Floyd Flexon, who runs recycling operations for bottle maker Amcor PET Packaging, said the current tough climate for PET recycling reminds of him of the dark days of early 1997.
``In 1997, you saw half the PET recyclers in the U.S. cease operations,'' said Flexon, who is vice president of environmental affairs and recycling operations for Amcor in Manchester, Mich. ``The first quarter of this year was probably the worst since 1997.''
If the trend continues, he predicts, the 15 PET recycling plants in the United States could see significant downsizing: ``The worst-case scenario is that 18 months from now, four or five recyclers go bankrupt.''
Many bottle recyclers are using that kind of stark language. The industry's main trade group, the Association of Postconsumer Plastic Recyclers, warns bluntly that the critical shortage of bottles could lead to the ``collapse of the North American plastics recycling infrastructure.''
The issue has attracted a lot of attention in the PET sector lately, with APR mounting a public campaign and soft drink makers calling PET suppliers into discussions on how to raise recycling rates.
A closer look at the market reveals a complex picture, though, with some positive developments. Recyclers say the industry thus far is holding its own, but they say long-term trend lines don't look good.
``Supply is still something that's very tenuous,'' said Steve Navedo, sales manager at Pure Tech Plastics in East Farmingdale, N.Y. ``It's definitely difficult to grow and expand your business.''
The cause is twofold: The supply of recycled bottles has stagnated for several years, while more and more of that supply is being snapped up by Asian importers anxious to feed booming demand in China.
Navedo, who also is APR vice chairman, said one positive sign is the solid demand for the more expensive type of recycled PET that can be used in bottles. Without that demand, he said, the industry would be in worse shape.
Much of the need is arising from Coca-Cola Co. and PepsiCo Inc.'s goals of having bottles with 10 percent recycled content by 2005, he said. That could equal an additional 200 million pounds of demand, according to rough estimates in the recycling industry.
``We don't want to give people the impression that the plastic recycling industry is in the toilet,'' Navedo said.
There are isolated signs of investment, albeit with government assistance. For example, Plastic Recycling Corp. of California recently got a $5 million state grant to start work on a bottle-to-bottle recycling plant there.
But overall, capacity is going down. The PET recycling industry had bottle-washing capacity of 850 million pounds in 2002, down from 1.07 billion pounds in 1998, according to the American Plastic Council in Arlington, Va.
Recyclers of high density polyethylene bottles also have seen a decrease in capacity, from 1.29 billion pounds in 1998 to 1.07 billion pounds in 2002, APC said. Some observers said HDPE recycling, while not growing as some would like, is not as challenged by collection and export issues as PET.
``No one is going out [of business] yet, but there are a couple that are in trouble,'' said Robin Cotchan, executive director of APR in Arlington. ``There are a lot of projects that are halted and lines that aren't running.''
The world's largest user of recycled PET, carpet maker Mohawk Industries Inc., said it has been able to keep its use of recycled PET steady at about 200 million pounds a year.
Phil Cavin, national procurement director for Mohawk in Summerville, Ga., said his firm has seen profit margins suffer, though, as prices for recycled PET bottles have doubled in the past year.
Prices for baled bottles were 9 or 10 cents a pound a year ago, but are 19 or 20 cents now, he said. Much of that increase is because Chinese buyers are outbidding U.S. recyclers, which generally are not able to pass on the increased costs, recyclers said.
``Our bottle costs have risen almost 10 cents a pound since this time last year, because of the Chinese,'' Cavin said. ``Then the Chinese are turning around and sending fiber back here cheaper than we can make it.''
Several recyclers said Chinese demand is down a bit lately, perhaps due to import restrictions, and summer weather will bring its typical increase in PET collection.
But long term, the market is still tight, Cavin said.
He said the carpet industry periodically explores using more recycled PET as a cheaper feedstock, but shies away because it worries that it won't be able to get enough material.
``Nobody wants to invest in any kind of infrastructure that is based on having bottles for a feedstock; it would be suicide,'' Cavin said. ``There is barely enough to go around now in the good times.''
A close look at the numbers, from the National Association for PET Container Resources, illustrates the problem. The United States collects about 800 million pounds of PET bottles a year for recycling. But about 275 million pounds of that went to exports, mainly to China, in 2002, the last year for which figures are available. That's a big jump from 1999, when 183 million pounds were exported.
That booming export market meant U.S. recyclers processed only about 520 million pounds of material in 2002, the lowest level since at least 1995. That has prompted some renewed looks at how to boost recycling.
Charlotte, N.C.-based NAPCOR said its research shows that inefficient recycling processing by cities results in the annual loss of 70 million to 100 million pounds of PET bottles that have been collected from community recycling programs.
NAPCOR said it studied about 30 facilities in which cities sort recyclables, and found that old equipment and reliance on manual sorting resulted in the loss of substantial amounts of PET.
Meanwhile, APR is holding a meeting in late May with its newly hired government relations firms to try to draft an agenda.
Some recyclers said they should look at a trade complaint, while others said the industry should search for ways to tap supplies that are less attractive to exporters, like recycling drop-off sites, or look again at bottle bills, which the beverage industry strongly dislikes.
APR said it wants to pursue a recycling solution that meets the needs of everyone, including the beverage industry, but some recyclers said privately that they are open to bottle bills being on the table for discussion.
Whatever course they pursue, industry executives said they want to move quickly.
``Our raw material price went up significantly and our ability to recover it is nonexistent,'' said Amcor's Flexon. ``That is the big squeeze.''