Lower resin prices squeeze recyclers
By Jim Johnson
Low oil prices, lower export demand and contamination are all helping to make life more difficult for an important link in the plastic recycling chain these days.
The nation’s waste and recycling companies — the folks who pick up your discards at the curbside — are struggling to make ends meet in an overall recycling market that’s turned south for them in particular.
These folks collect, sort and bale all types of plastics, but most commonly PET and high density polyethylene, and sell them off to plastic processors who recycle the material farther up the recycling chain.
Plastics make up a small fraction of the curbside collection stream, 5 to 8 percent for those interviewed for this story. But the commodity historically has accounted for a much higher percentage of the overall recycling revenue for these trash and recycling companies.
And these same firms are being squeezed by lower recycled plastics pricing as well as depressed pricing with other recycled commodities.
It’s gotten to the point where the nation’s largest trash and recycling hauler, Waste Management Inc. of Houston, is sounding the alarm. Loudly.
As the largest recycler in that sector, Waste Management has even gone so far as closing down material recycling facilities — MRFs — that were money losers.
“Anytime you are upside down like that in the equation, that is not something that is a sustainable business model,” said Brent Bell, Waste Management’s vice president of recycling.
Lower plastics commodity pricing, along with falling export demand and an increase in contamination have all conspired to create financial problems for some haulers.
“With those factors, it really puts us in a position where a lot of our recycling facilities, they were not making money,” Bell said.
Waste Management closed about 10 percent of its single-stream MRFs — locations that take in a mixture of recyclables from residential customers and then sort them all out. The company now has about 50 of those sites remaining.
The company also has started to push harder for contracts that share the risk of the up-and-down commodities market with their customers. Bell further said the industry needs to do a better job at education, both with residents about contamination that eats into profits and municipalities about the economics of recycling.
Light weighting of plastics, while lowering costs for container makers and consumer products companies, also has helped exacerbate the financial problems facing recycling. It takes more people pushing more material through MRFs to now capture the same amount of plastics.
“You end up paying a lot more,” Bell said, in terms of labor and equipment costs.
Companies on the supply side also face folks who are not willing to pay as much for their baled, recycled plastics.
“A lot of customers are saying it’s cheaper for me just to use virgin materials instead of using recycled materials,” Bell said. “That’s making it a little bit more difficult to move some material, but it’s definitely causing a lot of downward pressure on the price of the material.”
As head of recycling for Rumpke Consolidated Companies Inc. of suburban Cincinnati, Steve Sargent has seen the recycling market for plastics erode over time. His regional waste and recycling company operates eight recycling locations that handle plastics and other recyclables.
About 5 to 6 percent of Rumpke’s recycling volume is plastics, but the material accounts for about 17 percent of the revenue of that business, he said. “We have lost, in the last two years, the revenue from our plastics sales as dropped over 35 percent.”
Rumpke has seen customers find substitutes for recycled content as prices have fallen.
“We know that for a fact that some of the people we’ve sold to have actually begun to use more off-spec [virgin resin] material,” Sargent said. “We lost a big customer in the region of plastic PET bottles. …We’ve had to reach out and find other homes.”
Sargent agrees that his industry has to move toward what he called more “participatory” contracts where the risk and the reward are shared by both sides.
“Nobody wants the price of oil to go up. But we want to price of plastic scrap to go up. Those two worlds collide with each other. We feel like we’re in for a longer challenge. We’re going to have to have a partner relationship with our customers that can reflect this commodity price,” he said. “The long-term goal is to keep these programs alive and healthy.”
For Will Flower, a downturn in the recycling market is nothing new. It doesn’t make it any less painful, but he’s seen this before. More than once.
“For those of us who have been in the industry for a long period of time, we’ve seen cycles and we’ve realized that the recycling business is and always will be a cyclical market,” said the vice president of corporate and public affairs for Winters Bros. Waste Systems of Westbury, N.Y.
“Across the board, plastic prices have come down significantly. We’ve seen decreases in PET, HDPE, mixed rigid plastics. But even though the market is soft in terms of price, we’re still able to move those plastics so there still appears to be a demand there,” Flower said.
Plastics account for about 6 to 8 percent of the recycling volume for Winters Bros., which operates a network of recycling facilities across Long Island.
“The successful recyclers are going to be those who keenly focus on the quality of the materials that we are producing. There are a lot of companies that get into the recycling business when the markets are good, mills are hungry and they can produce a product,” Flower said.
“We’re still able to move our materials. We’re not getting top dollar for it because the markets are down, but we understand the commodity markets are extremely soft right now and we have to act accordingly. … I think plastics recycling is like every other piece of the recycling business. It’s cyclical and it will return,” Flower said.
Despite the current problems, the reality is that waste and recycling companies will try to weather the storm due to their existing investments in recycling and a growing customer demand.
“We’ll always be in the recycling business. I think it’s fair to say that we’re going to be more selective in making sure we get the volumes that can actually cover their cost of the investment,” Bell said.