SONOMA, CALIF. (Oct. 10, 8:40 a.m. ET) — With the number of PET reclamation plants growing rapidly, U.S. recycling capacity for the material exceeded the total amount collected by almost 10 percent. But more dramatic, U.S. capacity was almost double the amount of that PET that stayed stateside, with more than two-fifths of it going to export markets.
“The U.S. now has the capacity to process more post-consumer PET packaging — both bottles and thermoforms — than the amount of PET packaging collected,” said the National Association for PET Container Resources in its annual recycling report, issued Oct. 10.
“That means that in 2012, even if no PET bales are exported, these reclamation assets will be short of material,” said the report from the Sonoma, Calif.-based association. “Without additional collection efforts or new streams of material, the increased capacity will only serve to drive prices [of recycled PET] to unsustainable levels, as too many operations chase too few bottles.”
The number of PET recycling plants in the U.S. increased from 19 at the beginning of 2011 to 23 by the end of 2011, said NAPCOR. That boosted total annual capacity by more than 27 percent, from 1.38 billion pounds to 1.755 billion pounds, which is substantially more than the 1.6 billion pounds of PET collected in 2011.
That's troubling for two reasons.
First, nearly 43 percent of that 1.6 billion pounds of PET collected in 2011 was exported, mostly to China, leaving only 916.4 million for U.S. companies. And that was in a year when the amount of recycled PET purchased by countries in the Far East was the lowest since 2005
Second, four more PET reclamation plants under construction right now will soon add close to 200 million more pounds of PET reclamation capacity. And that does not include an expansion at Mohawk Industries in Summerville, Ga., which will double its capacity in 2013 and ultimately add 500 jobs.
“It is a challenge to have increased capacity and not have it immediately followed by increased supply,” said NAPCOR Executive Director Dennis Sabourin, in a phone interview. “But the investments send a strong signal about the continued sustainability of PET. There has been so much investment that it shows we need to collect more PET and feed these U.S. companies and create U.S. jobs.”
But that is easier said than done.
“I wish I was a little more optimistic, but we're not even close to what we need in terms of collected recycled PET,” said NAPCOR technical director Mike Schedler in a phone interview. “The demand for [recycled] PET is there, but we need to have it collected.”
By the numbers, the recycling rate in 2011 inched up just two-tenths of a percentage point to 29.3 percent. That is the eighth straight year the rate has increased, dating back to 2003 when it stood at 19.6 percent, and it is nearly as high as the 31.6 percent recycling rate in 1995.
The rate is being suppressed by continued light-weighting of PET beverage containers, salad dressings and snack jars for nuts. NAPCOR calculated that unit sales of PET containers and jars increased by 4 percent in 2011, but that the amount of resin used increased by only 2.4 percent.
As a result, the total amount of PET used in bottles and jars in 2011 — 5.478 billion pounds — still remains below the 5.683 billion pounds of PET used in bottles and jars in 2007. Similarly, the volume of PET recycled in 2011 increased only minimally — by 46.8 million pounds — after increasing by 113 million pounds in 2011.
“We are experiencing the full impact from light-weighting,” said Schedler. “We did pretty well in bottle sales, but the weight is down.”
“In the near-term light-weighting is an issue [and] and there is general agreement that innovation will continue to reduce package weight,” noted the report. “But most observers feel we have already experienced the largest impacts.”
To help overcome that shortfall of material, the industry hopes that PET thermoformed containers — which were recycled in “a significant amount” for the first time in 2011, said the NAPCOR report — can provide a boost.
“2011 saw the first significant amount of PET thermoformed packaging moving through the system in both the U.S. and Canada,” said NAPCOR, which began an initiative in 2009 to remove the obstacles to PET thermoform recycling.
Indeed, most of the 47-million pound increase in recycled PET in 2011 came from 45.8 million pounds of alternative PET feedstock, including 24.9 million pounds from bales of just PET thermoform packaging.
That is both an encouraging sign and “a small, but important beginning,” said the NAPCOR report.
“These efforts are now bearing fruit,” said the NAPCOR report. “All purchasers and processors of curbside bales are allowing some level of thermoforms mixed in with the bottles,” typically around 10 percent, with some accepting as much as 20 percent of thermoform containers in PET bottle bales.
“In the short-term,” said the report, “increased PET thermoform collection is the best hope of addressing the key issue of supply” which continues to vex a rapidly growing PET reclamation infrastructure.
“That's going to be the one place we get relief from supply,” said Schedler. “I see that more than doubling in 2012. That's the only thing that will give us a boost.”
NAPCOR hopes three model PET thermoforming projects underway in Omaha, Neb.; Montgomery County, Md.; and in Elk and Lebanon counties in Pennsylvania will boost PET thermoform collections even more.
“Those projects will prove that recycling of thermoform packaging is a viable business model,” Sabourin said.
To further augment the PET it can obtain domestically, PET reclaimers in the U.S. purchased 105.8 million pounds of PET from Canada, Mexico and South America in 2011, plus the 20.9 million pounds of PET pre-consumer bottles, post-consumer strapping and other material.
NAPCOR expects that U.S. reclaimers will be able to purchase a higher percentage of the PET recycled in the U.S. in 2012, as the amount of material purchased by China is expected to decline again.
“It is hard to believe the Chinese will get much out of California” with all the domestic capacity in that state, Schedler said. “They [Chinese buyers] have not shown much willingness to climb the price ladder. So there should be some additional volume there” for U.S. companies to purchase.
But still, PET recycling capacity utilization remains low, at 67 percent. Typically, a capacity utilization of at least 85 percent is the target.
“Operators would like to be in the mid-to-upper 80s,” Sabourin said.
The capacity utilization situation may get even worse when the four plants currently under construction come on stream with 200 million pounds of capacity, and if CarbonLite Industries goes ahead with plans to add a second 100-million-pound-per-year line, or Clear Path Recycling LLC moves forward with a second 120-million-pound PET wash line in Fayetteville, N.C., which they originally had hoped to bring online last year.
The capacity utilization situation is further compounded by increasing lower yields of good material from bales.
“U.S reclaimers reported yield losses ranging from 25 percent for deposit bottles to 35 percent for curbside material and 28.9 percent” for bottles redeemed under the California Refund Value program, said the report. “These contamination levels are higher in all categories than in 2010 and have reached crisis levels.
It cited two specific sources of contamination.
“As more programs switch to single-stream recycling, it appears to be no coincidence that quality of PET bales from curbside collection programs continues to deteriorate,” said the report. In addition, two types of labels also create yield programs — full-wrap bottle labels that sink in hot water and bleed inks, and pressure-sensitive labels, mostly on thermoformed packaging, that cannot be removed or leave too much adhesive residue on the flake after the wash process.
“Contamination continues to challenge the PET industry,” Sabourin said. “As more and more contamination occurs, it continues to decrease yields.”
And it is not just contamination from single-stream collection, but also from companies not following the design-for-recycling guidelines developed by the Association of Postconsumer Plastic Recyclers, said Sabourin and Schedler.
“The problem is that contamination is getting worse, and it still hasn't stabilized,” Schedler said. “The yields are still going down. We're going to have find a better way” to position those guidelines and explain why they are important.
But if collections can increase, and yields can improve, the market exists for recycled PET, according to NAPCOR.
“There was a record number of pounds purchased in 2011 by U.S. reclaimers,” Sabourin said. “And the end-use of [recycled] PET continues to grow,” climbing to 1.04 billion pounds in 2011.
Fiber applications still remain the biggest end-market for recycled PET in the U.S. and Canada, accounting for 38 percent of demand.
The report added there also has been significant growth in the use of recycled PET since 2008 in the sheet market for packaging, and in food and beverage bottles.
Some 242 million pounds of recycled PET was used in food and beverage bottles in 2011, up from 141 million pounds in 2008. Demand from film and sheet applications more than doubled from 2006-08, grew another 27 percent between 2009 and 2010 and jumped up 4 percent again in 2011 to 202 million pounds.
Those three applications account for 81 percent of the recycled PET used in the marketplace.
This is the seventh year that NAPCOR and APR have partnered to produce the annual PET recycling report. Data was also generated internally at NAPCOR and the International Bottled Water Association, as well as from surveys conducted by HDR Inc. and Moore Recycling Associates.