Citing the low price of virgin resin and less availability of manufacturing scrap, several plastic recyclers have laid off portions of their workforce. The largest downsizing is at Sundance Products Group LLC, which was the eighth-largest plastic recycler in the Plastics News 2008 recycler ranking.
The industrial plastics recycler, which has the capacity to process more than 200 million pounds of polypropylene annually and had sales of $58 million in 2007, laid off approximately 80 of the 280 workers at its three plants Dec. 5, reducing its workforce by roughly 30 percent.
In addition, Cycled Plastics Ltd. in Austin, Texas, laid off 15 of its 80 workers the third week in November and Waste Alternatives Inc. in Mount Vernon, Ohio, has reduced its manufacturing plant workforce from 35 to nine in two rounds of layoffs that began in August.
Adam Mosier, managing partner of Cycled Plastics, stressed that the layoffs at his company were not because of a decline in orders, but because of lower prices for recycled resin.
``Our orders have not declined,'' he said. ``But virgin resin producers are oversupplying the market so much that we had to get our costs aligned and trim staff,'' said Mosier, whose company has the capacity to recycle 24 million pounds of plastics annually and handles a variety of plastics, including low and high density polyethylene, polypropylene, and foam packaging.
``We just know we have to get as lean and mean as possible,'' he said.
For example, Mosier said he can now buy mixed-colored curbside PET for 5 cents a pound when three weeks ago, he was paying 30 cents for the same material. Correspondingly, the price he can sell his recycled pellets for has dropped from 55 cents to 25 cents per pound.
``Anyone selling recycled scrap is having a hard time selling it,'' said Mosier. ``We are seeing brokers having a real hard time. If the price drops another nickel, people might be more inclined to throw it away, even if the consciousness out there is to be green.''
Both Mosier and Steve Shew, general partner at Waste Alternatives, said there also is less material available.
``We are filling all our orders, but we can't get enough material to meet the demand because industrial production has dropped,'' said Mosier. Cycled recycles a variety of products, including detergent bottles, flower pots, milk crates and foam products.
Shew, whose company in Mount Vernon has recycled HDPE, PET and engineering resins since 1997 and has a processing capacity of between 35-45 million pounds per year, agreed.
``Most manufacturers aren't producing as much so there is less scrap,'' he said. Shew said the company's first round of layoffs were due to an inability to get needed efficiencies in an agricultural film processing line and that the second round was related to the economy.
``We have not been able to buy or sell anything since exports flooded the market. Prices have dropped so low that it is hard to compete with virgin resin,'' Shew said.
The layoffs at Sundance affected the workforces at all three of the company's plants — its pellet reprocessing plant in Gainesville, Fla., and plants in Buford, Ga., and in Gainesville that shred and grind the recycling plastic and prep it for processing, said Jim Frentheway, director of human resources for Sundance.
Private equity investment fund Soin Capital LLC in Dayton, Ohio, owns a 70 percent stake in Sundance, purchased in 2006.
``Orders have dipped pretty dramatically,'' said Frentheway. ``When virgin prices [for polypropylene] drop on the spot market to 20-25 cents per pound, it makes it hard for us to sell resin. There is a lot of product on the market, and the market is tight.''
``But, we don't expect that to be a long-term issue,'' said Frentheway. ``We believe this layoff is a temporary thing.''
Mosier also believes the downturn will be temporary, but said ``the scary part is that we just don't know where the bottom is. If this lingers too long, there are going to be a lot of failures and consolidations, and that's a shame.''
A lot depends on the economy and China, but Mosier thinks there is a possibility the market could improve in the second quarter of next year.
``China has to get back into the market to tighten things up again,'' said Mosier, adding that China has traditionally got back into the market in March in previous years after reducing purchases in January and February. ``But the key will be how well the economy picks up. If the economy is still where it is today in March and the price of oil is still low, things could get worse.''
Those workforce reductions come on the heels of a layoff in mid-November by Eco2 Plastics Inc. The water-free PET recycler laid off roughly 80 workers — or 70 percent of the workforce — at its Riverdale Calif., plant, reducing employment to 35. The layoffs were triggered by the installation of its second-generation processing equipment and the shut down of its less-efficient batch processing line.