Scaling up

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What if the recycling rate for polyethylene terephthalate (PET) bottles could be increased by 6 percent without expanding collection efforts? According to an analysis from Closed Loop Partners, New York City, and Resource Recycling Systems (RRS), Ann Arbor, Michigan, this is possible by implementing a suite of interventions that the organizations claim would improve the cost structure of recycled PET (rPET) and benefit material recovery facilities (MRFs), reprocessors and end users.

In a study titled “Cleaning the rPET Stream: How we scale post-consumer recycled PET in the US,” which was released in late 2017, the organizations shared the interventions they say can “effectively improve yield from residential curbside collection by more than 20 percent and lower costs of rPET processing by 10 percent.”

The need for intervention

According to the study, less than 30 percent of the PET used to produce bottles and jars is recovered for recycling in the U.S., and only 6 percent of that recovered material finds its way back into new bottles. This means only 370 million pounds of the 1.75 billion pounds of PET recovered for recycling in 2016 were made into new bottles and jars.

“Ideally, demand pull from end users would encourage the recovery and reprocessing of postconsumer recycled PET; yet, the market is constrained by the ability of suppliers to offer rPET at prices that can compete with virgin PET resin,” the study states. “If we are ever going to be able to grow the rPET market, we need better solutions that drive efficiencies throughout the process, improve the cost structure of producing rPET and enhance the material’s overall value.”

According to the study, end users can increase their use of rPET as long as it is price competitive with virgin and at suitable quality. However, in light of the potential yield loss and inefficiency throughout the supply chain, rPET has not been cost-competitive. The study says the relative ease of the virgin PET production process compared with the rPET process means the cost structures are very different for the materials.

Cost structure variables

For the last 10 years, rPET pricing has tracked the price of virgin PET and global oil prices, which have shown a high degree of volatility, according to the study.

“Brand owners are trying to match a virgin PET price when there is no correlation,” says Resa Dimino of RRS, one of the study’s authors.

During that same 10-year period, the PET recycling rate remained fairly stagnant nationally. In fact, 400 million pounds of PET recycling capacity were lost following recent facility closures. However, the study predicts that annual U.S. capacity is expected to return to about 2 billion pounds this year and at least 350 million pounds of new rPET capacity will come online in the next few years.

At the time of the study, the estimated average cost to produce virgin PET was 52 to 56 cents per pound compared with 60 to 65 cents per pound for rPET. “If rPET is ever going to be competitive with virgin at scale, we have to find ways to make improvements across the system,” the study states.

However, the study was prepared before major virgin PET producer M&G USA Corp. announced its bankruptcy, Dimino says. This development has “substantially changed” the virgin PET cost structure, she says, as did the effects of the hurricanes in the Gulf Coast region, leading to a considerable price increase.

“All projections were that virgin pricing was going to stay low for two to three years,” Dimino says of the study. She adds that no industry analysts had predicted the M&G bankruptcy, which the company filed for Oct. 31, 2017, after its proposed $1.1 billion plastics manufacturing plant in Corpus Christi, Texas, went significantly over budget. In its bankruptcy filing, the company says the plant was 85 percent complete and M&G would have needed an additional $505 million to complete it.

Dimino says virgin PET producers were showing discipline in terms of pricing, selling material at the cost of materials plus 10 cents per pound as of late spring of this year. However, she continues, “There are so few suppliers in the virgin PET market that if any of them decides to reduce that margin, the price will shift again.”

Regarding virgin PET pricing, Ellen Martin of Closed Loop Partners, who collaborated with Dimino on the study, says, “If nothing else, we can expect price volatility to continue.”

When it comes to rPET, Dimino says, the greatest variable in processing costs is feedstock price. “Processing and conversion costs are fairly consistent,” she says, though they do vary from reclaimer to reclaimer depending on their level of sophistication.

Dimino adds that transportation costs (which have increased significantly in the last year) also have a considerable effect on reclaimers’ bottom lines and factor into rPET pricing.

Spot buying of rPET also contributes to price volatility. This volatility “prevents suppliers from being able to invest in capital expense to keep up with the latest technology or expand capacity,” the study says. “Were long-term contracts more common in the industry, buyers and suppliers would have benefitted from pricing at roughly 62-73 cents per pound over certain periods based on historic pricing data,” according to the study.

Spot buying of rPET occurs because, as Martin says, “there is resistance to giving up on the upside of the market by both parties.” However, she adds that the data support using contracts for rPET purchases over the long term. “Short-term investor impact quarter to quarter is where there is resistance to changing procurement practices,” Martin says.

RPET costs also are driven by supply inconsistency, according to the study. Recovered PET supply is inelastic, meaning it is not affected by pricing, and the quality of rPET can vary without warning. “The variability can make it difficult for end users to maintain a consistent quality specification without adapting the process” or blending the materials they use, the study notes.

Source: RRS

Quality and yield issues

PET collected through bottle-deposit programs generally commands a higher price than PET collected via curbside programs because of its higher quality. MRF PET bales have sold for a national average price of 17 cents per pound picked up, according to the study, while bottle-bill bales typically see a premium of 5 to 15 cents per pound.

According to the study, an estimated 17 percent of PET that travels through a MRF is not captured and included in PET bales, while the average yield of PET in a curbside bale is 62 percent. Yield losses include caps and labels, non-PET material, fines and moisture.

Depending on the reclaimer, yield loss also can result from thermoforms. The extent to which this packaging affects the recovered PET bottle stream is a “very complicated question,” Dimino says, “and depends a lot on who the reclaimer is and what types of processes they have in place and the types of system adaptations they have made.” She adds that while some reclaimers consider thermoforms to be yield loss and don’t process them, others process them along with bottles.

“For the reclaimer, the adjusted yield price [of a MRF PET bale] is 31 cents per pound—a difference of at least 7 cents per pound (not including transportation),” the study says.

Contamination and yield issues result in part because of MRF inefficiencies in sorting, the study says, but also in part because of design decisions made by brand owners that can hinder the recycling process.

Martin says brand owners seeking to increase rPET content in their packaging will see the cost of poor recycling- related design choices come back to them in the form of higher rPET prices.

Intervening to improve recovery

Dimino and Martin say the best way to improve PET recovery is to implement the full complement of interventions outlined in the study, including investments at the MRF, in reclaiming and reprocessing and at the end-user or brand-owner levels. “Investments made at each stage in the process can also generate value throughout the system,” the study says.

Martin adds, “This impact happens only if you implement the suite of interventions. There is no silver bullet.”

The study recommends a number of interventions that its authors say could close the loop on nearly 80 million pounds of PET bottles annually:

• By implementing MRF sorting and quality-control measures that include the installation of optical sorters and robotics and the implementation of best practices, the capture rate could be increased by 10 percent or more while yield for reprocessors could be increased by 5 percent, resulting in 10 percent savings in the form of lower operating and disposal costs.
• Installing equipment that bypasses the pellet stage, going from flake to blending directly with virgin resin or directly from flake to preform production, would yield a 15 percent cost savings in each instance as well as better product quality with less discoloration. It also would increase rPET to bottle markets from roughly 23 percent to 30 percent.
• End users and brand owners committing to use the Association of Plastic Recyclers (APR) design guidelines would increase reprocessors’ yields by 5 percent.
• Implementing brand procurement strategies that include pricing to minimize volatility and long-term purchase agreements between end users and reprocessors would increase stability and access to financing for reprocessors and have potential stabilizing effects upstream.
• Installing chemical depolymerization technology to produce purified terephthalic acid (PTA) mono ethylene glycol (MEG) monomers would lead to minimal cost savings.
• Developing markets for non-PET byproducts, such as polypropylene and polyethylene, to incentivize MRFs to improve PET bale quality would reduce yield loss and improve and diversify MRF revenue streams.

While some of the study’s suggested interventions are “common sense,” Dimino says, the “disparate nature of the recovery infrastructure” makes them challenging.

Martin adds that as an investor in recycling infrastructure, Closed Loop Partners noted a number of key takeaways from the study. “One is the focus at the MRF level is not horribly expensive and that message aligns with the current conversation on export markets and the quality of material overall.” She adds that in this environment, MRF operators are more willing to make the capital investment needed to capture more PET from the incoming material stream.

The author is managing editor of Recycling Today and can be contacted via email at dtoto@gie.net.

For more information:
Closed Loop Partners, admin@closedlooppartners.com, www.closedlooppartners.com  
Resource Recovery Systems, 800-517-9634, info@recycle.com, https://recycle.com