Plastic bag maker Hilex Poly Co. LLC is spending $13 million to build a recycling operation in response to environmental challenges facing the plastic bag sector.
Hilex announced Nov. 5 that it is building the plant in North Vernon, Ind., next to one of its bag-making operations, where it will recycle used plastic grocery and retail bags into new bags. The company, one of the largest bag makers in the United States, also said it will work with its customers, like retail chains, on an education campaign to get consumers to recycle more.
``We need to put behind us some of the environmental concerns about our product,'' said Rex Varn, president and chief operating officer of the Hartsville, S.C.-based company. ``We need to see an increase in the amount of bags being returned to the system.''
This will be the company's first recycling plant. Varn said Hilex could build two more recycling plants in the United States if demand warrants. He said Hilex, which has about $250 million in annual sales and seven U.S. manufacturing plants, would put one in the West and one in the Southeast.
Varn said the economics of recycling have improved, as the price of virgin high density polyethylene has skyrocketed. But rising raw material prices are not a significant reason for the timing of the announcement, he said, adding that the company is not assuming high resin costs in its business model.
``We're with it through high and low resin cycles,'' he said. ``Our motivation has been strictly environmental.''
The bag industry has faced environmental challenges in the United States, mainly in California, as state agencies and legislators have looked at taxes and other ways to control litter. In other countries, plastic bags have faced bans and steep taxes.
Varn declined to disclose details of the plant's processing capacity, and he said it is unclear what percentage of recycled content will be used in bags. He also would not say how much money the company will spend on its education campaign, which he said will be customer-specific but could include advertising.
The Indiana plant, which will employ 50, should be running by the end of the first quarter of 2005, Varn said.
There's been a flurry of recycling activity in the bag industry lately.
Another large bag maker, Vanguard Plastics Inc. in Farmers Branch, Texas, last month joined a partnership to boost bag and film recycling. Vanguard joined an existing partnership between Sigma Stretch Film Corp. and bag recycler Sun Valley Worldwide Inc., in Delray Beach, Fla.
That partnership aims to recover millions of pounds of stretch film and bags each year by working with its corporate customers and consumers.
Hilex will get as much as $5.4 million in state and local tax credits for the plant, including a tax credit of as much as 30 percent against the $13 million investment, said Trevor Lane, executive director of the Jennings County Economic Development Commission.
The incentives include at least $126,000 in job-training money and a $1 million zero-interest loan for equipment to manufacture recycled-content products.