Tom Brady, president of Plastic Technologies Inc., expects good things in the recycled PET market.
His company is doubling its capacity for making recycled PET that can be used back into food and beverage containers, one of the most demanding and most lucrative end markets for recycled plastic.
The Holland, Ohio-based company also is working on technological improvements that it said will drive the cost of recycled PET down to the point where it's consistently competitive for even the largest virgin resin buyers, like Coca-Cola Co.
Brady follows the market closely. PTI and its Phoenix Technologies LP subsidiary in Bowling Green, Ohio, developed the technology now used by Coke to put 25 percent recycled PET in its bottles in Australia, and PTI is working with Coke to get to 10 percent recycled PET in its North American bottles by 2005. Pepsi-Cola Co. followed that with a similar pledge but is not as far along with implementation.
To meet that increasing demand, Phoenix is adding a second reprocessing line this summer to give it an additional 20 million pounds of capacity to create food-grade material, which will give it 40 million pounds of capacity for food containers and 80 million pounds total capacity.
By next year, he said, the company will have its second-generation technology working, an improvement that will let it ``potentially double or triple the output of food-grade flake without much additional investment.''
That new technology also may let PTI put flake directly into bottles, without needing the more costly repelletizing process, Brady said.
For Brady, the company's investment is driven by what he sees as increased comfort among brand owners in North America with using recycled PET.
``The influence of Coke and Pepsi on the nonsoft drink market will be huge, and the nature of that will drive additional demand,'' Brady said. ``We've gotten not just a lot of tire-kicking inquiries, but serious inquiries. Two years ago we weren't getting those kinds of inquiries.''
In particular, he said the juice markets will become much more interested in recycled PET.
Others also are investing in PET recycling. Evergreen Plastics Ltd. in Clyde, Ohio, reportedly is adding repelletizing capability, buoyed by the actions of Coke and Pepsi. Evergreen officials could not be reached, but the company told the Ohio Department of Natural Resources in a grant application that it saw growing opportunities in the market because of the soft drink industry's actions.
Evergreen received a $150,000 grant from the Ohio DNR to pay for part of that expansion. Phoenix received a grant of $150,000 from the same agency.
While recyclers report more interest, some are taking a wait-and-see attitude.
Ralph Taylor, director of U.S. recycling for Amcor Ltd., noted that his company recently expanded its PET recycling plant in France. But he said Amcor wants to see if it will make money before duplicating that investment in the United States. The company has an older recycling plant in Novi, Mich.
``The overall market is sticking its toe in the water just to evaluate,'' Taylor said. He described himself as ``cautiously optimistic'' and said there is more interest in recycled PET.
But he said he wants to see what happens when currently high virgin resin prices start dropping again and get in the neighborhood of 50 cents a pound, from more than 70 cents a pound currently.
``It's going to be some time before I feel like this is going to be the way it is for the next 10 years,'' Taylor said. ``I think we need to see how people respond in the tough times.''
He said he sees a lot of ``tire kicking'' - packaging departments checking out recycled PET to stay current and keep abreast. He said he still sees a need to pay a premium for recycled PET.
A Coke official said the company still is paying a premium for its recycled PET, but hopes to get that down to price parity with virgin. Scott Vitters, environmental manager with Coca-Cola North America in Atlanta, said the company will make its target of using 10 percent recycled PET in all its North American bottles by 2005, even if it has to pay a premium.
``We remain optimistic that it will be at parity,'' Vitters said. Currently, Coke has hit the 10 percent recycled PET level in 80 percent of its containers, which by one estimate translates to about 80 million pounds of recycled PET used.
Pepsi, by contrast, used just 1 million pounds of recycled resin last year as it began its rollout.
``We're confident that we're on target to reach our goal,'' said Pepsi spokesman Larry Jabbonsky. He declined to talk about how Pepsi would deal with recycled PET use if it remained more expensive in 2005, but he said the company is not backing away from its goal.
Recyclers seem to be counting on that to happen.
For example, an investment group led by former bottling industry executive Tom Hiles bought Crown Cork and Seal Co. Inc.'s PET recycling division earlier this month, and is banking on growth in recycled PET use in the food market.
Hiles, who had stints in the Pepsi system and with Cott Corp., the world's largest supplier of retail branded soft drinks, has said store brands and others are exploring recycled PET because they do not want to be seen as environmentally unfriendly or have a marketing disadvantage.
But both Coke and Pepsi said they have no plans to market recycled PET use to the public.
``It doesn't seem to resonate in a big way with consumers,'' said Pepsi's Jabbonsky.
Outside of Coke and Pepsi, it's more difficult to get specifics on recycled PET use. Cott, for example, declined to talk in any detail, other than saying it is investigating recycled PET because it sees a trend toward more use.
The third-largest soft drink maker in the United States, Dr. Pepper/Seven Up Inc., said the company constantly evaluates recycled-content PET but is not using it because it costs more and there is a shortage of material.
Getting more recycled PET used in bottles will help to stabilize the plastic recycling markets by expanding what is a more lucrative end use, said Peter Anderson, director of the Plastic Redesign Project, a Madison, Wis.-based coalition of state and local recycling officials.
The group, which is at times critical of packagers for bottle designs that harm recycling, presented Coke with its Award for Outstanding Corporate Responsibility in February for its plans to use 10 percent recycled PET in bottles, and the technological advances that followed Coke's decision.
``Coke has spurred a revolution in the economics of plastics recycling,'' Anderson said.
PRP estimates that when Coke gets to 10 percent, it will need 100 million pounds of recycled resin. That would be a sizable boost in a U.S. market that used about 700 million pounds of recycled PET in 2001. Only about 10 percent of that went back into bottles.
Gerry Fishbeck, vice president of operations with United Resource Recovery Corp., said there is a lot of interest in recycled PET behind the scenes. Spartanburg, S.C.-based URRC, however, nixed plans to build its first large North American PET recycling plant earlier this year because it had difficulty raising capital.
For recycled PET use to take off and sustain itself, the recycling industry must make it economical compared with virgin resin, Fishbeck said.
``A lot of people are scrambling to fill what is a growing market, but its ability to grow is going to be totally an economic issue,'' he said.