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June 2007
Plastic recyclers face stagnant raw material supply Flat plastic supply is creating challenges for plastic recyclers in the United States.
Demand stays strong for product
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Prices for recycled plastics may have increased, but other factors such as higher production costs and flat supply are hurting profit margins at plastic recycling facilities.

“The market gets more difficult by the minute,” said Benjamin Benvenuti, president of Commercial Plastics Recycling Inc. (CPR), headquartered in Tampa.

“Manufacturers are using their own scrap to cut costs, new technology has cut the amount of scrap produced and more brokers in the market leave no margin for error.”

CPR buys post-industrial and post-consumer plastic scrap from injection molders, blow molders, thermo formers and converters. It also purchases off-grade resin from major resin producers. It has plants in Tampa, Newton, North Carolina, Millwood, West Virginia and sales offices in Little Falls, New Jersey and Colorado Springs, Colorado.

All of CPR’s plants provide grinding, screening, repackaging, baling, sales, testing and laboratory facilities. CPR reported sales of $9.7 million in 2006 and it handled approximately 40 million pounds of recyclable plastic material during the year.

Benvenuti said buyers are happy with the increased competition, which helps to keep prices down, while sellers of scrap are enjoying higher sale prices. “It appears that the recycler is the unhappy player in the middle with smaller margins,” he said. 

CPR is looking to other countries to buy materials, Benvenuti said. This creates other issues, such as logistics, freight and higher fuel costs, and custom delays.

Other global factors are also impacting the market. “Many recycling companies in Central and South America are exporting materials. This was unheard of in the past,” Benvenuti said. “We see China sending their buyers to Latin countries to buy direct. When China is buying, the prices are up and when they stop, they plummet.”

Stephen Alexander, executive director of the Association of Postconsumer Plastic Recyclers in Washington DC, said plastic recycling is now a global business with materials trading internationally. “Like many manufacturing industries in the United States, plastics recycling has been impacted by Asian buyers of raw materials,” he said.

Alexander said that while the markets for recycled plastics are “robust,” the supply of raw material continues to be a major issue facing the recycling industry.

“The demand for recycled plastics has exceeded supply for over 10 years. Today, even as prices for bales of used bottles are well above historic averages, the growth in supply continues to be out stripped by demand for material,” Alexander said.

“Prices for bales of used bottles continue at the elevated levels of the last few years. As such, those bales are major revenue-makers for the collection industry.” Alexander also characterized the prices for recycled resin pellets as “competitive.”

According to a study by APR and the National Association for PET Container Resources, the quantity of PET and HDPE bottles recycled in 2005 increased 9 percent from 2004. HDPE is an acronym for high-density polyethylene, a plastic resin used in packaging such as milk jugs and detergent bottles. PET stands for polyethylene terephthalate, a plastic resin used to package soft drinks and water bottles.

The recycling rate for PET and HDPE bottles increased from 22.6 percent in 2004 to 24.3 percent in 2005, according to the trade groups’ research. “Those levels tell us there is considerable opportunity for increased collection,” Alexander said.

Access to quality material is the most important issue facing plastic recyclers, said Judith Dunbar, the director of environmental issues in the plastics division at the American Chemistry Council, a trade association based in Arlington, Virginia.

Contamination also has an impact. “The reclamation industry deals with numerous contamination issues including changes in bottle design, use of new materials, as well as contaminants from other materials,” Dunbar said.

Despite these challenges, the market for recycled plastics is strong. “It’s been pretty steady since leveling off after the 2005 hurricanes in the Gulf. We’ve seen an increase in pricing for baled plastic bottles on the West Coast recently,” Dunbar said.

“In recent years the companies that buy baled material and sell post consumer resin were desperate for material and there was talk of a supply crisis. Late last year a major reclaimer closed and we’re seeing some increase in collection of recyclables.”

Dunbar said the demand from the export market is also strong. “New capacity should go on line this year on the West Coast. Hopefully supply will rise as well. Scrap plastic prices have been holding steady for the last nine months,” Dunbar said.

Patty Moore, president of Moore Recycling Associates Inc., a management consulting firm in California that specializes in recycling plastic packaging, said the market could absorb more than is currently being collected across the country.

“Pricing is strong. I believe that collection is the major issue,” Moore said.

Moore describes the issue as a chicken and egg-type problem. “Do you open a facility to reclaim this material and then hope that you get the supply or do you have too much supply and then open a reclamation facility? Communities don’t want to collect more, different materials, until they are sure there is a market for it,” Moore said.

“The market doesn’t want to invest millions of dollars into their systems until they are sure that they are going to have the supply.” Moore said continuing changes in the package waste stream is also complicating the plastic collection issue.

“It’s not a static thing. Packaging is constantly changing. Whether it is for the protection of the product or for marketing reasons, it just doesn’t stay static,” she said.

Moore said that the United States needs to recycle more plastic materials. While the country has a decent infrastructure for collecting and reclaiming bottles, Moore said the country needs more collection for non-bottle material, “There is certainly demand for it. If it were available, you would see the investment. There is strong demand,” she said.

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