Sustained Action

Neil Gloger founded InterGroup International in Warren, Ohio, in 2006 to broker secondary plastics. Shortly thereafter, the company added processing capacity, relocating its headquarters to Euclid, Ohio. InterGroup presently operates three locations in northeast Ohio and one location in Georgia as well as toll processing arrangements in western Michigan, eastern Pennsylvania, the Texas Panhandle, Chicago, Toronto and Savannah, Ga.

The company buys material from generators in the flexible packaging, building and construction, housewares and personal hygiene industries and sells its recycled plastics primarily to the building and construction, lawn and garden and industrial packaging sectors. The plastics InterGroup International commonly processes include nylon, PP (polypropylene), rigid PVC (polyvinyl chloride) and ABS (acrylonitrile butadiene styrene).

In a profile of the company that ran in the November 2010 issue of Recycling Today (See “The Sky Is the Limit,” www.RecyclingToday.com/sky-limit-recycling-today-november-2010.aspx) Gloger emphasizes some key ways in which he feels InterGroup is different from other plastics recyclers. “When we identify accounts,” he told Recycling Today, “there are several things we identify as potentially positive aspects of whether we want to bring the material in. One of them is that we are able to strata the quality. Most people view quality as ‘the best.’ But really the definition of quality is that a product meets or exceeds the specifications that it is meant to fulfill.”

Therefore, he says, “in some ways we actually try to downgrade [material] because we want to make sure we meet customers’ quality objectives.”

Another area where InterGroup attempts to set itself apart from other recyclers has to do with the way Gloger and his executive team operate the business. “We understand the business that we are in,” Gloger told Recycling Today in 2010. “And we make a concerted effort to make sure that our vendors and our customers have an understanding of that marketplace as well, both from a financial and service perspective as well as from an educational one.”

Gloger labels his company’s approach to the business of plastics recycling as “sustainable.” In the Q&A that follows, he shares more of his thoughts on the challenges and opportunities in the plastics recycling industry and how processors can best position themselves to address them.

Recycling Today (RT): How would you characterize postindustrial generation of plastics?

Neil Gloger (NG): Postindustrial has slowed from the beginning of year, in part due to seasonality and partly because of general slowing of the marketplace.

RT: How would you characterize the state of domestic secondary plastics markets? What about overseas markets?

NG: The domestic market is returning to prerecession cut-throat antics, where buyers are willing to lose money to muscle into an account, and sellers are chasing unrealistic pricing in the hopes of earning brownie points and a little bump in revenue for their employer. None of this takes into account the long-term costs of switching customers, supply chain disruption, rerouting less-desirable materials to landfill and potentially not getting paid from unscrupulous brokers, which are some of the byproducts of this behavior.

The export market is open but picky. Materials must be as represented and fully discussed, or sellers are in for massive claims when received at the Chinese port.

India market demand is weakening mostly due to higher shipping costs and a slowing economy.

RT: How long do you think China’s Green Fence will remain in place? What effects have you seen in the short term? What long-term effects do you expect this policy will have on plastics recyclers in the U.S.?

NG: Some buyers believe this is just a “shakedown” from customs. Postindustrial material that looks like it can be recycled is less susceptible to rejection at port than some ugly postconsumer materials that have been “dumped” in China over the years. Word is that shipping materials from some European ports for disposition is less expensive than landfilling in the local community. The Chinese really needed to address this, but it is costing us all.

RT: You’ve spoken before about the need for a sustainable approach to pricing in the plastics recycling industry. Can you elaborate on what you mean and the philosophy that guides InterGroup?

NG: Many companies bid their scrap out load by load. What would their businesses look like if they bid out their finished goods? It doesn’t work. InterGroup has invested millions of dollars in equipment and infrastructure in support of our vendors’ scrap generation and recovery. No company can operate in a businesslike fashion without certainty, and bidding material in this manner causes uncertainty.

Secondly, as soon as an operations manager looks for expense savings or revenue generation, he or she looks at ways to reduce scrap or to gain more value for that scrap. They should; it is in their company’s best interest. But, at the same time, the scrap value is a two-sided equation. When chasing pennies on high-value scrap, the lower value scrap does not go down proportionally—Its price is discounted exponentially, and in many cases, there are no takers for the “ugly” scrap if the “nice” scrap does not go along for the ride.

InterGroup has found that the comprehensive approach—looking at the cost to disposition the entire waste stream—always offers more value than the couple of quick pennies that can be made by peeling off the higher-value material. It is the long-term Warren Buffet approach that all admire, but few can see past the next quarter to stick to it over the long haul.

InterGroup’s process is to do a comprehensive site audit that looks at waste, items being recycled, labor and handling costs and environmental risk factors. Then we put a plan in place that helps our counterparties achieve their sustainability goals in an economically advantageous manner.

RT: Do you think the corporate sustainability movement is here to stay? How can plastics recyclers best capitalize on this mindset?

NG: I believe that for the corporate sustainability movement to stick around, it must have an economic value as well. We’ve explored the marketing benefit with companies such as RecycleBank and Terracycle. These are fading, as actual numbers don’t always support the preimplementation market analysis used to support engagements with these upstarts.

We will need massive public policy support along the lines of that found in Europe and Canada to sustain the focus. I believe that support is coming. And I believe that plastic recyclers are ideally positioned to take advantage of the upcoming avalanche that legislation will bring on. InterGroup and many others have invested heavily in anticipation of this wave and are positioned to take advantage of these policy changes

RT: What about the role of brand integrity? How can plastics recyclers best serve consumer packaging companies?

NG: Many brand owners have made decisions based on brand integrity and brand security due to counterfeiting concerns. InterGroup is sensitive to this and has an open-door policy with our vendors. They need to feel confident that when secure destruction is called for, it is performed and documented. This type of confidence cannot be borne by a broker; it must rest in the hands of asset-based recyclers who have the infrastructure necessary to perform these actions in their own facilities.

RT: What challenges are facing the domestic plastics recycling industry?

NG: The biggest challenges are regulation and unscrupulous operators. Now that the economy has recovered to a certain extent, the “pirates” have crawled out of the woodwork with promises of recycling hard-to-recycle materials, only to abandon them when the scheme does not work out.

Equally challenging are corporate environmentalists worried about cradle-to-grave responsibility that causes scrap generators to landfill rather than trust that materials shipped to a recycler will actually end up being processed and remarketed.

RT: What opportunities lay ahead for plastics recyclers in the U.S.?

NG: With the new “on-shoring” movement as well as the Green Fence, there are multiple opportunities with new streams of materials as well as taking a look at why so much good scrap is shipped overseas. We can onshore much of the reprocessing of scrap plastic as well.

Neil Gloger is CEO of InterGroup International (www.intergroupinternational.com), based in Euclid, Ohio.