While demand for recycled PET and high density polyethylene resins continues to boom and sustainability remains a hot buzzword thanks to a Wal-Mart Stores Inc. initiative, U.S. recyclers are worried.
Recyclers are facing a decline in bale quality and contamination issues from bio-based resins and calcium carbonate filler. Bottle and container recycling rates remain stagnant. China receives huge amounts of American materials. All the while, recyclers are trying to come up with ways to increase collection so idle capacity can boost profitability, instead of being a drag on earnings.
According to several sources, 30-40 percent of HDPE recycling capacity is sitting idle and more than 15 percent of PET capacity is not being used. And these figures don't include a 150 million-pound-per-year plant in Johnsonville, S.C., Wellman Inc. shut down last year.
``There is plenty of capacity,'' said John Calhoun, a co-owner and partner with Custom Polymers Inc., a plastics recycler and broker in Charlotte, N.C. ``But you can't sell what you don't have. The market is growing faster than supply. The last few years, we have all been scrambling.''
``Growth is stymied by the lack of supply,'' said Steve Babinchak, plant manager of St. Jude Polymer Corp. in Frackville, Pa. ``The bottles are out there, but how do you get them back?''
Some 6.56 billion pounds of post-consumer plastic bottles were not recycled in 2005, compared with 2.1 billion pounds that were, according to data from the American Chemistry Council and the Association of Postconsumer Plastic Recyclers.
Scott Saunders, director of raw material procurement and resin sales for KW Plastics, has the same supply concerns and suggests that the reprocessor base is shrinking. Based in Troy, Ala., KW Plastics is a huge recycler of HDPE.
``Demand is higher than supply,'' Saunders said. ``It is more difficult today to get the same amount of material as you did in 2000. The market is similar to what it was in the late 1990s. I think you are going to see a shrinking in the converter base. I think that it is going to be a tough year for growth for HDPE converters and more of a battle to fight and hold on to what you have got.''
Almost one-third of the 2.1 billion pounds of HDPE and PET bottles collected in the U.S. in 2005 were exported, leaving U.S. recyclers with roughly 1.4 million pounds of domestic supply - 681 million pounds of PET and 759 million pounds of HDPE - for their operations. A staggering 42 percent of collected PET is exported - 82 percent of that to China, according to the National Association for PET Container Resources in Sonoma, Calif. And 18 percent of HDPE collected is exported as well, said Washington-based APR, which tracks that market.
``There is a huge home for it in the United States, and companies are starving for it,'' Saunders said.
HDPE recyclers also are seeing the overall available supply in the U.S. shrink because of lighter-weight containers, a reduction in motor-oil bottles as consumers shift to quick-lube services and a detergent industry trend of selling its product in concentrated form, according to APR.
``The huge volume leaving and going to China is a problem. Our supply isn't enough and so much is being exported,'' said Jean Bina, supply chain manager for Phoenix Technologies International LLC in Bowling Green, Ohio. ``Our company has to go all over the world to get material and meet customer needs. You have to be a lot more creative in negotiating for materials, go to places where they are not and offer value that the Chinese can't. If the Chinese backed out, there is plenty of demand in North America to take everything they use.''
``The industry could consume all the PET - 1.17 billion pounds - that is collected in the U.S.,'' said Dennis Sabourin, executive director of the National Association for PET Container Resources in Sonoma, Calif. In fact, he said there is enough domestic demand for ``almost two times'' the 759 billion pounds that now stays in the United States.
The China factor also drives up raw material prices and, according to U.S. recyclers, is the main contributor to a reduction in bale quality and yields.
``They pay upfront and they pay a huge premium [over market prices because] their labor costs are so low and transportation back to Asia is low because of all the empty containers bringing products to the U.S. that need to be shipped back,'' Bina said.
The bales headed overseas also are causing a quality and yield problem for recyclers.
``The general quality of the bales is going down because you can put in whatever you want when it is going to go on a boat overseas,'' Bina said. ``That means the yield is diminished, it costs more to process and there is less value from a bale.''
Commingled or single-stream recycling also has led to a reduction in bale quality, KW's Saunders said. ``It has taken huge amounts of material away from the U.S. because it is easier for material recovery facilities to bale and export than to segregate materials,'' he said. ``Companies in the Far East don't complain about the quality because they can hand-sort [using low-cost labor]. But we can't run those bales without a big charge back to operations.''
Bina and Saunders aren't alone in their assessment. One-third of HDPE recyclers surveyed by Sonoma, Calif.-based Moore Recycling Associates Inc. for Resource Recycling magazine of Portland, Ore., said bale quality diminished in 2006 compared with 2005. Half of the PET processors said bale quality diminished and their yields were down as well, contributing to lower margins.
In addition to bale quality, recyclers also are experiencing yield problems from new barrier resins in PET bottles, the calcium carbonate HDPE bottle makers are using as filler, and contamination from water bottles and other packaging made from polylactic acid starting to filter into the recycling stream.
``All innovations are good, but I am against the misuse of calcium carbonate,'' said Tamsin Ettefagh, vice president of sales and marketing at Envision Plastics Industries LLC in Reidsville, N.C. ``I have already seen PET bottles sink in the wash stream. That is a concern. The problem? The use of filler alters the gravity of the bottles and the bottles behave differently in a wash stream than in a lab, where bottles with up to 10 percent calcium carbonate float.
``That is based on natural color, no pigments and doesn't take into account glass, dirt, grit, adhesives, liquids and pigments'' that affect that equation, she said. ``I have seen bottles with as little as 3 percent filler sink.''
Sauders agreed. ``In the lab, they don't sink,'' unless there is more than 10 percent calcium carbonate. ``But in the real world, you lose bottles.''
There is also a concern about new barrier resins that resin companies continue to add when seeking new PET applications. ``If you can't remove the resin, it is a contaminant and that becomes a barrier to our recycling process,'' St. Jude's Babinchak said.
Babinchak also said he was beginning to see some PLA spring-water bottles in the recycling stream, which creates a problem because of a lower melting point.
``PLA is a contamination because it has a melting point much lower than polyester,'' he said. ``If you get it in a dryer, it will get all over everything else. You can spot PLA quickly in a dryer, but it is very difficult to spot it as it travels down a conveying line.''
Collection also presents a challenge because it falls into the hands of financially strapped communities, some recyclers said.
``There is not enough money thrown at it at a national level and when you look at local, state and community budgets, recycling is at the bottom of the radar screen,'' Phoenix Technologies' Bina said.
That is why APR is sponsoring a series of regional workshops and working with the Washington-based Curbside Value Partnership - a consortium initiated by aluminum and can trade groups to boost curbside collection and material recovery rates, develop industry data and share best practices.
``Our key audience is educating state and local recycling officials about what they can get for the materials they collect and what they have to do to the material to enhance its value,'' said APR executive director Steve Alexander.
Custom Polymers' Calhoun agreed.
``We have to make people aware that there is a need for the material, develop grass-roots efforts to educate kids, let people in government know there is a lot of companies who buy the materials, educate the people who run the programs and do a good job of giving them value,'' he said.
The industry also is convinced that Wal-Mart's commitment to sustainability will give recycling a boost.
``It is stimulating innovative out-of-the-box thinking,'' Envision's Ettefagh said. ``You are going to see a lot of positives for the environment from that,'' as people review how they use packaging.
``The Wal-Mart initiative has brought a new boost of energy to recycled content and to sustainability,'' Bina said. ``It has brought plastics recycling back onto the radar screen and heightened people's awareness [of environmental issues]. I am getting a lot more questions from consumer packaging companies about recycled content and recycled packaging. These folks are getting a new religion.''
Going forward, it means companies will have to ``look at how a package fits into the existing environmental infrastructure economically, socially and environmentally,'' NAPCOR's Sabourin said. ``We see a high amount of energy being expended and a lot of work being done to identify a packaging in the context of the issue of sustainability.
``It brings greater attention to the responsibility of manufacturers for their products, greater attention to the use of greenhouse gases and energy in production, and will lead to a greater use of recycled content in packaging.''