Although Clear Path Recycling LLC has postponed plans to install a second 120 million-pound-per-year PET recycling line at its plant in Fayetteville, N.C., this year, the firm still expects to add that line in the near future.
Our first phase is up and running, said Jon McNaull, senior business director of fibers for Charlotte, N.C.-based DAK Americas LLC, one of the owners of the joint venture recycling company.
Clear Path launched in July with a 40 million-pound-per-year line and added a 120 million-pound line in November.
We want to fine-tune production and quality and evaluate how everything performs in the first phase, and make a decision in the second-half of the year, McNaull said March 15 by phone. It is a question of short-term market dynamics and timing.
In initial plans, the second 120 million-pound line was slated to come on stream last fall. It takes roughly nine to 12 months to get a line up and running.
With cotton prices at an all-time 140-year high of $2 per pound more than triple the 65-cent-per pound price in July 2009 demand for polyester stable fiber has escalated in developing countries. The result is that more recycled PET bales are heading overseas, tightening supplies in North America.
We haven't had any problems getting a supply of PET bales, McNaull said, despite ferocious demand, which is driving up prices.
In the short-term, it is unclear what will happen, he said. Our decision on expansion is more a question of selecting the proper time to make the investment.
At this point, the market is accepting the price increases for recycled PET resin, he said.
Mike Schedler, technical director for the National Association for PET Container Resources, based in Sonoma, Calif., agreed with that assessment.
The more you need, the higher prices you are going to pay because we have a source of supply that isn't growing at the rate we need it to grow at, Schedler said at the Plastics Recycling Conference, March 1-2 in New Orleans.
Demand does not appear to be slowing down if anything, it is increasing.
We don't perceive any [drop] in demand for recycled PET, McNaull said. It is still strong. And there has been no change in how much virgin PET is used vs. recycled PET.
McNaull said the decision on when to add capacity will be driven by market conditions and the scale-up of sustainable products by its joint venture partner, carpet maker Shaw Industries Inc. of Dalton, Ga., whose ClearTouch filament-fiber carpet is made from recycled PET.
For us, our intent is for this [recycling venture] to become a core competency and give us the feedstock for sustainable products, he said. We want to become competent in that industry, become a bigger part of that industry and use that as leverage to produce our sustainable products.
Right now, Clear Path needs to assess its original projections on bale bottle yields, conversion costs and gain more experience on how to get conversion costs right, he said.
We have to evaluate if the profitability will be as we projected.
McNaull said the 120 million-pound line added in November hit full capacity this quarter and is being used to produce clear flake. The 40 million-pound line is making green flake.
More than 90 percent of that total capacity is used internally, compared to initial projections of 75 percent.
About $350 million in investments boosted PET reclamation capacity in the U.S. from 847 million pounds at the end of 2008, to 1.25 billion pounds a year later.
PET recycling capacity grew again in 2010, when several plants, including Clear Path, started up. U.S. capacity is expected to hit 1.88 billion pounds later this year, Schedler said.
With bale supplies tight, however, PET recycling plant capacity utilization in the U.S. has dropped. In 2010, it fell to 69.5 percent compared to 81 percent in 2009, according to a recent Plastics Recycling Update survey.