A pair of well-known movers in the recycled PET sector are jumping back into the business with high-profile plans to establish a nationwide footprint of facilities costing more than $100 million.
Operating under the name Circularix, the new venture features Leon Farahnik as chairman and Alex Delnik as chief operating officer.
Farahnik is the former CEO of CarbonLite Holdings LLC, a PET recycler that filed for bankruptcy and sold off locations in Dallas; Riverdale, Calif.; and Reading Pa., in 2021. Delnik was CEO and founder of Verdeco Recycling Inc., a PET recycler with locations in South Gate, Calif., and Terre Haute, Ind., that was sold to Cudos Group in 2020.
CarbonLite, Farahnik said, continuously bumped up against pricing pressure from customers. But the market now values recycled PET and has disconnected its value from virgin PET. This development has him bullish on the recycled PET market with plans to open Circularix's first location in Hatfield, Pa., late this year.
"It shows that recycling is the wave of the future and continues to be," Farahnik said about the improved pricing for recycled PET in today's market. "That's why I got back into it. I see a huge amount of need in the market in the recycled PET side of the business. Recycled PET is now more accepted in a sense that it is not connected to virgin material anymore," he said.
"It is really disconnected to virgin. And the prices are somehow [what] makes it at least profitable to build the plants and increase the capacity needed in the market," Farahnik said in a June 29 interview.
Farahnik and Delnik previously developed facilities that handle about 60 percent of the recycled PET recycling capacity in the United States. So the CEO said the two men have the experience needed to make Circularix a success.
They got to know each other about five years ago when they jointly worked on a state legislative issue regarding plastics recycling in California.
"[He] and I worked very hard on that and we became very close friends. When I started on this project, I asked him to join because he comes with a very huge background in recycling as well. I think between the two of us we have enough experience to do it the right way — hopefully," he said."
This time around, Farahnik and Delnik have the support of Macquarie Group's Commodities and Global Markets unit, which has formed the Circularix joint venture with Farahnik's HPC Industries LLC of Los Angeles.
Macquarie is a publicly traded financial services company based in Australia. In joining forces with Macquarie, HPC Industries is teaming with some deep pockets. Macquarie Group had A$774.8 billion (US$534.6 billion) in assets under management as of March 31 and posted a net profit of A$4.7 billion (US$3.24 billion) for fiscal year 2022.
Over the past 20 years, Macquarie has been associated with plastics recycling through investments in a series of solid waste management companies that have collected and sorted recyclables through material recovery facilities.
Macquarie is not only investing in the joint venture, but will also help in the areas of debt, hedging and risk management.
Circularix hopes to establish a network of five locations around the country, each with the capacity to handle about 55 million tons of recycled PET annually. Total investment for those facilities will be more than $100 million. Other locations could be in Florida, Texas, Arizona and the Pacific Northwest, Farahnik said.
CarbonLite previously announced plans for a Florida facility in 2020, but it did not open the location before filing for bankruptcy protection the following year.
Hatfield, site of the first Circularix location, is just 42 miles from Reading, Pa., where DAK Americas LLC now owns a former CarbonLite facility.
With a recycling rate for PET at about 27 percent and healthy demand for recycled resin from consumer packaged goods companies, Farahnik said there is both supply and demand for more recycled PET facilities. He estimated the country needs to build another 20 to 30 major locations just to satisfy 2025 recycled content goals established by CPG companies.