Economics, Rise of Recycled PP Highlight Recycling Conference

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Industry faces challenges, but opportunities beckon, in particular in PCR PP

These are interesting times for the recycling business—the industry has been impacted by erratic commodities markets, and today’s low-cost virgin resins will test commitments to use recycled materials. During Resource Recycling magazine’s Plastics Recycling Conference, Feb. 1-3 in New Orleans, many presenters were quite frank about the current difficulties of the recycling industry, while also highlighting potential areas of growth.

“The bad news for you all is that the low cost of virgin PET is probably going to be sustained, so the pressure on recycled material is likely to remain—and that remains a challenge for you and your companies,” said Tison Keel, director of PET, PTA & EO derivatives for IHS Chemical, Houston 

But there is a silver lining: Plastics are in a prime position to displace other materials in packaging, and as recycling programs continue to grow, that can change market dynamics.

“It is important to pay attention to consumer demand,” Keel added. “There are examples in California and elsewhere where the market is willing to pay more for recycled material as opposed to virgin. A lot depends on which market you are in and what the customer demand is. There is always an opportunity for a customer who wants to be more ‘green’ out there.” 

TOUGH TIME FOR SCRAP DEALERS
Joe Pickard, chief economist and dir. of commodities at the Institute of Scrap Recycling Industries (ISRI), Washington, D.C., also didn’t shy away from the fact that the industry faces a number of challenges. “ISRI members say 2015 was the worst year they have seen in a decade,” he said.

For the first 11 months of 2015, plastic scrap exports—totaling 1.9 million metric tons—were down 5% from the prior year’s shipments. Among the major overseas markets, the 20% drop in plastic scrap exports to mainland China and 42% decrease in shipments to Indonesia more than outstripped gains to Hong Kong, Canada, India, Taiwan, Vietnam, and others.

Pickard said the issues are falling commodity prices plus soft manufacturing output, a strong dollar, and logistical and regulatory issues—all of which mean disappearing margins and consolidation. The Chinese manufacturing slowdown is impacting commodity and scrap demand and having a big impact on U.S. scrap exports.

Will it be more of the same in 2016? China is still expected to slow down, and commodities are widely forecast to go lower. However, Goldman Sachs and the International Monetary Fund are forecasting gains in global economic growth and trade. While few are expecting a “V-shaped” recovery, Pickard said there are signs some commodities may hit bottom as falling prices impact supply. Overseas markets are expected to experience faster growth especially in South Asia. He said the industry needs to focus on operational efficiency, quality, and product diversification with targeted investment in technology.

“In terms of plastic recyclers, we have a little different market structure as compared with other materials,” he said. “A lot of growth in recent years in scrap came from overseas, and with that also came oversupply and overcapacity. I think domestic has as much—if not more—upside potential going forward than overseas markets.”

PP: THE BRIGHT SPOT OF RECYCLING?
A panel discussed recovered polypropylene (PP), which has gone from a single component of a mixed-plastics bale into a targeted commodity from recovery facilities. 

KW Plastics, Troy, Ala., is one of the world’s largest reprocessors of the material. Stephanie Baker, KW’s dir. of market development, highlighted work the company has done with Lush Cosmetics to apply recycled post-consumer (PCR) PP packaging. “Who would have thought 10 years ago that we’d not only see PP PCR in packaging but that a brand owner would actually want to tell customers, ‘We are proud not to be virgin?’” Baker said. “There are some really high-grade products developing as a result of our work with PP PCR.” She added that “PP is what is stabilizing us, as we are not seeing the big swings.”

Wellmark, a subsidiary of custom injection molder Technimark, Asheboro,, is a captive reprocessor and custom compounder of recycled resins. The company recycles more than 60 million lb of plastic annually, including PP. Tom Frantz, dir. of materials development for Technimark, said that the benefit of the Wellmark business model is that it embraces vertical integration to offer customers lower material costs for injection molded products.

Typically, when a customer wants to use the recycled material, they want the same quality as virgin but don’t want to pay more for it. “From an injection molder perspective, the post-industrial market is well established for PP,” Frantz said. “There is a huge demand for PP.”

Steve Sikra, materials science and technology manager at Procter & Gamble, Cincinnati, said brand owners do indeed want to use use recycled PP. Currently, P&G uses about 550,000 tons of virgin PP /yr, but looks to incorporate more recycled PP. By 2020, the company plans to double the use of post-consumer recycled content in plastic packaging.

“Let’s face it, pricing is always a challenge for us, but so is doing the right thing,” he said. “P&G has publically stated these goals and we are going to do that. The drive to use PCR is very real, and specifically in PP, there are a lot of potential applications.”

While plenty of issues remain for the recycling industry, Baker from KW Plastics perhaps sums it up the best: “Recycling is a business, not a charity. Recycling as a whole is not broken—but there are some parts that are broken. I think what we’re seeing now is a reevaluation of the supply chain.” 

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