Last October the bottom fell
out of commodity prices and
plastic recyclers were stunned.
But this is a tough, resilient
sector of the recycling industry
and the people in it are adaptive
to up and down markets and
working with lean margins.
After all, it’s a relatively
young industry – only about
30 years old – and the players
have learned from previous
economic bumps and bruises.
For instance, after a healthy
1995, commodity prices nose-dived
in 1996 and the lessons were
not forgotten – watch prices
and demand closely, avoid
burdensome inventories, always
look for new customers, even
new markets if necessary,
and try to have orders in
hand before acquiring new
supplies.
“We reached peak prices last
summer because the crude oil
price was very high and all
the plastics made from petroleum
products were consequently
high. Life was good. There
was demand and always a shortage
of supply because we did not
have enough recycled plastics
to satisfy all the domestic
and export demand. We are
returning to 2005 price levels
when crude oil was about $50
per barrel, like it is priced
today,” said David Cornell,
technical director for the
Association of Post-Consumer
Plastic Recyclers.
Since late last year, plastic
recyclers have been slowly
clawing their way back. There
may have been some unexpected
“winter vacations” for management
and labor, but the business
is reviving. It is nowhere
near the peak levels of last
summer, but getting back to
a sustainable business model.
Steve Anderson, a partner at
APC Recycling in Killingworth,
Connecticut reminisced about
his bleak winter. “November,
December and January were the
roughest three months in the
20 years I’ve been in the business.
After that, it started to slowly
pick up. We move a lot to China
and exports to there have picked
up, not at a level that it was
last summer, but it has stabilized
and is moving pretty steadily.
I wouldn’t say domestic sales
are flat. We can still move
product, but the demand is certainly
not robust. Some of the grades
that have normally picked up
at this time of year are still
fairly low and hard to move.”
APC ranks among the top 100
plastics recyclers in North
America and processes and markets
between five to seven million
pounds a month. “Exports were
absolutely dead the first two
or three weeks of January. It
picked up a little towards the
end of the month. In February,
exports started to warm up and
in March it picked up pretty
significantly, and it’s continued
picking up in April,” said Anderson.
Late last fall, the crushing
blow to post-consumer plastics
came from the drop in orders
from China. In fact, demand
evaporated with boatloads of
recycled materials stalled in
Asian harbors. Polyethylene
terephthalate (PET) is a good
example: Up until the fall of
2008, the United States had
been exporting 500 to 700 million
pounds of PET annually to China.
PET is one of the largest and
most commonly recycled plastics
used in food grade packaging
such as for water and beverage
bottles. The collection and
processing rate for 2007 in
the United States (most recent
available) was 1.4 billion pounds
of PET. Approximately 1 billion
pounds of PET is recycled domestically,
the balance is exported, most
all going to China. When China
stopped buying, the surplus
increased.
At the same time, curbside collection
continued at more or less the
same volume and delivered material
to material recycling facilities
(MRFs). For the 480 MRFs, the
trucks kept coming in and inventories
kept growing larger. Without
ready markets to move the material,
there were only two choices:
store it or shut down. A few
MRFs had to shut down, but most
survived – many because they
operate under municipal financing.
MRFs either dumped inventory
at a loss, or stored the material,
waiting for demand and prices
to recover. On the positive
side, unlike paper and cardboard,
baled plastics can be stored
outdoors to avoid warehousing
costs.
David Cornell explained the
ramifications: “People were
warehousing the material. The
question was where in the line
do you store it? It’s worth
money, now and in the future.
The difference between the future
value and the price paid was
the carrying costs to store
the stuff.”
Reclaimers and brokers like
APC Recycling were hit hard
by inventories backed up in
the supply chain, but had much
greater flexibility than MRFs
to manage it. APC acquires material
from professional recyclers
that bale products, from distribution
centers and from manufacturers
generating industrial scrap.
The company picks up polyethylene,
polypropylene, polyolefin and
other scrap plastics from all
over the country, but concentrates
in the northeastern market.
APC brings most material into
its grinding facilities in Connecticut,
but also brokers exports through
Vancouver to China. About 25
percent of APC’s business is
brokered for export and does
not come through its facilities.
“Even if it’s close financially
to bring it here, we prefer
to do so to check and assure
quality and take the proper
pictures for export,” said Anderson.
Like many processors these days,
Anderson is extremely cautious
about inventory. “Right now
I don’t allow any of our people
to buy anything for inventory
unless it’s already pre-sold.
We don’t speculate. Unless we
have orders in-hand we don’t
buy. I’m not going to get stuck
with a warehouse of goods if
things fall off a cliff like
late last year.” This seems
to be a prevailing attitude
among processors. Back in the
days of strong demand and peak
prices, processors would gamble
that they could warehouse today
and sell tomorrow. These days,
caution is the byword for inventory.
Post-consumer processors are
also buying at much lower prices.
Even though they add value through
consolidation, shredding, grinding,
pulverizing, fine separation,
pelletization and quality assurance,
it’s essentially a buy-low sell-high
business.
Post-industrial recyclers like
Nicos Polymers Group of Nazareth,
Pennsylvania have been affected
by the economic downturn, but
are nevertheless optimistic
about the future. Nicos is among
the top ten United States recyclers
and processes 90 to 100 million
pounds annually. In addition
to general purpose processing
and sales of polymers, Nicos
does toll processing for large
manufacturers. Kevin Cronin,
CEO of Nicos put it this way,
“The trading and selling part
of our business slowed significantly
in November and December, but
we see niches of recovery and
they tend to be very material-specific.”
Nicos is seeing relatively good
demand for packaging materials
such as clear PVC, polyester
and PET. “We also see some strengthening
in demand for some grades of
high-density polyethylene as
well as some higher strength
materials such as high impact
polystyrene. Some specific applications
requiring those materials seem
to be showing early signs of
a comeback but there is a long
way to go yet.”
Nicos’ toll processing for large
manufacturers has not dropped
off as dramatically as the buy-sell
side of its business, but it
has fallen off simply because
manufacturers are producing
less. “Overall, since last fall
our business has fallen off
approximately 15 percent in
volume, but of course from a
revenue standpoint it’s more
because on the buy-sell side
we deal significantly with commodities,”
said Cronin.
Cronin is optimistic about recovery.
His company just launched a
new division, Innovative Sustainability
Solutions, that specializes
in sustainability programs,
cradle-to-cradle recycling,
product life cycle management
and landfill avoidance strategies.
“Increasingly, larger companies
are beginning to focus on sustainability.
I do see our ability to generate
new opportunities and revenues
based on the focus of helping
companies reach their sustainability
goals,” said Cronin.
Today, plastic recyclers are
working off inventories. Export
demand is building slowly. Domestic
demand is down, but seems to
have stabilized, especially
for recycled plastics that feed
into containers and packaging
found in grocery stores. No
doubt consumers have moderated
spending, but the budget category
least likely to be cut is food
and beverage, which relies heavily
on plastic packaging. Recycled
plastics that had been going
into construction materials
and automobile manufacturing
have been badly affected. New
technology developments, however,
are working towards better recovery
of mixed streams of polymers,
such as from scrapped vehicles.
Plastic recyclers are generalists
and can readily adapt to changing
market conditions. Wherever
a market is, they follow it.
Despite current market conditions,
the future for recycled plastics
is promising. Recycled plastics
are purchased because they do
a better job for less money
than other materials. Even though
the raw material stream is diverse
and challenging, recyclers are
delivering higher quality products
in greater volumes across a
broader range of polymers. The
growth in electronic recycling,
for instance is delivering larger,
more consistent streams of acrylonitrile
butadiene styrene (ABS) from
computer and electronic equipment
housings. Electronic equipment
manufacturers are leading the
way by identifying components
with stamps on injection molding
tools that expedites separation
and results in more material
being reclaimed.
Products incorporating recycled
plastics and identified and
promoted that way, also have
market appeal in a greening
economy as consumers become
more aware of the fact that
polymers are infinitely recyclable
and the last place they should
go is into landfills. For example,
park benches made of recycled
plastics demonstrate a concern
for the environment, but also
delivers a more durable product
with better value due to reduced
maintenance.
“What is fascinating about this
market collapse is that unlike
financial institutions, recyclers
did not go out of business.
PET and high-density bottle
recyclers are survivors. These
are folks that are used to difficult
moments and last fall was a
really difficult moment – not
for the weak of heart,” said
Cornell.
“I’m cautiously optimistic as
long as things keep going the
way they are going. We had a
pretty good first quarter after
a terrible January and we’re
having a pretty good second
quarter,” said Anderson.
It may not the best of times
for recyclers, but it’s not
the worst of times either.
