Plastics’ Future Looks Bright

Despite the recent slump in prices for recycled polyethylene terephthalate, and an only moderately healthy market for high-density polyethylene, the outlook isn’t all gloom and doom in the plastics recycling industry. There may be a silver lining for PET and HDPE recyclers that will glitter as the new year approaches.

Both PET markets and prices have been in the doldrums of late. HDPE, while quite a bit livelier than PET in the marketplace, is far from having a banner year as recycled markets struggle to compete with virgin material production. However, there are long-term trends which bode well for those who can outlast the current tough times.

PET, for several years the star of the recycled plastic resins, is currently being hard hit as consumers find virgin material cheaper than recycled. “Unless your customers are 100 percent committed to a 100-percent recycled product, a manufacturer will buy the cheapest material he can find,” says George Glenn, president of East Coast Recycling Associates, Millville, N.J. “The bloom is off the rose. It’s pretty scary – I haven’t seen it this bad in six years. A lot of recyclers are going to go out of business.”

Glenn says the smaller, private firms will be hit hardest. The only answer, he says, is to be sure your recycling operation is vertically integrated. “You have to have some other phase to your business other than a washer and pelletizing line,” he says.

But despite poor PET markets, there’s no need to panic, according to Dennis Sabourin, chairman of the Association of Post-Consumer Plastics Recyclers and vice president of post-consumer procurement and recycling industrial affairs at Wellman, Inc., Shrewsbury, N.J. “PET prices have come down,” he agrees, “but they’ve come down to prices that are more historic, compared to 1994 levels. So it looks like a panic, but prices have been unrealistically high in the time since the run-up.”

He notes that the export mania of late 1994 drove prices through the roof, and it took from June 1995 to June 1996 for prices to stabilize. “We are in the final stages of that stabilization,” he says.

PET, a large use for which is soda pop bottles, is the driving force in most municipal plastic recycling efforts. Generally, other plastic resins will follow. Most commonly, PET is re-cycled into fiberfill, textiles and carpet.

Prices between a nickel and a dime a pound for baled bottles, delivered, were typical in mid-summer, but the price trend was to the low side, not upward.

“The market can absorb whatever recycled material is generated,” says John Malloy, director of packaging services for the Society of the Plastics Industry, Washington. “It is price driven. Virgin prices are below recycled, so everyone is going to the cheapest source. That’s just typical market activity.”

Usage, however, is solid. Luke B. Schmidt, president of the National Association for Plastic Container Recovery, Charlotte, N.C., notes that the need for PET in textiles continues to grow. In the auto area, 4 percent of the weight of a Ford Taurus is made from recycled PET, he points out. However, he knows times are tough.

“A lot of new capacity for virgin PET is just entering the market,” he says. “Wide-spec PET is a price competitor with recycled material.” He predicts that the “temporary oversupply” of virgin PET will subside sometime in mid-1997.

Sabourin agrees with that assessment. “I see the market trending down a bit more by the end of this year, but stabilizing in 1997,” he says. “With what is happening to virgin PET, there is not the need for recycled product in Asia.” Asia has long been a market for recycled plastics from the U.S.

The good news is that PET resins are gaining market share in packaging and other markets. According to a study by the Freedonia Group, Cleveland, demand for PET in North America will increase 10 percent annually to 6 billion pounds in the year 2000. In Canada, PET demand will advance at a slightly faster pace, according to analyst William Weizer, but will remain at low volumes due to a limited population base and a colder climate limiting per capita soft drink consumption. The most rapid gains – 18 percent per year – will occur in Mexico, according to the study. These will be driven by the world’s second highest per capita soft drink consumption levels, generally poor tap water quality, a hot climate, and PET’s advantages over glass in both one-way and returnable bottles.

Last year, Asia gobbled up PET for use as textile fiber to replace a short cotton crop. However, a downward trend started several months ago as this year’s cotton crop came through in decent shape. More recently, a large amount of off-spec plastic material was dumped on the market. All of this has slashed the attractiveness of recycled material.

HDPE DOES BETTER

It is a bit of good news to recyclers that the HDPE markets have not collapsed like PET markets. HDPE, most typically used in milk and spring water bottles, is recycled into products such as drain pipe, toys, plastic lumber, and base cups for soda bottles.

“HDPE certainly is not as difficult as PET,” says Gerald Claes of Graham Packaging, York, Pa. “There is plenty of demand.”

In the recycled plastic market, prices do not necessarily follow the typical supply-demand model. “Like it or not, recycled plastic prices are forever linked to virgin prices,” Claes says, “so the supply-demand factor is not totally independent.”

Although Graham is running 24 hours a day, five days a week, he adds that it is not as easy as one might think to get HDPE. He notes that both the pipe manufacturers and bottle producers are going great guns.

But Bruce Fortin, vice president of business development for EnviroPlastics, Auburn, Mass., calls the HDPE market “a confused, very complex marketplace.” Raw prices, he explains, are rising at a rapid rate, much faster than the selling price can rise.

“Vendors are watching prices and reacting faster than the market can react,” he says. “It creates a lot of pressure, and our customers are not happy. Basically, you can get material – you just have to pay the price.

“Prices for HDPE will be stable to rising as virgin prices go up – if virgin prices go down, prices will go the other way,” adds Fortin. “PCR prices are dictated by wide-spec virgin. I see a lot of risk in the market. If we can’t have an intelligent conversation on the rising market it could collapse the recycled market.”

There are no technical barriers to the use of recycled HDPE, says SPI’s Malloy. “There is no lack of demand for material if the price is right,” he says. “Use is strictly driven by the market.”

In late July, Union Carbide dropped a bombshell on the East Coast HDPE market when it announced it will close its Piscataway, N.J. recycled resin operation on October 1, saying it is not sufficiently profitable.

“We remain very proud of the initiative, creativity and technical innovation of our process such as color separation and ability to make Food and Drug Administration-compliant products,” according to Kevin Lynch, Unipol Polymers vice president and general manager. “However, we are discontinuing our operations due to less than acceptable earnings potential.”

The company markets a broad line of post-consumer HDPE resins to the household industrial chemical and personal care packaging markets.

WHERE’S THE CONSUMER?

“My perception is that John Q. Public is no longer pushing manufacturers for recycled content,” says Glenn. He concedes that manufacturers are running a business and need to purchase packaging supplies from the cheapest source available.

That’s so, agrees Tom Rattray, associate director of environmental quality for Procter & Gamble, Cincinnati. P&G is one of the largest consumers of plastic packaging materials in the nation.

“Despite what the consumer may say in surveys, recycled content or lack thereof has no impact on product sales,” he says. While the consumer will generally favor recycled content in surveys or polls, when it comes down to buying a product, recycled packaging is not as big a factor as price, pure and simple. “They are looking to buy Downy Fabric Softener or a carton of milk, not a recycled package,” says Rattray.

While he concedes that the consumer may feel better knowing that a package contains recycled material, he says P&G’s research – and that of many other people – does not show recycled content impacting the amount or kind of product purchased. Where allowable, P&G averages 40 percent post-consumer recycled plastic content in its bottles. “Across all our U.S. brands, we average 28 percent due to regulations limiting the use of PCR materials in food, beverage and drug bottles. These numbers include both PET and HDPE,” Rattray notes.

The only thing which will rectify the problem is for something to change the consumer’s mind, driving them to demand recycled content in the packaging and other materials purchased, according to Glenn. “The American public feels the issue is solved,” he says, noting that there have been a number of articles in the general press recently claiming that there is no lack of landfill space. “The public is not being properly informed,” he says.

There has been real progress made in recycling soft drink containers. According to the National Soft Drink Association, Washington, soft drink containers make up less than one percent, by weight, of the U.S. solid waste stream. Getting under one percent has long been an industry goal.

The U.S. Environmental Protection Agency’s figures show soft drink containers at only 0.87 percent – down significantly from 1993’s figure of 1.08 percent. Since 1988, soft drink container discards have decreased 46 percent while total municipal solid waste has declined only about one percent, NSDA notes.

According to an independent survey conducted by Robert A. Bennett, associate dean for the College of Engineering at the University of Toledo, a record 622 million pounds of PET plastic bottles were recycled in 1995. While that number represents an increase in volume of 55 million pounds, or 10 percent, it constitutes a slight drop from the United States’ recycling rate of 34 percent in 1994. Despite a surge in the amount of plastic used by the packaging industry in 1995, the recycling rate for PET actually declined two percentage points to 32 percent.

A significant increase in the number of single serve bottles on the market may be the most influential factor in the slight decrease, according to Schmidt. He notes that those bottles are made to be carried away – and thus are often disposed of away from any place with a curbside program.

“Manufacturers are finding more and more practical end-uses for recyclable plastic every day,” Schmidt says. “So, we need to increase our supply.”

However, Glenn maintains that any real solution has to start with public pressure, unless the government requires recycled content. “We have to demonstrate that there are economic reasons to use recycled materials – it’s better than pressure treated wood, or it’s better in a particular environment.” While he is convinced that public demand for recycled content would kick-start the market, he doubts that such an outcry is coming in the near future.

GOVERNMENT RETREAT

If recyclers are looking for short term relief from legislators, they are likely to be sorely disappointed. California, long a leader in demanding strict recycled-content guidelines, is considering backing away from the tough post-consumer content laws it passed earlier in the 1990s.

Under scrutiny is a study done by Cascadia Consulting Group for the California Integrated Waste Management Board, Sacramento, Calif. The study showed a 25.2 percent recycling rate. According to Lanny Clavecilla, spokesman for the CIWMB, the regulators had some difficulty with the 25.2 percent figure. “There was some discrepancy in the tons of recycled plastic generated versus sales of resins,” he explains. “The study claimed that there were 310,400 tons of recycled containers generated. National resin sales made that figure suspect.”

If the Cascadia study’s numbers were approved, industry would have been in compliance with the state’s strict recycling laws. As it stands, at its July 30 meeting, the CIWMB did not approve the 25.2 percent figure. Rather, board members sent the numbers back to their staff for re-evaluation and will reconsider the matter at a meeting late this month in Salinas.

Fortin says there is no basis for California to decide to pull back based on one study. “It has never gone through critical review,” he notes.

Even the threat of such a pullback in California has sent recyclers spinning. But Rattray does not agree that laws such as California’s and Oregon’s really drive the lion’s share of the market. Plastic recyclers realize that virgin is the big competitor, including off-spec, Rattray says. “Only Oregon’s and California’s laws had a tangible impact, and those laws moved only a small percentage of the market,” he maintains.

Where groups like NAPCOR hope to play a role is in bringing together buyers and producers. They are targeting government procurement agencies as a focal point for their program.

Quinn Davidson, communications director for NAPCOR, says that association’s goal is to bring product producers together with buyers. “We were pleasantly surprised to see how many products there are that are made of PET,” she says. But marketing is a different story. “Easy access is difficult – products are there, buyers are there, but getting them together is not easy.”

Nevertheless, Davidson is not as willing to write off the market as are some others. “PET had gone down, but it came back again,” she says.

“We don’t find virgin material far cheaper today – at least not yet,” P&G’s Rattray says. In the third quarter of 1996, however, it was cheaper and the company pulled back. “Then we went back to our previous levels, and I don’t see any further changes in our use of recycled material as long as the market stays the same.”

Long term, the outlook may be brighter. The Freedonia Group’s Weizer predicts that demand for recycled plastics will expand 13 percent annually to reach 2.6 billion pounds in 1998. PET and HDPE will continue to dominate with a combined 70 percent share of all recycled plastics, he says.

The plastic recycling industry will continue to stress expansion in the collection network, since further advances are contingent upon establishing a dependable supply of materials and steady markets for recycled products, he says. In addition, technological advances in sorting and processing technologies such as depolymerization will improve recycling efficiency and make recycled plastics’ pricing more competitive with virgin materials.

The price differential is expected to become more favorable for recycled plastics, offsetting quality and processing differences inherent when using recycled resins.

New plastic materials like polyethylene naphthalate may eventually cut into PET’s market, although many observers note that it fills a niche and may simply bring added material into the plastics stream (see sidebar).

Overall, there just may be a silver lining out there for plastics recyclers – PET, HDPE or PEN – as long as they take the long view of the business and plan market strategy accordingly.

 The author is an environmental writer based in Strongsville, Ohio.