America's largest solid waste management company is getting into the recycled plastic processing business by taking controlling interest in Avangard Innovative's film recycling operations in the United States.
Waste Management Inc., which goes by WM, becomes the second major solid waste management and recycling company to push hard into recycled plastics processing following a move by Republic Services Inc. earlier this year. While Republic Services is building its own facilities, Houston-based WM has decided to jump into the market through the purchase of an existing operation.
"We think this answers a lot of customers' questions on the circularity side and this is a portion of how we can help increase the recycling rate of all plastics, including film," said Brent Bell, vice president of recycling for WM, in a Sept. 13 interview.
Plastics have value, he said, and capturing them for reuse makes business sense.
"This material has a fairly high value compared to the blended value of what we collect and it's such a low recycling rate. We'd just like to see more of it get recycled and get into the stream because we think we can do a lot more with it."
WM's financial heft — it's an $18 billion company — will allow the acquired operations to execute on planned expansions.
"This transaction helps the business quickly scale operations, maximize source feedstock and meet the continued rise in demand for environmental additives, such as recycled plastic resin," Avangard Innovative CEO Rick Perez said in a statement.
The operation, under the new ownership structure, will be known as Natura PCR and operate as an independent company. The deal does not include operations in Mexico and South America owned by the Avangard group of companies.
Bell sees a couple of trends helping push plastics recycling these days: The growing interest in extended producer responsibility and minimum recycled content requirements on the state level.
"We think the demand is going to be there for years to come as more folks are looking for recycled and PCR content to put into their products and packaging," he said. "We think there's a lot of opportunity, and it's a great combination for us."
The ramp-up in capacity is going to be pretty aggressive and take place over the next 12 to 24 months, he said.
Waste Management has funneled used film the company has collected from commercial operations such as distribution centers and back-of-store operations to Avangard Innovative for years.
"For the last 20 years or so we've been a large supplier to them. We've kept an eye on them. We know them well. It's a great domestic outlet for our customers' material in the past," Bell said. "And lately we've looked at their growth that they've got projected. We figured with our supply, their projected growth, it looks like the right combination to go forward and increase rate for film plastics as well as provide some more sustainable solutions for our customer base."
WM expects the business "to scale and grow" recycling capacity to an estimated 400 million pounds of post-consumer resin in the next five years. That includes expanding the company's current location in Waller, Texas, near Houston, as well as constructing an additional site at an unnamed location in the Midwest. Avangard Innovative had been planning both moves ahead of the WM acquisition.
"WM's controlling interest in Natura PCR positions us to grow and scale rapidly in the emerging PCR space," WM CEO Jim Fish said in a statement. "WM's core material supply capabilities, with the head start and knowledge provided by Avangard's U.S. business, will help Natura PCR quickly deliver circular options to WM's customers as an important component of our continued growth strategy in recycling."
WM traditionally has served as a collector of recycled plastics from residential, commercial and industrial customers, providing initial handling through a network of material recovery facilities around the country. These MRFs typically sort and bale recycled commodities — plastics, fiber, metal and glass — for processing by other firms.
The move to purchase a controlling stake in Natura PCR moves the company into the actual processing of used plastics into recycled pellets that then can be used by other companies to make new products.
WM did once operate PET flaking operations in Raleigh, N.C., and Chicago, but that was years ago. The Avangard Innovative investment represents the company's first push back into the plastics processing side of recycling.
"Through Natura PCR, WM expects to deliver new recycling capabilities for its customers and provide circular solutions for films and clear plastic wrap used commercially, such as plastic stretch wrap for pallets, furniture film, grocery bags and potentially shrink wrap around food and beverage containers," WM said.
Republic Services, meanwhile, is in the process of building that company's first plastics recycling center in Las Vegas to produce food-grade PET flake. The company, the second largest solid waste management firm in the nation, also has signaled intentions to build additional facilities around the country.
Bell said he expects the large size of the Texas and Midwest locations could mean that WM would simply funnel film from other regions into those operations.
Avangard and affiliates will keep a minority state in the firm through the deal expects to close late this year.