Great expectations: companies that process and consume recycled resins hope for more promising days to come - Commodity Focus - Brief Article

Recycling Today, May, 2002 by Deanne Toto

Everybody knows that recycled commodities haven't enjoyed the best of times lately. It should come as no surprise that markets for plastics haven't escaped untouched.

Judith Dunbar, technical assistance program manager for the American Plastics Council (APC), Washington, says that at 74.6 billion pounds, domestic virgin resin sales for 2001 were 3.3 percent lower than in 2000. At 69.4 billion pounds, production of virgin plastic resin in 2001 decreased 5.5 percent. However, Dunbar adds, December sales showed an increase of 2.3 percent when compared to the 2000 figure. Recycled resin figures for 2001 will not be available until mid-2002, and it is uncertain to what extent they will mirror the downward trend in virgin resin production.

A STUMBLING ECONOMY

"Production has definitely slowed," Robert Render, president of Maine Plastics Inc., North Chicago, Ill., remarks. Maine Plastics processes and markets scrap plastic from the manufacturing sector. "The availability of scrap regrind ... relates to the vibe of business," he says. "The more molding and thermoforming going on, the more scrap, the more material [generated and consumed]."

Render says the demand for recycled plastics is reasonable, but less material is available because overall production of plastic goods has decreased.

He adds that as manufacturing moves offshore, so do the sources of scrap. "From what I read in the trade magazines, there are a lot of molders closing, and there's a lot of consolidation in the industry," Render says.

SelecTech Inc. uses post-consumer and post-industrial feedstock to manufacture planters, landscape timbers, flooring and traffic control products. The company recycled roughly four million pounds of plastic into new product in 2001.

"Our product sales have dropped off in the past nine months, mostly because of the economy," SelecTech's Thomas Ricciardelli says. SelecTech has experienced consistent growth since it began in 1994, he says. "This is the first time we've ever slowed down."

Some resins are faring better than others. "From my perspective, growth has slowed somewhat, but still remains `above average' in the area of PET packaging," Jean Bina, manager of commercial operations for Phoenix Technologies, Bowling Green, Ohio, says. Phoenix Technologies pelletizes and crystallizes post-consumer PET for reuse in consumer packaging applications.

Pricing, however, remains an issue. Mike Biddle, president and CEO of engineering plastics recycler MBA Polymers Inc., Richmond, Calif., says that prices for virgin resins have decreased dramatically in the last two years, to the detriment of plastics recyclers.

"There's so much oversupply of virgin and what's called off-grade or off-spec, it's hard to sell recycled," Biddle says.

Bina agrees. "Virgin manufacturers routinely dump `pencil prime' or wide-spec, which continue to be a threat to recycled resins."

"Virgin resin prices fluctuate with the level of demand. A lot of it is impacted by Asia," the APC's Dunbar says. "When Asia experiences an economic downturn, it negatively impacts markets because Asian companies export more virgin resin, which adds to the overcapacity in the U.S. During these periods of lower demand, there's pressure on virgin resin pricing, and that in turn puts downward pressure on pricing of post-consumer resin."

Ricciardelli says, "When virgin pricing is cheap, you can't compete period. You have nowhere to go." He adds that escalating virgin prices don't put recyclers at an advantage either, as the price of the source tends to increase.

An adaptive approach got Denton Plastics Inc., Portland, Ore., through a difficult time. Dennis Denton explains, "I was selling two truckloads [of PET] a week for 14 years into the nursery pot business. We got booted out ... by virgin for six months."

Denton's search for new markets uncovered an opportunity in rotational-mold grade resins, which are pulverized instead of pelletized. "That's what you have to do--find new and better ways to compete," he says.

Render says that commodity resins--such as propylene, high density and styrenics--are difficult for recyclers to compete with economically. However, he says recycled engineering resins compete "head to head" with their virgin counterparts.

Improved sorting and processing technologies have increased the quality of recycled resins. Dunbar says these technologies also have helped recyclers to weather pricing fluctuations. Cost-savings innovations in processing technology, such as optical sorting, have improved the quality of recycled resins and enabled broader market acceptance, she says.

QUALITY ASSURANCE

"Plastics recycling, the processing technology, has evolved to the point that most reclaimers can produce PCR (post-consumer resin) that can compete easily with the performance of virgin in many applications," Dunbar says. "As evidence, there are some companies that have received letters of non-objection for PET from the FDA that allows the PCR that they produce to be used in food-contact packaging."