The recent rise in the price of raw materials has caused the cost of used PET bottles to rise, pricing plastics recyclers out of the market as new buyers emerge and seriously undermining the nation's domestic recycling process.

The recycling process relies on used PET bottles being collected by municipal governments who sell them on to registered recyclers under the Containers and Packaging Recycling Law. However, due to recent oil-price-led rises in the cost of raw materials, demand for plastics made of recycled materials instead of those made of crude oil has increased. This has resulted in PET bottles being sold to Chinese companies at higher prices than domestic recycling companies are able to pay.

The price of used PET bottles has increased 2.6-fold in the past two years, which has resulted in established recyclers and recyclers that were famous for their advanced recycling technologies closing their plants.

Tokyo PET Bottle Recycle Co. in Koto Ward, Tokyo, started in 2000 on reclaimed land in the Tokyo Bay area. In Tokyo it is the biggest of the PET bottle recyclers that wash and crush collected bottles before baling them for sale to textile and other manufacturers.

However, the company faced difficulty obtaining enough PET bottles in April.

Company President Teruaki Noguchi, said: "We could only purchase one-tenth of the used bottles we sourced last year through public bidding. Without cheap used bottles, our business won't be able to continue."

Plastic bottles collected by municipal governments are put to tender by the Japan Containers and Packaging Recycling Association and sold to registered recycling companies under the recycling law.

Until the 2005 business year, registered recyclers received the used bottles and commissions for recycling them from soft drink manufacturers and others.

However, from fiscal 2006 the recyclers began purchasing used bottles because the recyclable resins they contain, which are used for production of artificial fibers and plastics, have been trading at higher prices as a result of the rising price of crude oil.

However, the price also resulted in some municipal governments selling the bottles to unregistered companies who offered them a higher price than the recycling association.

As a result, while about 190,000 tons of used bottles were put to tender in fiscal 2004, only about 160,000 tons were put to tender in fiscal 2008, an amount that meets only about half of the recycling capacity of the nation's domestic recyclers.

The successful tender price was about 17,000 yen per ton in the 2006 business year, but it rose to about 45,000 yen this year.

Negoro Sangyo Co. in Sakai, Osaka Prefecture, which used to manufacture carpet from fibers made of recycled PET bottles, filed for court-led rehabilitation last month.

The company donated 3 percent of its profits to environmental groups.

Negoro Sangyo Co. President Isao Negoro said, "The situation worsened rapidly because we couldn't pass on our rising costs via our products."

PET Rebirth Co. in Kawasaki, known for its recycling technologies that could prepare PET bottle resin for use in the production of new PET bottles, filed for bankruptcy in June.

In recent years, about 40 percent of PET bottles sold in the domestic market have been exported to foreign recycling firms, mostly in China.

Prompted by its concern about this trend, the association in April called on municipal governments, which sell many of their collected bottles to companies that are not part of the association, to cooperate with the domestic recycling process.