Hoping to stem losses in their polypropylene recycling operations, compounders Spartech Polycom Inc. and Washington Penn Plastics Corp. are merging their South Carolina recycling plants and setting up a joint venture.
Both companies have maintained recycling plants there at the behest of automotive customers that increasingly are required to use recycled-content materials, but the firms said they are finding it tough to make the operations profitable.
``This is a cost center, not a profit center,'' said George Abd, Spartech's executive vice president of color and specialty compounds. ``There is no way to have it be a profit center.''
Maintaining the recycling center will let both companies maintain a commitment to environmental issues, said Paul Cusolito, executive vice president of Washington Penn, based in Washington, Pa.
``We both had identical facilities doing the identical thing to feed the identical appetite, and we were both breaking even or losing money, depending on the market conditions,'' Cusolito said.
Each company will own 50 percent of the new venture, to be called the Plastics Recycling Center LLC. PRC will start operations at Washington Penn's 72,000-square-foot plant in Summerville in early September.
Spartech Polycom, also based in Washington, will close its leased facility in Ladson, S.C., and move some equipment to Summerville. A Spartech Polycom plant manager, Roy Crosby, will be general manager of the PRC.
Washington Penn bought the plant from Exxon Chemical Co. in 1994.
The two companies employed a total of about 32, but the new operation will employ about 20. Some workers will be laid off and some temporary employees will not be retained, Cusolito said.
The PRC plant will have an annual throughput of 20 million to 25 million pounds a year, Cusolito said. Previously, both companies' plants did some recycling and some virgin compounding. The joint venture will do only recycling, Cusolito said.
Each company will take half the material coming from the plant.
Most of the material is post-consumer, from sources including textile backing and bale wrap, Cusolito said.
Abd said it is unusual for a compounder to run its own PP recycling plant: ``There are opportunities to purchase this type of raw material but neither one of us has been comfortable with doing that and leaving the quality in somebody else's hands. We have a little bit of control here.''
The competitors claim to have roughly 30 percent of the PP compounding market, but the recycled-content applications served by the joint venture remain a small part of the business, Abd said.
The plant mainly serves automotive customers, although there are other recycled-content applications such as McDonald's serving trays, Cusolito said. Auto companies are pushing 25-35 percent recycled content in components because they want to avoid government mandates in the future, Cusolito said.
``It is very difficult to have the economics work out in this business, but it is something the customers demand, particularly Ford,'' Abd said.