Downcycling is "the recycling of a material into a material of lesser quality. The obvious example is the recycling of plastics, which turns them into lower grade plastics." The Dictionary of Sustainable Management sez: "Most recycled industrial nutrients (materials) lose viability or value in the process of recycling. This means they can only be used in a degraded form for components other than their original use. White writing paper, for example, is often downcycled into materials such as cardboard and cannot be used to create more premium writing paper."
"When a recycled good is cheaper or weaker than the original product, it's known as down-cycling (or downstream recycling)," adds Ed Grabianowski at HowStuffWorks.com. "Eventually, goods move so far down the recycling stream it isn't feasible to recycle them any further. After being recycled a few times, paper is no longer usable." Or, as Josh Spear explains, "Most recycling sends material downwards on the 'food chain'. Once the material is recycled, it's of a lower quality than it started and is therefore less useful."