The rPET Boom Just Got Its First Crack. India's Biggest Chemical Recycling Plant Has Been Cut by a Third Before a Single Brick Was Laid.

The numbers at a glance

(Capacity and financial figures are from Loop Industries' SEC filings for the quarter ended 31 August 2026 and the company's earlier joint-venture announcements. Mechanical-capacity figures are from the Food Safety and Standards Authority of India's authorisation list and APR Bharat's industry estimates in 2026.)

Two roads to a new bottle, and only one is paved

We wrote on 18 October that India is building food-grade rPET plants faster than it can feed them, and that clean PET bottles are now the scarce input. That piece described the mechanical road: wash, decontaminate, melt, pelletise, repeat. It works, it is proven, it is what all 17 of India's FSSAI-approved plants use, and it is what the 40% recycled-content rule for 2026-27 relies on.

But mechanical recycling is picky. It needs clear or light-coloured PET, well sorted, free of labels and contaminants, and low in moisture. Coloured bottles, oil containers, multilayer packaging and heavily printed PET are either downgraded to polyester fibre and strapping or rejected altogether. Each mechanical pass also degrades the polymer a little. After a few loops the material cannot go back into a bottle.

Chemical recycling, specifically depolymerisation, was supposed to handle everything the mechanical line rejects. The technology breaks PET all the way down to its building-block monomers, dimethyl terephthalate (DMT) and monoethylene glycol (MEG), which can be repolymerised into resin that is, in principle, identical to virgin. Colour, contamination and prior recycling history wash out in the chemistry. On paper it is the perfect complement: mechanical plants take the clean stream, chemical plants take the rest.

That is the theory. In practice, commercial-scale PET depolymerisation barely exists anywhere in the world. And the largest project aimed at India just got smaller.

What happened at Loop

Loop Industries is a Canadian company, listed on Nasdaq under the ticker LOOP, that developed an acid-hydrolysis process it brands Infinite Loop. In December 2024, it signed a joint-venture agreement with Ester Industries, a publicly listed Indian polyester and specialty-films maker, to build a depolymerisation plant in Bharuch, Gujarat. The joint venture, named Elite, bought roughly 93 acres in Gujarat's Bharuch industrial corridor.

The original plan was ambitious: 70,000 tonnes a year of recycled DMT (rDMT) and 23,000 tonnes a year of recycled MEG (rMEG), with Ester converting the monomers into specialty polymers on the same site. The project budget was $165 million to $176 million. Tata Consulting Engineers finished the front-end engineering design. Toyo Engineering India was awarded the detailed engineering contract in December 2025. Nike signed a multi-year offtake agreement as the anchor customer.

Then the money ran short. Loop's quarterly filing for the period ended 31 August 2026 listed $9.86 million in available liquidity, enough to keep the lights on at its Canadian headquarters but nowhere near enough to fund its share of the Indian plant. On 17 September 2026, the board formed a Strategic Alternatives Committee to consider its options, which it described as including strategic investments, project-level financing, licensing, joint ventures, and a potential sale or merger.

On 15 October 2026, when Loop reported its second-quarter results for fiscal 2027, it disclosed that the India facility had been rescaled to 45,000 tonnes a year, a 36% cut from the original 70,000. Management said the resized project's cost would not fall in the same proportion because some costs are fixed. Construction had not begun. The company said it expected to start building in the first quarter of calendar 2027 if financing could be secured.

The filing also carried a going-concern warning: the company's ability to continue depends on whether it can raise the capital it needs.

Why the pullback matters beyond one company

Loop's troubles are specific to Loop: a pre-revenue company running out of cash before its first commercial plant is finished. But the signal is broader.

India does not have a single operating large-scale PET depolymerisation plant. The Loop-Ester facility was the most advanced project in the pipeline. A handful of smaller chemical recycling ventures are at various stages, but none has reached commercial production at food-contact scale.

That leaves the entire rPET supply chain running on one technology: mechanical recycling. Mechanical works for clear, well-sorted bottles, but it cannot touch the coloured and contaminated PET that makes up a significant share of what India collects. The informal collection network that handles nearly 95% of PET recovery in India does not sort to food-grade standard. Much of what it delivers is mixed-colour, mixed-polymer, and difficult to trace.

Under the EPR rules, the recycled-content obligation steps up every year: 40% in 2026-27, 50% in 2027-28, 60% from 2028-29. As those percentages rise, the clean-bottle bottleneck will tighten. Brands will need more recycled resin than the mechanical chain can supply from clear bottles alone. The coloured-PET pile will grow, and the technology that was supposed to process it is not ready.

The paradox on the factory floor

The situation in mid-2026 was already contradictory. The beverage industry projected food-grade rPET demand at about 6.84 lakh tonnes a year against operational capacity of about 3.56 lakh tonnes, a shortfall on paper. Yet about a quarter of the country's 17 FSSAI-approved rPET plants were running below capacity, because brands had not yet committed enough purchase orders to fill them.

Both things were true at once. The capacity existed, but the demand had not shown up. Brand owners were cautious, partly because rPET costs more than virgin resin and partly because the mandate was still new. Recyclers built lines expecting the mandate to pull orders in; instead they found themselves waiting.

This is the world the chemical recyclers were supposed to enter: a market where the mandate drives demand upward, but mechanical supply is capped by feedstock quality. Chemical recycling would absorb the overflow, take the dirty PET, and produce virgin-equivalent resin at a premium.

Loop's pullback delays that entry. And no one else is close.

What this means for you

Kabadiwalas and PET bottle collectors: The premium on clean, clear, well-sorted bottles is not going away. If anything, it will widen. With chemical recycling delayed, the only route to food-grade resin is the mechanical line, and the mechanical line is choosy. Every improvement in sorting quality, whether by colour, by polymer type or by removing labels and caps, puts you closer to the high-value buyer.

Mechanical PET recyclers: Your technology is, for now, the only game in town. The mandate's escalator will keep pushing demand toward you. But the feedstock squeeze is real: the collection chain was built for volume, not purity. Investing in better washing, sorting and decontamination is the edge, not more capacity.

Traders of coloured or contaminated PET: The short-term outlook is flat. Chemical recycling was the technology most likely to pull coloured PET out of the fibre-and-strapping rut and into higher-value resin. That pull has weakened. Coloured PET will continue to move into fibre, but the price gap between clear and coloured is unlikely to close soon.

Brand owners with recycled-content targets: The mandate is not going away, and the supply of food-grade rPET from mechanical plants is bounded by the supply of clean bottles. If you are not already securing offtake agreements with FSSAI-approved recyclers, the window is narrowing. Do not count on chemical recycling to bail you out before 2028 at the earliest.

What to watch

1. Loop's financing: If the Strategic Alternatives Committee finds a buyer or a lender, the Bharuch plant could still be built, albeit smaller and later. If the committee winds down without a deal, the project may not survive.
2. Other chemical recycling entrants: Indorama Ventures, the world's largest PET producer, has a joint venture with Varun Beverages for PET recycling in India, though that is mainly mechanical. Any announcement of a commercial-scale depolymerisation plant in India would change the picture.
3. FSSAI clearances for new mechanical plants: If the 7.5 lakh tonne target by March 2027 is met, mechanical supply comes closer to matching the 2027-28 mandate, but only if clean bottles follow.
4. The clean-bottle premium: If the price gap between clear sorted PET and mixed-colour PET widens further in the next two quarters, it confirms that the feedstock bottleneck is tightening and chemical recycling's absence is being felt.

The bottom line

India's rPET story has two chapters. The first, written over 2025 and 2026, was about building mechanical capacity fast enough to meet the EPR mandate. That chapter is going well: 17 FSSAI-approved plants, about 3 lakh tonnes of capacity, heading toward 7.5 lakh tonnes by March 2027.

The second chapter was supposed to be about chemical recycling stepping in to handle the PET that mechanical plants cannot. Loop Industries' India plant was the opening line of that chapter. It has now been cut by a third, its timeline pushed out, its financing uncertain, and its parent company's survival in doubt.

The rPET boom is real. But its most important complement, the technology that can eat what the boom's main plants reject, just wobbled.