America’s plastic scrap draft

Slightly more than $1 billion worth of plastic scrap, or “waste” as it’s categorized by the U.S. government, was exported in 2011—the equivalent of nearly 2.15 million metric tons. By 2014 exports were at 2.18 million metric tons, though the value was down to $953 million. (There were various reasons for this decline, including currency fluctuations.)

At 2.05 million metric tons, last year saw exports down 6 percent from 2014. This material was valued at $816.4 million. The first six months of 2016 show that 958,243 metric tons were exported at a value of $369.2 million.

Supplying the world …

Two million metric tons per year, give or take a few hundred thousand tons, is a lot of plastic scrap. And it literally goes to the far corners of the world. Have you heard of the Heard Island and McDonald Islands (HIMI)? There they are, about 600 miles north of Antarctica in the Indian Ocean. These uninhabited islands have received 57 metric tons of nonsorted plastic scrap from the U.S. this year, according to USA Trade Online. (See the table for additional export data.)

China’s Operation Green Fence, announced in early 2013, may have blocked some imports of less-than-pristine plastic scrap (from the U.S. and elsewhere), but the impact was limited: U.S. plastic scrap exports to China and Hong Kong combined in the first six months of 2016 totaled 687,743 metric tons, or 72 percent of total exports. (Exports totaled 812,371 metric tons for the two countries in the first half of 2015.) Inspections of bales and other scrap shipments at ports may have increased, but it hasn’t slowed overall plastic scrap exports from America to the world’s largest markets for this material.

U.S. plastic scrap goes everywhere, it seems—78 countries have been on the receiving end of these exports in 2016—even if it’s just to test a few hundred kilograms for possible future shipments. From neighbors Canada and Mexico to Romania, Nepal, the Cayman Islands, Pakistan, Nigeria and the big volume countries of China and Hong Kong—wherever you may be, America’s got plastic scrap to sell you.

Name your scrap, and there’s a market for it.

A broker in the U.S. South collects low-density polyethylene (LDPE) film bags from poultry plants. He bales them and sells them at a nickel per pound, picked up at his shop. The bags are unwashed—“They stink,” he says, unapologetically. But not to worry; his buyers take them as is and typically move them by truck to Southern California for export. (A thorough washing with hydrogen peroxide can reduce the “smell contamination.”)

Loose polyvinyl chloride (PVC) pipe scrap from construction sites and scrap yards goes for about a dime per pound in markets in the U.S. South. Some of it is washed and ground into flake for reprocessing in the U.S. and sold at 20 cents to 22 cents per pound delivered to East Coast locations, including Florida; some finds its way to a port via rail or truck for export.

PVC is one of five categories of plastic scrap exports tracked by the U.S. Census Bureau’s USA Trade Online. The others are polyethylene terephthalate (PET), polystyrene (PS), polyethylene (PE) and “other.” Other accounts for the largest volume of these exports and includes any plastic scrap not categorized in the other four. For instance, post-industrial acrylonitrile butadiene styrene (ABS) scrap from computer casings would fall into this category, as well as unsorted Nos. 1-7 plastic and mixed rigids. Oddly, there’s not a category for polypropylene (PP), so any PP scrap, say a load of beverage bottle caps, would be lumped into “other.” This categorization is based on a system established by the World Customs Organization.

… and processors stateside

The United States is a massive consumer of plastic. And now, 46 years after the advent of the modern environmental movement, a massive recycler of it. Data for the actual volume of plastic recycled in the U.S. is not available, but a look at the many markets throughout the country shows it has indeed become a robust part of the recycling industry.

The modern era of recycling can be traced to circa 1970, the year of the first Earth Day, which was followed by the creation of the U.S. Environmental Protection Agency (EPA) a few years later. Since then plastics recycling has been a great success story, at least to many people, horror stories like “plastic island” in the Pacific Ocean notwithstanding.

Who would have predicted plastic scrap would be commoditized into hundreds of subsectors? Your local material recovery facility (MRF) or municipality will sell you bales of assorted resin types and colors. Looking to enter the growing PET scrap market? How about some green pallet strapping chops—20 cents per pound delivered on the East Coast; post-industrial PET lump-and-chunk? Yours for 16 cents per pound picked up on the East Coast. Get some recycled high-impact polystyrene (HIPS) in your production mix—dirty HIPS trays are offered at 13 cents per pound delivered in the Midwest. You say your plastic scrap is too big to grind, such as those post-industrial nylon purge patties you’d like to sell rather than dispatch to the landfill? Shops will slash and bash them down to size with chainsaws and sledgehammers. Repro and regrind, post-consumer and post-industrial, are available in multiple colors or au natural.

Premium pricing

One vantage point that shows the success of plastics recycling has been its cost. Some of the most sought-after repro, or post-consumer resin (PCR) in industry parlance, is costly compared with new resin coming out of hydrocarbon-burning petrochem plants.

Take high-density PE (HDPE) natural, or “dairy,” resin. The premium for this PCR in mid-August was 15.5 cents per pound over HDPE “generic prime” wide-spec dairy resin, which was selling at 52 cents per pound delivered in Chicago. Normal-spec generic prime HDPE natural resin was just a few cents higher than wide-spec. This compared with a spread of 64 cents to 71 cents per pound for PCR picked up in the U.S. South.

The primary feedstock used to produce HDPE natural PCR is dairy-grade bottles, jugs and containers, typically baled and delivered to converting plants. The PCR price is directly linked to the price of the bales. And bale pricing often is tied to monthly bid offering sales made by large municipalities. One such closely watched bid offering is sales of bales by the Solid Waste Authority (SWA) of Palm Beach County, Florida. SWA sales have for years been used as price indicators for buyers and sellers of HDPE natural, mixed-colors (or pigmented) and other plastic scrap bales (also aluminum scrap) up and down the U.S. East Coast and Midwest. The most recent sale for August delivery included three truckloads (about 120,000 pounds) of HDPE natural bales at 35 cents per pound to two buyers—GP Harmon Recycling and Only Recycling. This price in turn was referenced by HDPE natural PCR producers to justify their prices. The cost of the PCR was then used by some end users to justify the cost of their containers and other HDPE-natural-resin-bearing products.

Regional pricing differences: California

The U.S. is a very big country, needless to say. And as such prices for recycled plastics vary by market, depending on location. California, as would be expected as the largest state with a vigorous recycling effort, is one example.

The price of HDPE natural PCR published by PetroChemWire as of mid-August was 64 cents to 71 cents per pound, picked up in the U.S. South. This included pricing for monthly contract and spot business.

In Southern California, the same PCR was 57 cents to 59 cents per pound picked up at Long Beach because of lower bale costs in this part of the Golden State. In one case this year, a buyer of PCR booked multiple truckloads for a plant in the South out of SoCal; even with trucking costs, it was cheaper to book in California and truck it a few thousand miles east.

At the same time, wide-spec generic HDPE natural resin was offered at 52 cents per pound on a delivered Chicago area bulk-truck basis. Why does recycled HDPE dairy resin sell at a such a premium to prime resin? Strong demand from manufacturers of plastic bottles, jugs, pails and other containers and packaging that use a certain percentage of recycled feedstock on this production mix.

Another example of costly PCR relative to prime resin is PET. The U.S. is awash in PET—prime, recycled, bales, off-grade—you name it. Packaging-grade prime PET imports came from 22 countries in June. Last year these imports were valued at more than $800 million. Three major PET producers are in the U.S., and early next year the world’s largest PET plant is expected to come online at Corpus Christi, Texas. M&G Chemicals’ new plant will pump about 1.1 million metric tons per year or prime PET into the U.S. market.

This production overload—some might say it’s simply a response to robust demand—is a primary reason recycled PET is a U.S. growth business. Bottlers and packaging manufacturers likely will rely more on PET as supply grows and as the price drops. This in turn will pump more PET into the recycling stream. Some will be exported—in the first half of 2016, PET scrap exports totaled 106,992 metric tons, 11 percent of the total—while PET recycling in the U.S. is robust in many states.

The PET bale remains the preferred form, with much of this material coming from curbside collection and redemption centers. Municipalities such as SWA sell PET bales in bid offerings coveted by converters, reclaimers and brokers. The Plastic Recycling Corp. of California auctions off PET bales—Grade A and Grade B—in bid offerings every Tuesday (every other Tuesday during the summer).

California’s Grade A bales could be the country’s crème de la crème—comprised of PET from state redemption centers, with PET yields as high as 94 percent. They then command a premium, fetching 16.21 cents per pound picked up in Long Beach and 16.06 cents per pound picked up in Oakland at the Aug. 16 sale. This compares with 10 to 11 cents per pound for “curbside” bales with yields typically at the mid-60 percent level, picked up in many areas of the South and Midwest.

One vantage point that shows the success of plastics recycling has been its cost. Some of the most sought-after repro, or post-consumer resin (PCR) in industry parlance, is costly compared with new resin coming out of hydrocarbon-burning petrochem plants.

Costs are associated with recycling, which is to be expected. Consumer brand companies making products ranging from shampoo to soda figure the cost of PCR into their total raw materials purchasing analysis. They are doing this in response to demands from big box retailers and other retail chains that want more recycled content in everything plastic that they sell.

The percentage of PCR in HDPE and in many other plastic resins used to make bottles, bottle caps, jugs, crates, pails, buckets and other forms of packaging—you name it—varies widely from product to product, state to state, municipality to municipality.

HDPE natural repro is sought after, for one, for its purity of color; the clear plastic that holds your milk is made from a special chemical process with a cost associated with it. By the time it moves from the grocery dairy section to your refrigerator to your curbside recycling bin to the transfer station or MRF where it’s baled and then sold to a converter and melted into HDPE dairy repro, the recycled HDPE natural pellet sells at a hefty premium to prime resin.

“The bottom line,” says a buyer of HDPE natural repro and other raw materials for a manufacturer of bottles for consumer brands, “is the clear milk jugs and other dairy bottles are not going into the landfill.”

The author is senior editor of PetroChemWire, a pricing and news service based in Austin, Texas. The company’s olefins and polyolefins prices serve as benchmarks for a number of physical and swap contracts that trade on the CME/NYMEX ClearPort system.