Pictured from left: Xavier Cronin, Robert Render, Lori Carson, Kim Holmes and Recycling Today Media Group Publisher Jim Keefe.
Despite the current softness in some recycled plastics markets, speakers during the session “Market Outlook: Plastics” at the 2015 Paper & Plastics Recycling Conference, hosted by the Recycling Today Media Group in Chicago Oct. 14-16, maintained a positive outlook about the future of the industry.
Moderator Kim Holmes, senior director of recycling and diversion, SPI: The Plastics Industry Trade Association, Washington, said, “It’s a dynamic time for plastics right now,” referring to the effect of petroleum and natural gas pricing on that of virgin plastics.
Xavier Cronin, an editor with PetroChem Wire, Austin, Texas, said PET (polyethylene terephthalate) offered the most extreme example of this situation, with recycled PET pellets selling for 10 cents more per pound than their virgin counterparts.
He predicted lower plastic scrap prices across the board in response to lower crude oil prices during the fourth quarter of 2015, adding. “Barring a crude rally, commodity plastic scrap prices will continue to fall.”
Additionally, pricing for secondary plastics are influenced by commodity market cycles that affect polyethylene (PE), polystyrene, polypropylene (PP) and nylon, as well as by logistics and delivery dynamics that affect physical commodities, Cronin said, citing the difficult winter of 2013-2014 the East Coast and Midwest experienced. Blizzards prevented curbside collection of recyclables for days or even weeks in some cases, cutting off the supply to material recovery facilities (MRFs) and reprocessors, causing pricing to surge and some consumers to turn to prime or off-spec products.
Robert Render, commercial manager of Ravago Recycling Group, a division of Belgium-based plastics distributor Ravago, also pointed to the effect of declining crude oil prices on recycled plastic markets, noting that PP pricing declined 30 cents per pound from September 2014 to September 2015, when oil prices reached $45 per barrel.
He added that new prime PP and PE resin capacity will be coming online in 2016 and 2017, keeping prices for these resins soft and further squeezing recycling operations.
“Compounders have their choice of materials to purchase and are being selective,” he said.
Despite these trends, Render said recycling is moving forward as demand for recycled content grows among brand owners. He said building and construction markets have strengthened and are increasingly demanding recycled content. Demand for recycled content also is increasing in the automotive and appliance sectors as well as from consumer products companies.
Technology also has led to beneficial changes in the plastics recycling industry, with continuous melt filtration being “one of the most innovative technologies,” Render said. The technology allows reprocessors to be more flexible because it can handle some paper contamination, he added.
Render offered his thoughts on how recyclers and reprocessors can be successful despite current market conditions. He advised focusing on quality, saying, “Consumers have many choices—be the one that delivers quality materials consistently.”
He added, “The hardest part is being selective in what you buy. You must have honest conversations with your suppliers.”
On the sell side, Render suggested building “loyalty currency” by working with consistent suppliers rather than taking a higher price from someone else.
“Make sure suppliers understand where you costs come from,” he advised. “Separate freight costs from purchase costs—be more transparent with your suppliers.”
Regarding PET in particular, Lori Carson, director of commercial operations at Phoenix Technologies, Bowling Green, Ohio, said, “Market economics are the big elephant in the room,” citing the diversity of packaging available today, overcapacity issues and the low yield from curbside bales that affects volume and cost.
In response to these factors, she said Phoenix was establishing longer-term contracts with its suppliers, providing direct feedback in an attempt to improve bale quality and engaging in value-based purchasing.
Phoenix Technologies also recently added equipment to produce its own PET flake, which has allowed it to improve the quality and economics of this material by removing the middleman and giving the company direct control over the process.
Prior to this backward integration, Carson said, “We spent a lot of time blending material from different suppliers to get uniform quality.”
Carson attributed this to the general decline in PET bale quality, noting that domestic bales only have a 64 percent yield on average in light of the presence of more 2-7 plastics.
“Materials in the bale that we can’t use contribute to the delta we see between recycled and virgin resin,” she added.
Despite the current challenges, Carson was optimistic about the future of PET recycling, saying that applications and demand for recycled PET will grow and that the focus on processing technology will help to improve the quality and volume of material collected for recycling.
The 2015 Paper & Plastics Recycling Conference was at the Marriott Downtown Magnificent Mile in Chicago. Next year’s conference will be Oct. 19-21 at the same venue. More information will be available at www.RecyclingTodayEvents.com as it is confirmed.