An already tight supply situation is becoming even more troublesome for reclaimers of post-industrial plastics as well as for companies making products from post-consumer materials.
The culprits include the economic downturn, the downsizing of consumer packaging and an increased contamination of bales, according to U.S. recyclers.
``Because manufacturing is down in general, companies are not producing as much scrap,'' said Dave Kaplan, vice president of Maine Plastics Inc., an industrial recycler in Zion, Ill. ``We have seen a decline in material since November, and until there is more consumer confidence and manufacturing kicks in, it will be about the same. We are able to get enough material, but we are finding that we have to expand our supplier base.''
Scott Saunders and Dennis Denton said their companies are dealing with the same problem.
``We have had to reach out into wider geographies for supplies,'' said Saunders, general manager of KW Plastics Recycling in Troy, Ala., which recycles polypropylene and high density polyethylene post-consumer plastics. ``Contamination issues have forced a company like ours to become more aggressive in the post-industrial marketplace, which typically is higher cost and more competitive.''
Denton, president of Denton Plastics Inc. in Portland, Ore., echoed the sentiment: ``We have extended our reach to bring in material from all over the country.''
Scott Mouw, chief recycling officer for the state of North Carolina said recycling companies may have to take on a different role to solve their supply issues.
``Companies may have to consider investing and integrating into collection and find a way to feed their own appetite,'' Mouw said.
``I think many companies are compensating for losing domestic volume by buying from other countries,'' said Tamsin Ettefagh, vice president of Envision Plastics, an HDPE recycler in Reidsville, N.C.
There also has been a decline in available post-consumer HDPE because of a shift to concentrates for bottled detergents, said Dennis Sabourin, executive director of the National Association for PET Container Resources in Sonoma, Calif. Light-weighting trends in PET bottles also could have a ``great impact,'' he said.
``One-half liter [PET] bottles used to weight 20 ounces, now they weigh 13 ounces and they are going down to 10,'' Sabourin said. ``That is a huge percentage change. We could have an increased recycling rate, but the pounds recycled could be less and it could affect virgin resin sales as well.''
But supply isn't the only pressing issue. With a barrel of oil more than $120, reclaimers face rising fuel and logistics costs, as well as price pressures from both buyers and sellers. ``One of the biggest problems facing us is the transportation issue,'' Denton said. ``With demand slowing down and rising fuel costs, there are often drop charges if you don't take or pick up at least 6,000 pounds.''
Fuel costs and the weak dollar also have influenced the availability of containers for exports, with four- to five-week waits for smaller companies, higher container prices and almost no availability of larger containers, Kaplan said.
``We won't see any more 45-foot containers,'' Kaplan said. ``Because of the weakness in the dollar, container companies can command higher prices. Directly and indirectly, how well the dollar does affects the availability of containers.''
But the biggest concern, at least for post-consumer recyclers, is the disturbing rise in bale contamination.
``That creates a lot more cost on the front-end to sort out materials and squeezes margins,'' said Steve Alexander, director of the Association of Postconsumer Plastic Recyclers in Washington. Most reclaimers are not in a position to confront their suppliers, he said.
Envision Plastics intends to challenge some of its bale suppliers on quality, according to Ettefagh. ``We are getting 10-15 percent PET contamination in our HDPE bales and that has got to stop,'' she said. ``Bale quality has gone downhill.'' She said Envision is sending out letters to some of its suppliers.
``Bales of HDPE, specifically mixed colors, continue to be the dumping ground for every bottle that people don't know what to do with,'' KW's Saunders said. His company is seeing contamination rates as high as 25 percent with the growth of all-bottle collection programs and single-stream recycling, he said. ``It used to be 15 percent.''
Slightly more than half of HPDE recyclers surveyed by Moore Recycling Associates in Sonoma, Calif., said bale quality diminished in 2007 compared with the previous year — with the average yield just under 82 percent. Similarly, 75 percent of PET recyclers said the quality of bales declined last year. No one indicated an improvement in bale quality from the previous year.
``With the growth of pay-as-you-throw programs and with the efforts to expand curbside recycling, there are a lot of different materials thrown in and collected,'' said APR's Alexander. ``A lot of the [materials recovery facilities] have not upgraded their separation technology.''
APR, for its part, updated its design-for-recyclability guidelines in January, and is now focusing on developing bale-quality guidelines, Alexander said.
``There has been an increasing amount of bottles and containers made from different plastics, and the push into bioresins continues to be a cause for concern,'' he said, because such products look identical to the PET and HDPE containers they replace. ``It is incumbent on us to do a better job of communicating with solid waste facilities and MRFs on bale specifications and how they can get a better value if they separate materials.''
Exacerbating that problem is the Chinese market for baled materials.
Bale quality doesn't have to be as good for recyclers in China, which buy almost 50 percent of the baled post-consumer PET and 20 percent of the baled post-consumer HPDE, Alexander said. That reduces the incentive for municipalities to invest in sorting, especially since Chinese buyers are willing to pay higher prices than U.S. buyers.
In addition, he said, financially strapped municipalities have limited funding to invest in recycling.
``There is fiscal pressure on municipalities, so it is one of the last priorities, even though it can be a revenue generator and not just a loss center,'' Alexander said.
On the bright side, Ettefagh said there seems to be more interest among plastics processors and their customers in using post-consumer resin because of sustainability initiatives. ``It has been a tough year for the industry,'' she said. ``We are definitely seeing a drop in demand due to bottle shifts, reduction due to concentrates, as well as flower pots and pot demand dropping due to housing and construction dropping.
``But I am optimistic.'' she said, noting that Envision is selling its resins into more film applications and will be adding food-grade material before year's end. ``That makes me feel good. It has opened the door to a lot of new markets,'' including toys for the green market.
The current economic and market climate makes significant capacity expansions unlikely, said NAPCOR's Sabourin.
``Reclaimers are, by and large, small companies and they are not going to make capital investments unless they have someone who will commit to buying supply long term. They are not willing to put their neck on the line without a long-term commitment,'' he said.
Several sources are also concerned about how the market will change when Coca-Cola Co.'s PET recycling plant in Spartanburg, S.C., goes on line later this year.
``Everyone is sitting back and waiting for Coke,'' said one recycling executive.
``No one knows what they are going to do. I know companies that are planning 35 million, 50 million and 80 million pound [per year] facilities, but they are waiting to see what Coke does.''