"We think there's a lot of inefficiencies in the marketplace today. We talked a little about yield today," Keller said after a conference presentation to hundreds of people in the plastics recycling business. "There was a lot of people in the room we do business with today and we expect in the future we'll be doing business with those same people."
Vander Ark said that, based on discussions he had with plastics recyclers during the conference, Republic Services will be able to continue work with its long-term customers. "We think there's a market for us," the CEO said.
"We're open and honest. We've got some long-term agreements for a couple of years for materials, so we don't think our current product is going to get dislocated before this is up and ready," he said.
The trash hauler's move changes the dynamics of the plastics recycling sector as it no longer will be viewed simply as a bale provider to plastics reprocessors who have handled duties such as cleaning, grinding, separation and creation of recycled pellets.
"I think it is a very interesting concept, and could change the way the industry works, but as with all things it remains to be seen how the company meets the challenges of processing material into a feedstock," said Steve Alexander, CEO of the Association of Plastic Recyclers, in an email exchange. "That is an entirely different industry segment."
Alexander questioned if the two facets of the recycled plastic industry — collection and sortation and then processing — can successfully merge. "I guess we shall see," he said.
Republic Services is the nation's second-largest solid waste management company and has a network of some 70 material recovery facilities, or MRFs, that take in recycled materials including paper, metal, plastics and glass. Those MRFs are designed to sort materials for sale to companies that then further reprocess.
Output from MRFs are bales of separated plastics, ferrous and non-ferrous metals, different grades of paper and different colored glass. But as the country has continued to migrate to single-stream recycling, where residents put all of their material into a single collection cart, the quality of finished bales coming out of MRFs has declined over the years. Consumer convenience has increased the volume of recyclables collected, but commingling creates cross-contamination in finished bales from facilities that are not equipped to separate the materials completely.
This causes yields from plastic bales to decrease to the point where maybe two-thirds of plastic bales are usable and the rest of the material, including other resin types, is considered contaminated in some cases. Republic's new Polymer Center will handle both PET and polyolefins, which will allow the company to simply divert this so-called plastic contamination to a different processing line.
Republic sees a future where additional facilities will be located in different parts of the country.
"Obviously, Vegas is meant to support the West. Midwest makes a lot of sense just because of our operational footprint and density we have in that part of the country," Keller said. "We're also looking to the Southeast as probably a logical No. 3."
Republic also is eyeing the Northeast, where the company has several recycling facilities. "A lot of those states have bottle bills so you don't see as much of that material in the blue bin or the curbside programs, but we do have a lot of volume in that part of the world as well," he said.
Each of those facilities could cost between $50 million and $60 million. Republic said investing in regional polymer centers makes more sense than trying to retrofit existing MRFs.
"Rather than say we're going to recapitalize 70-plus centers, which would take us a long time and be a big check, this is actually, I think, a much more elegant way to get after the solution," Vander Ark said.
"We have a range of centers. Some are incredibly automated. … Others are more legacy facilities that have more labor and less technology. You can go in and put in new equipment, more optical sorters in those, but that takes time and a lot of capital. We think this gets us after the opportunity more quickly with less money," the CEO said.
Republic's plan is to grind HDPE and PP into larger fractions and use color sortation to create colored bales, including natural, red and orange, to create added value in the output. The market already has signaled an interest in paying more for those sorted products, the company said.