Plastek joins investors in $100M recycling startup

A startup recycling company with strong ties to the steel industry plans to build a $100 million plastics waste sorting plant in Erie, Pa., with investment from injection molder Plastek Group.

For Plastek, which is also based in Erie, it's a way to secure supply of the recycled plastics its consumer product customers are demanding.

But the startup, International Recycling Group, has a bigger vision.

It hopes to demonstrate that the highly automated sorting plant it wants to build can be a model for handling plastic waste on a larger scale.

The former steel industry executives starting IRG are also claiming a commercial advantage over other plastic recycling firms — a proprietary technology to use waste plastic as the raw material to make a processing agent for steel manufacturing.

They see it as providing a solid end market as they build out the plastics side of the business.

"It is the bridge that carries us, makes us economically viable," said Doug Schrader, co-founder and vice chairman of IRG. He's a former president of the U.S. Iron Mining Association.

In an Aug. 17 news release, IRG announced investments by Plastek and another local firm, Erie Insurance.

Plastek CEO Dennis Prischak did not disclose the details of his company's investment but said IRG will help the firm, a large manufacturer of packaging for consumer products, meet a push from its customers for recycled content plastic.

"It will significantly help satisfy the increasing demand for [post-consumer recycled plastic] being driven today by content targets set by our customers," Prischak said in an email. "At the moment, demand exceeds supply based upon content targets set by our customers."

Prischak said Plastek would be able to "dramatically" increase the post-consumer plastic content in the packaging it makes.

According to the IRG release, Plastek and Erie Insurance made separate investments totaling $9 million. Plastek made an equity investment in IRG's parent company, GreenSteel LLC, IRG said.

Prischak said the investment will be good for the environment and the Erie region.

"Plastek is making this investment for our industry, our customers and our community," he said. "When this plant is up and running, it will create good jobs with the hopes of growing over time."

IRG will employ 50 and have capacity to sort 275,000 tons of mixed waste plastic a year from residential, commercial and industrial sources when it opens in 2022, said Schrader, who has held management and government relations jobs in the steel industry.

The other co-founder and chairman, Mitchell Hecht, is also a former steel industry executive, as well as an investment banker past and board member of the National Association of Manufacturers.

Schrader said IRG will initially pull out the more valuable scrap PET, high density PE and polypropylene materials to be made back into recycled plastic pellets.

The low density PE, polystyrene and other mixed grades — or the plastics 4, 6 and 7 in the resin identification code — will be made into its CleanRed additive, which the company has been developing as an iron reducing agent used in steel making.

Initially, Schrader said about half IRG's volume will be made into pellets for plastic companies like Plastek and half into the additive for steel companies. Last year, it announced an agreement with Canadian steel maker Stelco Inc. to supply that processing agent.

On the plastics side, IRG will not pelletize the recycled plastic material; other firms will do that, he said. IRG will focus on sorting.

Over time, Schrader said IRG wants to aim more of its business at the plastics industry.

It wants to develop other markets within plastics for the lower-value materials that are used for CleanRed, including working with the plastics engineering school at the Penn State University Erie campus to do, he said.

He said IRG sees the CleanRed additive as a way to diversify markets as it does that.

"The development of CleanRed allows us the bridge — maybe it's 10, 20 years down the road — to fully develop the quantities of plastics that we need and develop new markets," Schrader said.

Schrader said the company, which employs other executives with a plastics background, has developed a highly automated sorting process to handle large volumes. It refers to the plant as a SuperPRF, or plastics recovery facility.

"If you look at the system for aggregating this plastic raw material today, it's at best mediocre," Schrader said. "We will be putting in state-of-the-art infrared sensing devices and robotics. It's the size and the volume as well that drives the economics of our company. It'll be highly automated. It'll be the state-of-the-art."

IRG said in its news release that it sees what it calls "megaplants" like its plastics sortation facility as a key part of dealing with plastic waste.

Schrader said the company has plans for additional phases of investment, based on how the first phase goes.

For now, though, the company needs to complete the $100 million in fundraising to build the Erie plant, he said. It hopes to do that in the first quarter of 2021.

"We're well into those discussions, those actually have been ongoing for a number of months and I don't see any problem in us raising the $100 million," Schrader said.