtha—a losing proposition when crude oil prices fall below USD 70/barrel. Investors should require contracted offtake covering >70% of nameplate capacity before considering equity positions.

Contamination in informal collection systems undermines yield assumptions. Much of Southeast Asia relies on waste pickers and informal recyclers who aggregate materials without systematic sorting. Contamination rates of 15-30% are common, requiring pre-processing investments that add USD 80-150/tonne to effective feedstock costs. Projects modeling feedstock costs below USD 200/tonne without captive collection infrastructure are likely understating input economics.

Overstated mass balance claims have triggered regulatory scrutiny. In 2024, the Australian Competition and Consumer Commission (ACCC) investigated greenwashing complaints related to chemical recycling claims, finding that some products marketed as containing "recycled plastic" involved mass balance allocations where no physical recycled molecules were present in the specific product. This has prompted calls for stricter certification requirements and threatens the credibility of the mass balance approach if not addressed through enhanced transparency.

Energy intensity and carbon footprint concerns persist for pyrolysis. Life cycle assessments indicate that pyrolysis typically requires 2-4x more energy per tonne of output than mechanical recycling. Without access to renewable electricity or waste heat integration, the carbon footprint of pyrolysis-derived polymers may exceed that of virgin production—undermining the environmental rationale. Investors should scrutinize energy sourcing strategies and demand third-party verified carbon intensity data.

Key Players

Established Leaders

1. BASF (Germany/Asia-Pacific operations): The ChemCycling initiative processes pyrolysis oil from certified partners across Asia into virgin-equivalent polymers. BASF's Verbund integration and technical expertise in steam cracker optimization position it as the leading off-taker for chemical recycling feedstocks in the region.

2. Mitsui Chemicals (Japan): Operating demonstration-scale pyrolysis in partnership with Microwave Chemical, Mitsui is pursuing 100,000+ tonnes/year capacity by 2027. The company's existing monomer production infrastructure in Singapore and Japan provides natural integration points.

3. SK Chemicals (South Korea): The Ulsan glycolysis facility represents the most commercially advanced PET-to-PET chemical recycling operation in Asia. Partnerships with major beverage brands ensure stable feedstock and offtake.

4. Jeplan Inc. (Japan): Pioneer in polyester textile-to-textile chemical recycling through the BRING Technology platform. Recent funding rounds have accelerated capacity expansion targeting post-consumer clothing waste.

5. Indorama Ventures (Thailand): The world's largest PET producer has committed USD 1.5 billion to recycling infrastructure through 2025, including chemical recycling R&D partnerships and acquisition of mechanical recycling assets across Southeast Asia.

Emerging Startups

1. Plastic Energy (UK/Asia expansion): Licensing TAC (Thermal Anaerobic Conversion) pyrolysis technology to partners across Asia, with projects announced in Indonesia and Malaysia targeting 30,000+ tonnes/year capacity.

2. Mura Technology (UK/Japan partnership): The HydroPRS (Hydrothermal Plastic Recycling Solution) technology uses supercritical water to process mixed plastics in under 25 minutes. A joint venture with Mitsubishi Chemical targets commissioning in Japan by 2026.

3. Circ (US/Asia pilots): Hydrothermal processing technology specifically targeting polycotton textile blends—a waste stream largely unaddressed by existing solutions. Pilot partnerships with Asian apparel manufacturers demonstrate potential for regional scale-up.

4. Clariter (Poland/Singapore operations): Converting end-of-life plastics into specialty waxes, solvents, and oils rather than competing in commodity polymer markets. The differentiated product mix achieves higher margins and reduces exposure to virgin polymer price volatility.

5. Quantafuel (Norway/India partnership): Catalytic pyrolysis technology licensed for a 70,000 tonne/year facility in Maharashtra, India, representing one of the largest chemical recycling investments in South Asia.

Key Investors & Funders

1. Circulate Capital: The Singapore-headquartered impact investor has deployed over USD 150 million specifically into plastics recycling infrastructure across South and Southeast Asia, including chemical recycling ventures.

2. MUFG Bank: Japan's largest bank has established a USD 500 million sustainable finance facility for chemical recycling projects, offering preferential rates for certified circular economy investments.

3. Temasek Holdings: Singapore's sovereign wealth fund has made direct investments in multiple chemical recycling technologies and funds focused on plastics circularity in the region.

4. Asian Development Bank (ADB): Technical assistance grants and concessional financing have supported feasibility studies and pilot projects across developing Asia, with a dedicated plastics action program launched in 2023.

5. SoftBank Vision Fund: Portfolio includes stakes in advanced sorting and robotics companies with applications in plastics recycling, signaling technology-first investment thesis in the space.

Examples

1. Mitsui Chemicals and Microwave Chemical Co. Pyrolysis Facility (Japan): Located in Osaka Prefecture, this 20,000 tonne/year demonstration plant utilizes microwave heating technology that reduces energy consumption by 30% compared to conventional pyrolysis. The facility processes post-consumer polyolefin waste from Osaka municipal collection systems, achieving 72% liquid yield with pyrolysis oil meeting steam cracker specifications. OPEX has stabilized at JPY 45,000/tonne (approximately USD 300/tonne), well below the regional benchmark. The facility received JPY 3.2 billion in METI subsidies and achieved carbon neutrality through renewable electricity procurement. Offtake is fully contracted with Mitsui's nearby Osaka Works petrochemical complex.

2. SK Chemicals PET Glycolysis Plant (South Korea): The Ulsan facility processes 60,000 tonnes annually of post-consumer PET bottles collected through South Korea's deposit-return system. Material recovery rate exceeds 85%, with BHET monomer purity at 99.5%—enabling direct repolymerization without quality degradation. Unit economics benefit from the KRW 50/bottle (approximately USD 0.04) deposit refund that incentivizes near-complete collection of PET bottles. The facility's carbon footprint is 60% lower than virgin PET production, verified by third-party LCA. Coca-Cola Korea has committed to purchasing 50% of output through 2030, with remaining capacity contracted to domestic cosmetics and food packaging converters.

3. Wongpanit Advanced Sorting Network (Thailand): Thailand's largest recycling aggregator has invested THB 2.8 billion (approximately USD 80 million) in NIR and AI-powered sorting equipment across 150 facilities since 2022. Polyethylene and polypropylene purity rates have increased from 72% to 94%, enabling the company to supply feedstock to multiple pyrolysis projects at premium pricing (THB 2,500/tonne above unsorted mixed plastics). The network processes 850,000 tonnes annually of post-consumer plastics, with traceability provided through a proprietary blockchain platform that tracks materials from collection to recycler. The enhanced sorting capability has reduced contamination-related pyrolysis downtime by 65% for customer facilities.

Action Checklist

• Conduct feedstock availability mapping for target geographies, quantifying collection infrastructure maturity and contamination rates before committing capital to chemical recycling projects.
• Require offtake agreements covering >70% of nameplate capacity with investment-grade counterparties or integrated petrochemical partners as a condition of investment.
• Benchmark OPEX projections against USD 350-550/tonne range for pyrolysis and USD 250-400/tonne for solvolysis, flagging any models significantly outside these ranges for enhanced scrutiny.
• Verify mass balance certification (ISCC PLUS, REDcert²) for any claims regarding recycled content, and assess reputational risks associated with evolving regulatory interpretations.
• Evaluate energy sourcing strategy and demand third-party carbon intensity verification to ensure environmental claims withstand LCA scrutiny.
• Assess advanced sorting partnerships or captive sorting infrastructure, targeting >95% single-polymer purity as a feedstock quality threshold.
• Model sensitivity to virgin polymer price fluctuations, particularly at crude oil prices below USD 70/barrel where chemical recycling economics become most challenged.
• Track EPR policy evolution across target markets, with particular attention to fee modulation linked to recycled content and recyclability.
• Engage with brand partners early to understand specific recycled content requirements, certification standards, and willingness to pay premiums for verified circular materials.
• Establish KPI dashboards tracking material recovery rate, energy intensity, carbon footprint, and feedstock cost per tonne as leading indicators of operational health.

FAQ

Q: How does chemical recycling compare to mechanical recycling in terms of cost and environmental impact? A: Chemical recycling typically operates at 2-3x the cost per tonne of output compared to mechanical recycling, with OPEX ranging USD 350-550/tonne versus USD 150-250/tonne for mechanical processes. Energy intensity is also higher—pyrolysis requires 4-8 MJ/kg versus 1-2 MJ/kg for mechanical recycling. However, chemical recycling addresses materials that mechanical recycling cannot process economically: multi-layer films, contaminated plastics, and degraded polymers. For these feedstocks, the comparison should be against incineration or landfill rather than mechanical recycling. When renewable energy is utilized and integration with existing petrochemical infrastructure is achieved, carbon footprints can approach parity with virgin production while diverting waste from disposal pathways with zero material recovery.

Q: What material recovery rates should investors consider as benchmarks for viable chemical recycling projects? A: For pyrolysis targeting mixed polyolefins, material recovery rates of 55-75% (measured as naphtha-equivalent liquid output) represent commercially viable performance, with 65%+ considered strong. Solvolysis processes targeting specific polymers (PET, PS, PA) should achieve 70-85% recovery to approach positive unit economics. Rates below 50% typically indicate feedstock contamination issues, suboptimal process conditions, or technology immaturity that will erode returns. Critically, investors should distinguish between "oil yield" (total liquid output) and "usable feedstock yield" (liquid meeting steam cracker or monomer specifications)—the former can be 10-20 percentage points higher, masking true conversion efficiency.

Q: What role do EPR policies play in chemical recycling economics across Asia-Pacific? A: EPR policies are increasingly decisive for project viability. Japan's Container and Packaging Recycling Law, South Korea's EPR system with recycling fees tied to material type, and India's EPR rules for plastic packaging (effective 2024) create both feedstock push (by requiring producers to fund collection) and demand pull (by mandating recycled content in packaging). Fee modulation—where EPR fees are reduced for products containing recycled content or designed for recyclability—directly improves the value proposition for chemically recycled materials. South Korea's mandate for 30% recycled content in PET bottles by 2030, with chemical recycling explicitly eligible, has been pivotal in de-risking investments. Investors should monitor Vietnam, Indonesia, and the Philippines, where EPR frameworks are under development and could significantly expand addressable markets.

Q: How important is advanced sorting technology to chemical recycling success? A: Advanced sorting is foundational. Chemical recycling yields are highly sensitive to feedstock purity—a 10-percentage-point improvement in single-polymer content can increase usable output by 15-25% while reducing pre-processing costs. NIR spectroscopy achieves 85-92% accuracy on rigid plastics but struggles with black plastics, films, and multi-layer materials. Emerging technologies including hyperspectral imaging, AI-powered robotic picking, and digital watermarking are addressing these gaps. Projects that integrate advanced sorting (either through captive facilities or contracted partnerships with high-performance MRFs) consistently outperform those relying on conventionally sorted feedstock. The most sophisticated operators are now requiring digital watermarking for premium feedstock streams, enabling polymer-specific sorting accuracy exceeding 98%.

Q: What are the key risks specific to chemical recycling investments in Asia-Pacific? A: Primary risks include feedstock supply volatility (particularly in markets with immature collection infrastructure), technology scale-up delays (many processes are transitioning from pilot to commercial scale for the first time), policy uncertainty (EPR rules and recycled content mandates remain subject to change), and commodity price exposure (virgin polymer pricing sets a ceiling on recycled material valuations). Additionally, greenwashing scrutiny is intensifying—mass balance claims have faced regulatory challenges in Australia and are under review in other jurisdictions. Currency risk is elevated for projects with dollar-denominated CAPEX but local-currency revenues. Mitigation strategies include long-term offtake agreements with creditworthy counterparties, policy-linked financing structures, feedstock supply contracts with liquidated damages provisions, and conservative financial modeling that stress-tests returns at virgin polymer parity pricing.

Sources

• Ellen MacArthur Foundation. (2024). The Global Commitment 2024 Progress Report. Retrieved from https://ellenmacarthurfoundation.org/global-commitment-2024

• International Sustainability & Carbon Certification. (2025). ISCC PLUS: Mass Balance Chain of Custody Certification for Circular Economy. Retrieved from https://www.iscc-system.org

• Japan Ministry of Economy, Trade and Industry. (2024). Roadmap for Plastic Resource Circulation. METI Policy Documents. Tokyo, Japan.

• McKinsey & Company. (2024). Chemical Recycling: A Catalyst for Plastics Circularity in Asia. McKinsey Sustainability Practice Report.

• South Korea Ministry of Environment. (2024). Extended Producer Responsibility Implementation Guidelines for Plastics Packaging. Government of the Republic of Korea.

• Wood Mackenzie. (2025). Chemical Recycling Market Outlook: Asia-Pacific Capacity and Investment Trends. Energy Transition Research Series.

• World Economic Forum & Accenture. (2024). Scaling Chemical Recycling: Technology, Policy, and Investment Pathways. Platform for Accelerating the Circular Economy (PACE).