...Welcome everyone, and thank you for being with us at Indorama Ventures Recycling Day. It is truly a pleasure to have all of you here, both in person and those who have joined on us online from overseas. My name is Naree Pruksayaphai, representing team IR at IVL. I have joined the company last year, but I have two decades experience in Thai investment and capital market. A quick disclaimer that this meeting is being recorded, and a replay of this session will be available on our website after the meeting. We have made few assumptions and estimates on future trends for industry and business, which are based on our analysis and available information at this point in time. This seminar is our opportunity to share IVL recycling developments and explain how this progress will contribute to lead us into the next phase.
Today, we are pleased to have Mr. Yash Lohia, Chairman of the ESG Council and Executive Director, IVL, as our main speaker. We'll walk you through IVL's recycling business and industry landscape, followed by a video showing our recycling facilities. After the presentation, we'll have Mr. D.K. Agarwal, Deputy Group CEO and Group CFO, Mr. Yash Lohia himself, Mr. Kumar Ladha, representing our CPET segment, and Mr. Vikash Jalan, Head of Investor Relations, for the Q&A session. Before we get started, I'd like to express my sincere appreciation to our co-host, UOB Kay Hian Securities, and I'd like to invite Khun Arsit, representative of UOB Kay Hian, to welcome you all as well. Hand over to you, Khun Arsit.
Good morning, and welcome to our Recycling Day event, krub. I am Arsit Pamaranont from UOB Kay Hian Securities Thailand. Now, I would like to thank you to all our guests and for joining us today. And I want to thank you, Indorama Ventures, for their invaluable partnership in co-hosting this event. Let me introduce our first speaker, Mr. Yash Lohia, Chairman of ESG Council and Board of Director of IVL, to share with us on IVL recycling business.
Thank you. My name is Yash Lohia, and... Thank you. Good morning, ladies and gentlemen. Today, we'll be presenting our recycling business separately for the first time, as many of you have been wanting to understand our strategy more deeply. Next slide. So why recycle? As a reminder, the real big push on recycling happened when China banned the import of plastic waste back in 2018. Back then, they were importing 90% of the world's plastic waste, which meant all of a sudden, other countries, mostly in the West, had no choice but to start thinking about their own waste infrastructure. The concept of a circular economy is not new anymore. We started talking about this five years ago, and I'm very happy to share that we have made significant strides and are achieving many of our committed targets.
The relentless one-way consumption pattern is no longer viable. Our planet's resources are finite, and global demand for materials continues to rise. We must shift to a circular economy, where recycling plays a pivotal role in preserving our resources, reducing our waste, and ensuring a sustainable future. Next slide. The Paris Agreement underscores the urgency to limit global temperature rise to 1.5 degrees Celsius by reducing greenhouse gas emissions. By recycling and reusing materials, we can significantly reduce these emissions and combat climate change. Governments, on the right-hand side of the slide, are implementing regulatory measures to drive circularity. These include recycled content regulations, mandating the use of recycled materials. Collection targets, setting goals for waste collection to ensure materials are viable for recycling. Fiscal measures, implementing taxes and incentives to encourage sustainable practices such as plastic waste and carbon tax.
Sorry, plastic tax and carbon tax. In the middle, you can see the leading brands are also stepping up with commitments to sustainability. Our customers have set ambitious targets to incorporate recycled content into their packaging, demonstrating the growing consumer demand for sustainable solutions. Recycling has a positive impact on the environment. At IVL, we have built on decades of recycling experience and are well-positioned to embrace the circular economy. By doing so, IVL not only meets current regulatory and consumer demands, but also paves the way for a future sustainable. Next slide. Recycling is a key component of our Vision 2030. Our commitment to circularity is deeply embedded in this vision, as we aim to become a world-class sustainable chemical company.
Our Vision 2030 is broken up into three areas: driving innovation and sustainable products, where we use a lot of R&D to work on new products. We're doubling down on our rPET leadership to 1.5 million tons by 2030, from 750,000 ton commitment next year. And we hope to achieve almost 40% of circular renewable feedstock by 2030. In 2023, that was 8%, so that's almost fivefold by 2030. The second area is decarbonizing operations, where we have a target to reduce our greenhouse gas emissions by 30% by 2030, from a base year of 2020. In order to do this, we will phase out our coal operations by moving to biomass and natural gas.
By improving on our green projects, that means improving on our process efficiencies, consumption efficiencies, process yields, by increasing our use of renewable energy, and by working on new technologies such as carbon capture. The third area is on shaping a future-ready organization by implementing digital tools such as AI, improving our Indorama Ventures Excellence, and bringing up the next generation leaders. Next slide. As the world's largest PET recycler, we pledge a long-term commitment to circularity focus. A truly magnificent milestone in the history of Indorama was achieved by last year when we surpassed the 100 billion mark on PET bottles recycled. Since entering the recycling business in 2011, we have recycled over 109 billion post-consumer PET bottles, diverting 2.2 million tons of waste from the environment and saving 3.2 million tons of CO2 emissions.
Next slide. The focus of our recycling is work is PET, which we believe is the most sustainable, affordable, and versatile packaging material. PET is the lowest cost material to produce. And just to give a few numbers there, when brand owners think about their cost of packaging, they consider cost of packaging as a percentage of million liters. PET accounts for 3% of their cost of packaging. Oh, sorry, of the cost of retail bottle on the market, where aluminum accounts for about 4.5%. So by that analysis, you can see that PET has a lower cost. It also emits the least greenhouse gas emissions, and just to give some information on that. It has... So virgin PET has a CO2 efficiency of what?
Of 2.4 tons of CO2 per ton of virgin PET, and recycled PET is even further reduction on GHG at 1.5 tons of CO2 per ton of rPET. The carbon footprint of rPET is less than that of VPET due to several reasons. Energy efficiency. Producing rPET requires significantly less energy compared to producing virgin PET, which is to produce from crude oil, whereas rPET avoids such processes. The process of recycling PET starts from post-consumer PET bales, which involves cleaning, shredding, and reprocessing the plastic, which consumes less energy than the process involved in extracting, refining, and polymerizing raw materials to make PET. Reduction in raw material extraction. The production of virgin PET involves the extraction and refinement of petroleum, which is carbon intensive, where recycled PET starts from bales. Decreased landfill impact.
By recycling PET, you're avoiding bottles going to landfill and therefore bringing it back into the circular economy, and therefore, they're kept and used for longer periods. And finally, the transportation effect. The transportation of raw materials for VPET production involves long distances and significant fuel consumption. This is also aluminum and glass bottles. Aluminum and glass bottles also have a higher transportation emission. We will continue to leverage PET's higher circularity by offering more rPET and SPS solutions, reducing our carbon footprint, and introducing innovative applications in food, dairy, cosmetics, and more. It's clear that PET is a material of choice for brands and consumers. However, the challenge of mitigating plastic waste needs to be on top of everyone's mind to achieve a truly circular economy. Now, let's hear from the CEO of Coca-Cola on the benefits of PET.
So that was the CEO of Coca-Cola a few years ago, openly sharing that his preference is PET bottles, recycled PET bottles, specifically. And as I showed on the slide before, that PET bottles, apart from its obvious characteristics, such as it's lightweight, it doesn't break, it's... You can open it and close it. It also has a lower price point compared to glass and aluminum, and it has a lower carbon footprint compared to glass and aluminum, as he was talking about. The next section is: the circular economy is a place where we all work together. It is a future where governments, civil society, and industry deliver sustainable solutions. Next slide. At IVL, we see six key drivers shaping the circular future: infrastructure, regulation, finance, innovation, education, and collaboration, and I'll touch on each one of these in the coming slides. Next slide.
Infrastructure is needed to close the loop and keep the material in the economy. So what you see on the slide here is the value chain. IVL buys plastic bottles from waste management. We bring those to our recycling plants, where we clean it, shred it, and turn it into flakes and rPET. Those flakes can be fed into our existing PET production sites to create what we call SPS, single pellet solution. With single pellet solution, you can have between 10%-30% recycled content in a single pellet. This is, you know, this is one pellet that sort of achieves certain regulatory frameworks. Like in the EU, you need 25% recycled content as a policy. So SPS achieves that, solution, achieves that law in a single pellet, which makes it easier for the downstream converters to use.
Alternatively, what's also growing is we also produce rPET. So the flakes then gets extruded into rPET, which can be supplied to our customers directly. So there are multiple ways to keep... to achieve a circular economy. IVL is working closely with our customers on sustainable solutions to help them achieve their sustainability targets, while developing the recycling infrastructure needed to support their goals and close the loop for PET packaging. In 2019, we made a global commitment to the Ellen MacArthur Foundation that we would recycle 50 billion PET bottles per year by 2025. That's equivalent to 750,000 tons per year by 2025. Today, we are already at 740,000 tons of input capacity.
So we are very close to achieving our 2025 commitment that we had made to the Ellen MacArthur Foundation back in 2019. We also committed back then that we would invest $1.5 billion to achieve the 2025 targets, which I'll talk about later. Next slide. Regulation. Increasing regulatory frameworks are driving the need for circularity, especially in packaging and packaging waste. These regulations increase collection and the use of recyclable and recycled content. One effective example is Deposit Return Schemes, or DRS, or bottle bills, as they're also called, which significantly improves collection rates. Countries with DRS typically collect nine out of ten bottles. New DRS systems show that in the first year of collection, it jumps up to 75%, and then 85% collection by the second year, and 90% by the third year.
This has been done in many countries. Germany was the first in Europe, and many countries in Europe, states in the U.S. and Australia are also adopting the DRS. This trend is consistent and has shown to be very effective. Being the most recycled plastic globally, PET is well positioned to meet these advanced packaging laws. Through our expertise and experience, IVL is actively contributing to this transformation. For example, we have helped secure approvals for bottle-to-bottle recycling in India and Thailand, enabling 1.5 billion people to join the circular economy. Today, Thailand... Well, last year, Thailand and India had high recycling rates already, but all those bottles were going to the fiber industry. Now that bottle to bottle is allowed, those bottles will start going into the circular economy and back into bottles. We also advocate for extended producer responsibility.
That's when plastic producers, brands, and retailers pay for plastic to be recycled. We've participated in the UN negotiations going on to promote effective recycling regulations, and our efforts include enhancing waste collection to ensure high-quality recycled feedstocks. These regulations will further boost the circular economy for PET. To sum up, these tools, such as EPR and DRS, will significantly improve collection rates. Next slide. Finance. I am excited to share with you the impressive support our circularity and sustainability commitments have garnered from our financial partners. At present, a notable 32% of our total debt is financed through alternative sources of funding through ESG-linked funding. It's a clear reflection and recognition of our long-term commitments to ESG. Our valuable ESG-linked financing partners are international development banks such as IFC, ADB, DEG.
International banks from Europe, Japan, such as BNP, Bank of China, HSBC, ING, Mizuho, OCBC, and SMBC, and also domestic banks, Bangkok Bank, Kasikornbank, Krungsri Bank, Krungthai Bank, and SCB. ESG-linked financing has provided a diverse pool, diversified pool of long-term financing through blue loans, green loans, sustainability-linked loans, and sustainability-linked debentures. Also, we're able to tap major currencies such as Thai baht, U.S. dollar, and euro for our long-term funding requirements. We do benefit from engaging with ESG teams of our financial partners, who provide us insights and guidance into ESG policies, OECD guidelines, and practices at their institutions, and other corporates in the global markets, what they're following.
It's our belief that by aligning ourselves with ESG practices and principles for our financial partners, and through leveraging alternative sources of ESG financing, we build a large, diversified pool of liquidity with long tenure and effective cost. This will bring in ESG into our investment philosophy, our capital allocation, and decision-making. We look forward to your continuous commitment, guidance, and support in our ESG journey. Next slide. One important aspect of the circularity shift is innovation. We're continuously expanding our recycling capabilities beyond traditional mechanical recycling. In 2022, we established IVIH, our sustainable business incubator, to drive advancements in several key areas, including advanced recycling, bio-based chemicals and polymers, renewable feedstocks, and biodegradable polymers. Through IVIH, we have identified and are evaluating 30 additional circular feedstock projects, including 20 bio-based feedstock initiatives, eight advanced recycling projects, and two biochemistry projects.
These projects will help us achieve our 2030 vision of the additional 19% coming from circular and renewable feedstock, and as part of the 39% renewable and circular feedstock. These efforts are crucial in accelerating our journey towards a more circular economy. Next slide. We believe education is the most powerful tool for change. By empowering the next generation with knowledge on waste reduction, separation, and disposal, we can significantly increase recycling rates and build a sustainable future. So when I talk about education, we do not educate people about the price or the greenhouse gas emissions, or the properties of PET. I mentioned earlier the challenge is to mitigate plastic waste, and that is what we educate on. The examples include Waste Hero, which is a partnership with a nonprofit co-founded by Nobel Peace Prize winner Professor Yunus.
This program provides free lessons on recycling and the circular economy for teachers worldwide. Waste Recycle Bank Project, this is in Thailand, started in 2010. This project educates on waste segregation, upcycling, and recycling awareness, contributing to a cleaner environment and turning waste into a source of income. The third one is Sustainable Plastic Waste Management Project. In collaboration with the BMA, Bangkok Metropolitan Administration, this project provides training to over 100 schools in Bangkok and aims to educate 40,000 students per year. On the right-hand side, you can see some significant metrics. Almost 700,000 tons... Oh, sorry, 700,000 people educated since 2018. Almost 100,000 beneficiaries reached since 2020, and in Thailand alone, 80 tons of bottles collected since 2020.
These initiatives demonstrate our commitment to using education as a tool to promote recycling and sustainability. Next slide. Collaboration is vital to IVL, as we believe to go far, we must travel together. We work with influential organizations like the New Plastics Economy, the Global Plastic Action Partnership, which is part of the World Economic Forum, the Recycling Partnership, which is U.S.-based, and the Ellen MacArthur Foundation, to drive circular economy initiatives and promote sustainability. In 2022, we partnered with Coca-Cola to open the PETValue bottle-to-bottle recycling plant in the Philippines, recycling about 2 billion PET bottles per year. This JV showcases our combined efforts to close the loop on plastic bottle recycling. Most recently, we have teamed up with Varun Beverages of India, PepsiCo's second-largest bottling company outside the U.S., to enhance PET recycling in India.
These collaborations exemplify our commitment to advancing global recycling efforts. Next slide. Coming to our recycling business. Recognizing the need for a one-stop solution for our customers and stakeholders on both recycled and virgin products, we have now merged the recycling business into our CPET business segment, and we are confident that recycling can be our future growth engine under the CPET management. Next slide. IVL is recognized as the leading force in PET recycling. Today, we have 23 recycling facilities across Asia, Europe, and the Americas, and we continue to expand our recycling projects to strengthen our business and build a more sustainable future. Our goal is to be a one-stop shop for brands, combining global leadership, skills, knowledge, and scale that is unmatched. This enables our business partners to access the best products through the most efficient processes and provide the most effective rPET solutions.
Now, let's take a virtual tour of our recycling process.
Indorama Ventures Public Company Limited, or IVL, is one of the world's foremost petrochemical companies. The company is also one of the largest producers of polyethylene terephthalate, or PET, in the world. In 2011, Indorama Ventures started our first PET recycling business in Europe with a commitment to operating an environmentally friendly business that supports our goal of sustainable development. Our recycling business fulfills our position as a closed-loop petrochemical provider. We have further expanded our recycling business in different regions around the world. Nakhon Pathom Province, Thailand, was the location of our first PET recycling facility in Asia. The production process for recycling PET requires that plastic bottles be first compressed into bales, which are then brought to the factory. The bottles are inserted into a machine and sorted. Labels are separated from the bottles.
Thermal processing is used for cleaning bottles before going through the next step. Any impurities, such as iron, sand, or other types of plastics, are cleaned out. Afterwards, the bottles are crushed into small flakes and cleaned again. PET flakes are now ready to be reused. The flakes are examined before they are melted. The flakes are melted at 285-300 degrees Celsius to become recycled resins or rPET, which can be used to produce recycled PET packaging for food and beverages, for which quality and safety is certified by leading global organizations. rPET can also be used to produce recycled polyester fibers for garments, home, and automotive textiles. Our recycling business helps reduce energy consumption, natural resource use, and supports a sustainable environment.
So the recycling site you saw there is Nakhon Pathom, and if you haven't visited, we invite you to do so at some point. The year 2024 marks a turning point for our recycling business, driven by a series of strategic initiatives and operational advancements. Following the acquisitions of multiple recycling assets, predominantly in the West, we undertook a comprehensive retrofitting process in 2023. This involved implementing operational enhancements, optimizing processes, enhancing periodic maintenance work, and streamlining workflow. By addressing issues related to low productivity, quality concerns stemming from reliability and mechanical issues, we have successfully increased our operating rates from a low of 49% in 2023. Noteworthy successes have been achieved, such as our site in France.
This was a greenfield site in France, producing rPET, where these actions led to a remarkable improvement in operating rates from an average of 50% last year to the current 90% this year. We are committed to replicating these successes at other sites, including those in India and Africa and beyond. So all this, the recycling sites that we acquired in the West are older sites ranging between 1990 and 2010. So these are sites that were operated by smaller shops, and we had to do some retrofitting after acquiring them. That's why it's taking taking some time to increase the operating rates. Our greenfield recycling plants, such as Nakhon Pathom here in Thailand, Philippines, Indonesia, and the plants in India, I'm going to talk about.
These are greenfield sites which use the latest technology and also uses our internal know-how on recycling, which is why the plants in Asia have a higher recycling rate. Looking ahead, we anticipate a continuous enhancement in both operational efficiency and EBITDA performance, with a projected increase of $100 million in EBITDA by 2026 compared to last year. Transforming our performance from negative last year to a robust performance by 2026, with sequential improvements starting now. In addition to operational improvements, our commercial strategies have played a vital role in this transformation. These include securing necessary customer approvals and contracts, transitioning from traditional negotiated spot pricing to long-term cost-plus contracting mechanisms to ensure volumes and spreads, reaping the benefits of past investments, and planning for future growth through new investments in India and Africa.
Our disciplined capital allocation approach is driving us towards our targets, aiming to achieve 750 KT of recycling capacity by next year, by judiciously investing half of our initial capital allocation of this goal. So I mentioned earlier, we committed $1.5 billion to achieve our 2025 goals. We will have done that within under $800 million of investment. This has positioned us to achieve a double-digit ROCE by 2026. We expect to achieve 1.5 million tons of recycling capacity by 2030, doubling our 2025 target, which will ensure that 20% of our total PET sales are recycled back into mechanical recycling. Through a blend of operational excellence and strategic foresight, we're shaping a successful and sustainable future for our recycling business. Next slide. Taking India as a case study, we are working on improving our operations.
We also continue to expand our footprint, focusing on high-growth regions such as India, where IVL can leverage our existing ecosystem. I mentioned the key six drivers earlier. India touches on three of those drivers very strongly. Infrastructure, India already has a 90%+ collection rate, and IVL also has infrastructure in India, where we produce virgin PET and polyester fiber. Regulation, India has put in regulation by starting next year, where they require 30% recycled content, going up to 60% recycled content by 2030. And collaboration, we recently formed a joint venture with Varun Beverages, Varun Beverages, to build four recycling sites across India, with a total RPET capacity of 140,000 tons per year. Next slide. The circular economy of the future is about make, use, collect, and recycle, and IVL aims to continue leading the charge towards that.
We continue to enhance our recycling capabilities beyond rPET, leveraging on innovative technologies and exploring bio-based chemicals and polymers, renewable feedstock, and biodegradable polymers. We will strive to fulfill our purpose, reimagining chemistry together to create a better world, by growing together - by growing together with our customers to reshape our business and find new solutions to provide higher performance, healthier, safer, and more sustainable products to serve the market needs. Thank you. We can now do Q&A?
Yeah. Thank you. Okay, thank you, Yash, and thanks, everyone. So if you have any question, you can ask them now. So we have online audience as well, so you can unmute, and you can ask your question. And, the audience here, you can ask the question here on the floor as well. While we are waiting for the first question, I've got one online. This is from Bank of America. Partha is asking that, "In terms of the ESG CapEx, what percentage is the capital allocation from 2024 to 2026? As a rough estimate would be fine, our capital allocation in next three years.
So I think we have allocated about $550 million as a growth CapEx, and about 60%. Am I right, Kumar?
Yeah.
Is allocated to the sustainability initiatives. As Yash covered, the biggest thing today, what we are doing is India. The four plants which are getting built in joint venture with Varun Beverages. India is putting a lot of regulation, starting next year. The two plants are already under construction. Actually, the machines have been ordered. So, India will be a very big growth area, and, as you saw that, the major focus is on turning around this asset, nearly $100 million upliftment of EBITDA by 2026. So that's a focus area. So hopefully that answers your question. Yeah.
Thank you. We have a question from Kunaphat, from CLSA.
Hi, thank you, Yash, for the presentation. I have three question. The first two question is related to the industry, and the last one is on IVL. About the collection rate in the U.S., I see the number collection rate in U.S. is much lower than Asia and Europe. I wonder what is the main reason for the collection? Even U.S. is a developed market, but why is it much lower than Asia? And even when we look at the forecast up to 2030, it is also, you know, still lacking. Yeah. And second question is on the recycling PET. What is the bottleneck for the to ramp up the, you know, recycling capacity? When, you know, when we look at on both the regulatory or cost point of view, are we...
Can we import the recycling part if we, you know, if we build more recycling plants? Last one on the IVL, specifically, because we have about 740,000 out of 750,000 target of the recycling capacity. In terms of the EBITDA, EBITDA margin, the difference between virgin and recycling, I understand that we had a very low operating rate at this point, but once we get to 750,000 ton target, and we... Let's say we operate, you know, 80%-85%, what how big difference between, you know, EBITDA margin between virgin and recycling? Yeah. Thank you.
So I can take the first two?
Yeah. Go ahead, Yash.
So on the first question, collection rates. Collection is very different by country. And so I'll just explain a little bit. So in Asia, in Thailand, China, we have an informal collection system where we have the hand pickers. So the bottles are handpicked, and therefore, you get very clean bottles, and you also have a high collection rate. Then the hand pickers take it to a sorting site. The sorting site will then segregate the different materials: bottles, glass, paper, aluminum, other metals. And that's why you have a 90%+ collection rate in all these informal sectors, informal countries... In Europe, you have a—I'm sorry. In the U.S., you have a very automated collection system.
So the waste all goes into one or two different bins, and a garbage truck comes and uses a robotic arm to put all that waste into the garbage truck. So there's no segregation happening at the curbside level. Whereas in Thailand, because of the informal collection, it's happening at the disposal place. So in the US, you know, that waste goes to a sorting center, and it gets harder to separate that waste 'cause it's really mixed with so much other waste. Europe is a mix of...
In the U.S., you only have the Deposit Return Scheme that I spoke about in a few states, which is actually. So the collection rate, the average of 27% in the U.S., you have about 85%-90% in California, 80% in New York, but then you have some states that are very low, about 7%-9%, so the average comes out to very low. As more states implement DRS, you'll start to see those states improve their collection rates very quickly. Europe is a mix of the automated collection system as well as DRS. So countries like Germany has DRS, which is 90% collection rate, but then you have other countries like France at the moment, that doesn't have DRS, but will implement it, that has about a 50% collection rate.
So it's a mix of different collection systems in different countries. On the second question on rPET, our strategy has been to acquire recycling plants in the West. By recycling, we mean washing lines. So these plants already had secured feedstock of bales, and those bales then get washed and shredded into flakes. The retrofitting we have done, apart from the wash line, we've also added an extruder. The extruder converts the flake into rPET. So that extruder itself has a lead time of over a year to order and install. Once you have that extruder, then you start producing rPET. Then that rPET has to be qualified by the customers, which takes about six months. So from acquiring a wash line, you basically install an extruder, which takes 18 months.
Then you start producing good quality rPET, then you have to get it qualified by the customer, which takes another six months. So it takes about two years from basically acquiring a wash line to actually supplying the customers. In India, where we are building these wash lines, we will build an extrusion with it, so we're not gonna have that lead time issue. These take about 18 months to build, then you'll have a process of about three-six months to qualify the rPET. D.K.?
Yeah, if you can bring the slide on EBITDA. So I think it's a good question. What exactly has happened that, as Yash was mentioning, we bought many assets around the world, right? They were second-hand assets, we were doing retrofitting, and our utilization rate was very poor. And it is also linked to the collections, because in U.S., a lot of the yield is only 56%, 57%, right? So you can see here in 2023, our utilization rate was only 49%, and we also bought some new lines, new technology, NGR, which got stabilized. Now, we have put a lot of digital methodologies. We have improved now the recycling. Actually, in Europe, the first quarter is already turned positive. Asia is already positive, U.S. is on that track.
So by utilizing this to 77%, you can see that we will be $85 million EBITDA. Now, your question was, how do you compare with virgin, right? As Yash mentioned, that we did $750 million, we are going to do the investment, so it's $1,000 per ton, and of rPET versus $2,000, what we were targeting. The good, the way the pricing of rPET is done is bale plus, you know, is a margin-based, because bale price can fluctuate in winters or summer, as you know, the collection changes, and it can go volatile from EUR 300 to EUR 700, for example. In Thailand, it doesn't, I mean, change so much, but in Europe and United States, it can change a lot. So what we do is bale plus basis, bale divide by yield plus.
So it's a fixed margin linked to the, basically the bale prices. So the EBITDA per ton, you can talk that investment cost is $1,000. We are talking a double-digit ROCE, so we are talking about $150 per ton. Eventually, when we operate fully, $130-$140 per ton. And the key in this will be three things: You know, you don't... You mentioned whether you import rPET and all that. We do move, sell rPET to U.S., but basically, your bale collection is within the few hundred miles, right? You can't make, otherwise you're transporting air. So basically, it's a very reasonable. Why in India, we are putting four plants in different four corners of India? Because you can't transport that much. So that same is in the Europe.
So you have minimum transportation costs, collect the bales properly, process them in the right manner. That's what is the structure, what you see, 49% utilization rate. As we move the utilization rate, the profitability improves. The question is about sales. Is there an issue in sales? No, marketing is not an issue. The way we make two products, as Yash was explaining, 100% rPET, which is called complete 100% rPET. Customers take it, blend with the virgin resin, and make bottles. Or you saw Coke CEO presenting in U.K., it was a 100% rPET, means the bottle was made from 100% resin, completely. So these are different ways.
The Single Pellet Solution, where we put the flakes on the backbone of the resin, and we make a resin which is blended with 40%, up to 40% virgin recycled resin. The advantage of this type of resin is that you don't have contamination risk, because when you may bring recycled or you have two silos. So both product sales, Single Pellet Solution and recycled pellet. So we see this business unlocking a lot of value going forward as the sustainability drive across the world is happening, commitments of the brand owners is there. We are the largest recycler in the world today.
As we move the operating rate further and we invest in new assets, and that would be the drive that we make 1.5 million tons by 2030, and there is no reason that we should not be able to reach there. So one is mechanical recycling. You saw the video that how you do mechanical recycling, which is the cheapest way to make the rPET. Then there is a chemical recycling, which is that you break the difficult to recycle plastics into the monomers. Basically, you back into the PET, MEG or DMT and MEG and make the... But this is more CO2-intensive and more investment cost there.
We are engaged in many technologies here as the IVIH, which is the incubator for such technologies, which are basically like what you heard, might have heard, Carbios. We are looking. We also have a partnership with Loop. So we are working on many technologies, and that is selectively we will go and invest in those technologies to have that. So there's the two routes, mechanical recycling and advanced recycling. So this will be a very good, you know, area, because as you saw, the PET, compared with other plastics, is most easy to recycle as compared to high-density polyethylene or other polystyrene cannot be done. So that's where PET stands out. And as you saw, that the CO2 footprint of rPET is lower than aluminum, as folks you were referring. So all these adds, and your question is why we had this recycling day today.
The objective of this recycling day is to get you educated about what is the potential of this sustainability route which we are having. Now, this is only PET we are talking. We are also working on fiber side, textile to textile. As the world passes through this climate crisis, which we, which we can see today in India, the temperature is 50 degrees Celsius above, you know? It's just unimaginable. As we see zero waste, how do you reduce the waste? I think this sustainability angle, which IVL has, will certainly unlock the value. So I hope that answered your question. A lot of work to be done, but we are there. We're going to be there.
You also mentioned import and trade. So today, some trade of rPET does happen. For example, the U.S. imports some rPET from Asia because it is cleaner, it's got better quality, and it's cheaper. But long term, when the U.S. is able to collect more bottles and recycle more bottles and achieve their recycled content from their own bottles recycled, then this will become a very localized industry. So, you know, shipping rPET across the ocean is counterproductive in terms of emissions. So at the moment, for the brands in the U.S. to achieve their targets, they have to import because there's not enough available locally. Europe doesn't really import anymore because now they're achieving close to the demand, but still far away. So it's a very local business. It's country-wise business.
Just to expand on that a bit, you know, Kunal, back in India, the regulation requires that the material be collected within India, and only then does it count as recycled. So, you know, more and more countries will move towards that, and as Yash mentioned, that it will become localized.
Because circularity is important. We are talking of local, as Kumar is saying, that in India, you need collected bottles for it.
Thank you. Any more question from the floor? While we wait for a question, I got one online. Is asking, "We have been talking about PET, but how about the circularity of other plastics?" So can you give some thoughts about it?
Yash, you want to take or you want me to take?
As IVL, we only produce PET. PET is one. The plastic universe is about 400 million tons, and the biggest part of that is polyethylene and polypropylene. They have about 60 and 90 million tons. PET industry is about 35 million tons, so it's about 8% of the entire plastic universe. You can see on the side here the different plastics. They all have different properties, and they all go towards different applications, so they all have their uniqueness. PET, as we know, goes towards beverage bottles and food trays, mostly. They're mechanically recyclable, where others are not, and they have a much higher recycling rate. As IVL, we only produce PET. We only operate in PET as far as plastic goes. Yeah, so I think, I guess-
Yeah, I think Yash covered very well. You know, one is called single-use plastic, another is multi-use plastic. So what you see here, as we're saying, total 400 or 450 million tons of world's plastic is made. You saw polyethylene bags disappearing totally, correct? When you go to the shopping mall, you now they say that we're gonna charge you or you pay for the paper bag. Now, high density polyethylene, if you see, is 30% recyclable, but the cost of recycling is high because there are different type of colored bottles. And so PET has some opportunity to take some functions from HDPE because of their circularity, but single-use plastic is, of course, there, like polystyrene. Give you example of yogurt cups. Yogurt cups, cups move from polystyrene to PET, like Danone and Nestlé make. So there are applications which are moving to PET.
There are some plastics that are difficult to recycle, like PVC. High-density polyethylene, as you might have seen, a lot of companies are working on a process called pyrolysis, which is—of course, we are not involved into it—which is very energy-intensive. So our focus is making PET more and more collected, more recyclable, giving solution to our customers for food packaging, beverage packaging, and other packaging.
Thank you. Yeah, we've got one last question here. So what are the key markets or regions that IVL is focusing on in the recycling industry?
Sorry, one key?
Key markets and regions we are focusing on recycling.
I think, key markets, of course, Europe is the leading, where Europe has regulations, and you saw that, collections is quite high. Thailand was never a bottle-to-bottle allowed. We've lobbied along with other peers. Now, Thailand has launched the rPET. India is going to be a big growth area. Indonesia is already having it. So we are basically focusing on the markets. United States, as Kunaphat said, the biggest challenge is the collection, 29%, 28%, and then, as the collection improves, more and more rPET and bottle bills are coming in different states, so more collection will happen more. So we are focusing across the region. You can see our footprint is 23 manufacturing sites across the world, Brazil, Mexico, United States, entire Europe. China, we are not there. China still there is no bottle-to-bottle approval.
That all goes, collects, and goes into fiber. But I think we are hearing that China will also soon approve in bottle-to-bottle, which will, of course, make some dynamic changes because there will be, as it is going into fiber, so more virgin fiber demand will come. It will benefit this textile business. But we are focused entire world, as you can see, because this demand for customers is everywhere. Our two plants, which we are exploring today, one is in Nigeria, another is in Egypt. These are the two other where we are exploring.
The geographies where we supply virgin PET are the same geographies where we want to be able to supply rPET and SPS. So like in Africa, we also have PET Nigeria, and we are also planning on to build a recycling plant in Nigeria. That's already been approved by the board. We're studying Egypt as well at the moment to build a recycling plant. So in Europe, you know, we cater to the same customers as we do for virgin PET, and also, we produce rPET in the same, some of the same countries as well.
Okay. Thank you. Audience, do you have any last question?
Yeah. Please.
I would like to understand about the emissions reduction target. I would like to understand, like, how the recycling business contribution, I mean, to the emission reduction target of IVL. And then to meet that target, I mean, how much of the capacity that you need to grow for the recycling business?
Yeah. So the emission reduction target can be... I can explain in two different parts. One is recycling. So rPET has a lower per ton CO2 emission than VPET. And as you increase the share of rPET in your total PET business, then the average of emissions comes down. rPET has a lifecycle analysis emission of 1.5 tons of CO2 per ton of rPET. VPET has 2.4 tons of CO2 per ton of VPET. So as you increase your share of rPET in the total PET sales, then you're bringing that average below 2.4, closer to 1.5. Secondly, on Scope 3, when you buy petrochemicals feedstock, that has a higher carbon footprint than when you buy waste bottles. So Scope 3 for IVL accounts for 75%.
You have Scope 1, Scope 2, which is about 25% of our emissions. Scope 3 is 75%. That 75% today comes from buying para-xylene, MEG, PTA, which are high-emitting chemicals. As you shift to more rPET, you're also shifting your feedstock away from those fossil-based to bale bottles, to waste bottles. That's another way that your emissions are reducing. Vision 2030 or IVIH, that we spoke about, is converting more fossil-based feedstock, so virgin PTA, virgin MEG, towards bio-based PTA and bio-based MEG. That is gonna come much later on. We expect, I think by 2026, we're gonna start seeing some volumes of circular feedstock. Circular feedstock, because it's made from either wood, corn, or sugar, opposed to oil or gas, has a lower emission again. So that again brings down your Scope 3 emissions.
Because you would basically buy that and use it in your system. So that's on the recycling side and on the circular feedstock. The third part is our decarbonization. Our overall target is to reduce our emissions by 30% by 2030, from a 2020 base year. So I mentioned, recycling, mechanical recycling, how that improves your emissions. I mentioned Vision 2030. The third part is decarbonization. The biggest area there is coal phase out. So today, we still use some coal in India, Indonesia, Thailand and China as a power source. Converting that to gas or biomass significantly reduces, your emissions. I think phasing out coal alone will reduce our emissions by 1 million tons of CO2. The second largest project there is carbon capture.
Now, this is a high investment, and the technologies are not mature as yet, but we are considering a big project in the U.S. to capture carbon of about-
Can you talk Mexico?
And Mexico.
We are doing it.
Mexico was actually a project that Coke asked us to do, where we capture the CO2 from our stacks, from our emission stacks. We capture that, and we sell that back to Coke to carbonate the soft drink. So that also is kind of a circular economy. But by capturing your CO2, you, instead of releasing it into the air, you capture it. You can either store it or you can reuse it, like I mentioned. That again reduces your own CO2 emissions, and even though it gets emitted later on, it's still sort of captured along the value chain. So it's reused along the value chain. Renewable energy and green projects are smaller initiatives, but they stack up, and they do make a difference. Hope that answered.
Thank you. Maybe my last question is about any support from the government, I mean, for your recycling business in each region. Because, I mean, this is a good thing, and then many governments are supporting it. So I'm just curious that, do you expect any support in terms of, I don't know, lower tax or any kind of support from the government? Thank you.
So it's correct that governments are supporting recycling. All governments... You know, since all governments have signed the Paris Agreement, they all have carbon neutral goals. Even though plastic accounts for a very small share of emissions for that country, recycling and reusing reduces the country's emissions. So that's why they're pushing for more recycling and for more reuse, instead of for alternative materials that have higher emissions. So Europe were the first ones to start out by having collection rate targets and recycling rate targets, recycled content targets. So the government is supporting that way. In the U.S., you know, the government is quite divided, so there's no consensus, but state by state are implementing regulations. So, it's more the Democratic states that have implemented certain regulatory measures to have more collection, and therefore more recycling.
In Asia, we don't get any subsidies in the West, but it does improve the overall recycling infrastructure by the increase in collection rate. And then in Asia, you know, a government's allowing bottle-to-bottle recycling to happen. That is opening up a circular economy for Thailand, for India, and for China going forward as well.
Just to add on that, India, there will be some capital subsidies provided by the government, for recycling, different in different regions.
Thank you. Any more questions from the floor? I've got one from JP Morgan, Hong Kong. Hannah is asking: What's our views on the UN Plastic Treaty from an industry standpoint?
You want to take that?
Yeah. So we have a pretty strong advocacy team, led by Colm Jordan, who he sits in Ireland. He has a team, one that sits in Americas, one in Europe, one in Asia, one in Bangkok. So they have been very involved in the UN negotiations, Plastic Treaty. They've been joining each meeting physically, and over there you have a mix of government, industry, NGOs, who are basically advocating their view of a plastic treaty. And our view of this has been in line with what the governments are thinking and what the UN is thinking. So we support the UN Plastic Treaty, and what that means is basically better design for circularity, which means better design for reuse and recycling. The CEO of Coke mentioned that the best, the most, not...
The most environmentally friendly way to consume beverages on the go is to have your own refillable bottle. So that is the first drive for that UN Plastic Treaty, but it's not practical. Or not all consumers are going to use a refillable bottle. So the second biggest drive there is recycling, and that is something that the government and the UN recognizes. So we are quite aligned on that, along with the industry.
Yeah, I think in the plastic treaty, it's a long way to go, naturally, because there is so much negotiation going between developing and developed countries. They're talking of, you know, keeping a cap. But we think PET really stands out because of its circularity, and that's what the strong lobbying is being done. From our side, we are attending it, but it's, I think it's a long way to go because there's a lot of disagreements there still.
... Thank you. So anyone from the floor? So the last question that we got from our co-host, UOB, so they're asking about the collection. So the bales, and how the collection system works. So that's if you can give some color on that.
Yes, can-
Is that for Thailand or f-
Yeah, so that's in... I think it's regionally. Yeah, if you can give some thoughts on that.
Yeah. So Thailand is. I'll take Thailand as an example for Asia. We have an informal sector. You have the scavengers and the waste pickers picking up all of the waste that they see value in. All waste, all recyclable waste has value, whether it's PET bottles, metal scrap, paper, aluminum cans, glass, all of these have value. And so the waste pickers collect them and put them in individual bags. Then they take that to a sorting center, and they sell it for a few baht per kilo, depending on the recyclable waste. The sorting center will then accumulate all of the collected waste and bale it specifically by the material. Baling it means basically crushing it into a cube to save space. So PET bottles get baled into a cube.
Glass will also do the same thing, metal scrap and so on, paper. That, those PET bales we would buy as a recycler. We would then shred up those bales, remove the label, remove the cap, wash it, clean it, turn it into flakes. Those flakes then can be extruded into recycled PET, which then mimic the properties of virgin PET. So that is the representative of how it works in India, in China, and in Thailand. In other countries in Asia, like Indonesia and Philippines, where it's an archipelago of many islands, it becomes a bit more difficult, so collection rates are lower. But we are working with the ecosystem there to improve. In the U.S., I mentioned it's a very automated system. In the U.S., waste management companies, actually, it's more profitable for them to landfill than it is for them to sort different waste.
So in certain. So they get paid about $90 per ton to simply landfill waste in the U.S., whereas they have to spend about $130 per ton for the sorting technology to sort plastic, PET bottles, aluminum, other metal scrap, paper, and then they can only sell it for so much. So they're not making that $90 per ton profit, what they're doing from landfilling. The countries where they've put in a DRS system. Sorry, the states where they've put a DRS system, those states now have a different avenue for PET bottles. So the PET bottles don't go into that bin anymore. They get mixed up with other waste, but instead, the consumer goes directly and puts it in the reverse vending machine.
Through the DRS, they'll get their deposit back, which is about $0.05-$0.10, and that is a concept that's been proven to work in many countries globally. In Europe, it's a mix of the automated system as well as the DRS system, but you can see many countries are moving towards DRS. What it allows is less landfilling, less waste, and more circular economy and more recycling.
So each country has different. In Japan, you know how many bins are there, right? They collect 90% because the municipality, there's a very well-organized system, and the municipality also subsidize. So it's all, I think, education, which will drive infrastructure, which will drive basically the collection.
Thank you. So we've got one more question online. So it's Hannah from JP Morgan. Can you unmute yourself, and can you ask your question?
Hi. Yeah. Thank you. Hopefully, you can hear me.
Yeah, please go ahead.
Great, thank you very much for the presentation today. Very informative. Just wanted to ask about the competitive environment for the recycling plants, especially in India, and I suppose you also mentioned China. I suppose that's a longer-term opportunity, but could you just give a little bit more color on that? Because I suppose recycling is a very local business, so what's the differentiator, kind of your overall market presence, or is customer relationships with key customers also kind of an important differentiator for you?
Yeah, so that's a good question. What is the differentiator? IVL is 17% of the world's virgin PET market. We have connection with all the customers. If you exclude China, we are nearly 25%, so every customer, we are able to give solutions. And in United States, as we said, it's a local business. U.S. is less fragmented. In United States, they are consolidated. I mean, we have nearly... We are going to have nearly 25% market share in rPET eventually, with many facilities. Mexico is also looking to be consolidated. Brazil, there are actually only four or five players. Europe, it is still fragmented, but we have the leading position because of our footprint. India is still fragmented. China, as I mentioned, we don't have a presence. We are only in virgin PET.
Recycled PET bottle-to-bottle will be still coming up, but certainly, we'll have an opportunity there in case we want to convert one of the lines there. So competitive landscape, the key differentiator is customer quality. Quality is very, very important, as Yash was mentioning. That's where we differentiate. We implemented what's called NGR technology in Europe, which has low benzene content, which is very important for water and particularly custom containers. So the quality is important, customer proximity is important, solution to the customer, because each brand owner has very, very strong commitments, and this is right up to the CEO's level, that I want to achieve so much percentage rPET content by 2030. And that's why we are able to give them solutions of single pellet solutions, recycled PET, and that is...
Quality, service, solutions is the biggest differentiator. That's why, IVL has a distinct advantage versus other competitors in the market.
Just to build on, in India, we have two-
Right.
I think there'll be two distinct advantages. One is the infrastructure. So India already has 90+ collection rate, but all those bottles go to the fiber industry. That means those wash lines have been catered to, to create fiber-grade flakes. They would have to do a lot of retrofitting and investment to, to make those flakes bottle-grade. So since we're building, and those plants are also decades old, so, you know, similar to the plants we bought in the West, we've had to do some investments over there. Similarly, in India, the existing wash lines, they will have to do a lot of investments to bring that up for bottle-to-bottle recycling. Today, they're bottle to fiber. Our joint venture in India, this is all greenfields, so they're all built for purpose, built for bottle-to-bottle recycling.
The second advantage is we have a tie-up with the customer. So, we'll be co-located with the customer, and therefore, you know, you have security of offtake volumes.
I think what Yash mentioned, joint venture with Varun Beverages. Varun Beverages is the largest Pepsi bottler in India. It's listed company, so this is going to be a joint venture, so offtake becomes easier. The remaining 50% we sell to the other brand owners. Similarly, Pepsi, so, sorry, the Coke joint venture in Philippines. So wherever we can create a collaboration, which I think Yash presented, create collaboration with the customers, because they also need solutions. So all these things are being worked out. Yeah.
Thank you. Hannah, do you have any follow-up question?
No, that's great. Thanks very much.
Thank you. I don't see any more questions online, and neither I see nor I see any more questions on the floor. So thank you very much for joining us today. We look forward to stay in touch with you. If you have any questions, please do contact Investor Relations, and we'll be happy to connect and answer your all the questions. Thank you.
Thank you. Thank you very much.
Thank you.