Plastics

While some recyclers may have been moved to tears by the recent slide in demand and pricing for secondary plastics, a reprocessor in the East reminds, "There is no crying in scrap."

Operations with a domestic focus and tolling capabilities have fewer reasons to cry than those companies that have built their businesses on export orders, particularly those from China. "We have more business in the domestic market and are much less dependent on export," the reprocessor based in the East says, noting that less than 5 percent of his company’s business involves export markets outside of North America. "We do a lot of toll processing, which helps shield us from the volatility of trading," he adds.

A recycler based in the Southeast says her company is benefitting from the better position of the foreign automakers in the region compared to Detroit’s domestic automakers. "Injection molders in the automotive sector are eating material up," she says of the suppliers to the Japanese automakers in the region. "Even though resin prices have dropped, any kind of savings they can get they use."

As the recent failure of an initial $14 billion rescue plan and their well-documented problems indicate, domestic automakers are not faring as well, however. A recycler based in Michigan notes declining automotive production, and therefore a decline in basic materials buying. "No one wants inventory at the end of the year or to be holding on to material that they cannot pay for in 60 days," he says.

Recyclers who rely heavily on export markets, particularly those in Southeast Asia, are feeling the recent decline in secondary commodity markets more acutely than processors who sell most of their material domestically. "Right now, my focus is to make it to the next quarter," a recycler based in the Midwest says. "Through October, it was a great year; in November and December, we gave it all back."

The reprocessor based in Michigan notes that his company has not exported material since November. However, the recycler based in the Southeast says she had three loads going into China during the last full week in December.

"The window is opening" on the export market, she says, which she takes as a good sign. "After the Chinese New Year I am hoping the window will be wide open."

The recycler based in the East also says the export market appears to be rebounding, though slowly. "It seems to be opening up a little," he says. "That should help pricing to firm up."

The recycler based in the East says he believes the market is bottoming out. "My own feeling is that it will get better in January," he says. "Consumers are running down their inventories. Once they have exhausted that, they will be happy to try to get back in the market."

According to the recycler based in the Midwest, down markets like this one have a lesson for processors: "Even if business conditions improve, make sure that your operation is the right size and you have contingency plans for these kinds of things." He continues, "People blindly thought things were going to go on forever."

The Midwestern recycler says the current market creates opportunities for companies with strong balance sheets. "I think you’re going to see a lot of mergers, both in the plastics and the recycling industries," he adds.