By Katie Pyzyk
Public interest in sustainability is driving demand for some recycled plastics in North America, but other resins continue to face price and quality concerns.
2019 was a landmark, evolutionary year for plastics recycling. After China banned nearly all imports of scrap plastics as of January 2018, plastic scrap exporters turned to Southeast Asian countries—including Indonesia, Malaysia, Thailand, and Vietnam—to pick up China’s slack. Those countries, overwhelmed by the influx of supply, illegal processing and consuming operations, and insufficient regulatory infrastructure to control the situation, soon set their own restrictions or bans. Then the Basel Convention Conference of Parties imposed worldwide trade restrictions on many forms of plastic scrap, a policy scheduled to go into effect Jan 1, 2021.
Despite the impact such regulatory changes are having on recycled plastic exports, those policy shifts were not the biggest driver of change in the U.S. recycled plastics market last year, says Scott Saunders, general manager at KW Plastics (Troy, Ala.). Instead, he points to ramped-up awareness, advocacy, and legislation focused on plastics’ sustainability issues—especially the problem of ocean plastics. A recent report, “A Sea Change: Plastics Pathway to Sustainability,” also takes that perspective. Led by IHS Markit in collaboration with More Recycling (Sonoma, Calif.) and Environmental Packaging International (Jamestown, R.I.), the report calls the plastics sustainability movement one of the industry’s “biggest potential disruptors” and “one of the least understood from a demand, supply, regulatory and technology standpoint.” The timing of China’s ban just happened to coincide with Americans’ mentality shift about plastics, Saunders says.
The sustainability movement has some industry participants optimistic that demand for recycled resin will grow to meet or exceed the supply. Others caution that it’s not that simple: North American demand already exceeds supply for some recycled plastics, they say, but other resins are still struggling to find markets. Even as some companies announce plans for new or expanded capacity, others point to factors that may impede growth in this industry sector.
The Sustainability Bandwagon
The call for better end-of-life plastics management and more use of recycled resins quickly grew from a few voices to a worldwide movement in 2019, sources say, and major multinational brands took notice. Many of them announced or signed commitments to increase the recycled content of their plastic packaging and products. “The number of brands coming out with goals to use recycled content in the last 12 months is unlike anything we’ve seen before. Companies are aware their consumers are demanding more sustainable packaging,” says Susan Collins, executive director of the Container Recycling Institute (Culver City, Calif.).
Brands have made commitments both individually and in large collaborations. Businesses representing 20% of the plastic produced globally—including Coca-Cola, Colgate-Palmolive, Kellogg, Keurig Dr Pepper, Mars, PepsiCo, and SC Johnson—have signed the New Plastics Economy Global Commitment, an Ellen MacArthur Foundation initiative, alongside more than 400 other manufacturers, retail businesses, governments, and other entities. Advocacy groups and industry associations have launched other large-scale commitments. For example, the Association of Plastic Recyclers (Washington, D.C.) says its Recycling Demand Champions program increased participants’ postconsumer resin use by 25.9 million pounds in 2019, the program’s second year.
These commitments had already spurred growth in demand for some recycled resins as of late 2019, Saunders says. “We have noticed a big change in PCR demand for our natural high-density polyethylene, which is made from milk bottles. … As a result, we’ve seen those bale prices go up rapidly.” The export market restrictions came at an opportune time for his company. “Without the China ban, we would not be generating enough material in the U.S. to supply this new demand,” he says.
“Most of the buzz about domestic demand that I’m hearing is about PET,” says CRI’s Collins. “The U.S. has about 22 PET reclaimers, and they are not at full capacity, so they could easily take in and process more material.” Even at full capacity, these facilities would not be able to generate sufficient material to meet expected demand, especially for food and beverage packaging, says Jason Farahnik, director of brand partnerships and resin sales at CarbonLITE Industries (Los Angeles), which calls itself the world’s largest recycled PET producer. For RPET, “demand far outweighs current supply capacity. Not a lot of plants are able to process PET to the food-grade level,” he says.
Some analysts caution that brand commitments are promises that might never come to fruition. Most aim to achieve a specific percentage of recycled resin use by a deadline five to 10 years from now, but there’s no mechanism to hold the brands accountable for meeting those goals. Nor is there a sustainable funding source to support the infrastructure enhancements needed to produce the high-quality recycled feedstock consumers require, says Nina Bellucci Butler, CEO of More Recycling. “Many companies will not pay more” for recycled plastics than for virgin material, Butler says.
Processors are left wondering if demand will really grow enough to justify investing in more collection and processing capacity. “If brands are willing to pay for recycled content and live up to the pledges, I think the new recycling facilities will have markets” for the material they process, says Chaz Miller, chair of the recycling markets task force for the Northeast Recycling Council (Brattleboro, Vt.) and Northeast Waste Management Officials’ Association (Boston). “But if brands are not willing to pay and live up to the guarantees, we will have problems.”
Sustainability commitments are an “artificial driver” for postconsumer resin, but they could yield positive long-term consequences, says Kim Holmes, a consultant for the Plastics Industry Association, or PLASTICS (Washington, D.C.). They have “the potential to decouple recycled [pricing] from virgin pricing, which it’s always been tied to,” she says. Such a commitment “makes its own market for recycled material because regardless of the cost, people will seek it out just to fulfill these commitments.” That could prompt further, deeper plastics recycling market changes in the next few years.
“There is a lot of uncertainty in the market,” Butler says. The IHS Markit report suggests that demand could contract for certain resins if material bans—on straws, bags, and other single-use plastics—proliferate, but new end-market opportunities could expand recycled plastics demand on a more widespread scale. That growth also might depend on how new policies affect the economics of recycling and the value placed on carbon, Butler adds.
While these recyclers say they’re seeing higher demand for PET and natural HDPE, demand is not as strong for other resins. Most of the demand for postconsumer resin is for material from bottles, Butler explains, but bottles are only 1/3 of the packaging market, and packaging is about 40% of the total plastic market. Fewer North American destinations exist for nonbottle material, much of which had been exported to China and Southeast Asia. “The U.S. isn’t prepared to absorb the commodities that were mostly slated for Asian markets, such as mixed rigid plastics,” Butler says.
EFS-plastics (Listowel, Ontario) purchases bales of mixed plastics Nos. 3-7 and processes the PE and PP into products for less visible applications, such as garbage bags or pipes. “Ours is a very different story than recyclers who are handling PET and able to get that into a consumer-facing water bottle,” says Eadaoin Quinn, director of business development and procurement. Because it comes as a mixed plastics product, the material typically is more contaminated than material that’s segregated during MRF sorting, such as PET. But the resins are well-suited to industrial or utilitarian products such as stormwater pipes, residential foundation barriers, slip sheets, pallets, and waste or recycling bins, Quinn says. “There are a lot of easy outlets for PCR that have been proven over the years,” she says, and stronger collaboration between recovered plastic consumers and processors could identify more uses for these less in-demand resins.
“People need to think beyond that ‘unicorn PCR,’” Quinn says. “There is high demand for clear, food-grade-approved PCR”—typically clear PET from water bottles and clear HDPE from milk jugs—but “opportunities to use colored, non-food-grade PCR are being overlooked, even though these applications could be the easiest to switch from virgin resin to 100% recycled resin.”
The cost of separating mixed plastics, as well as the technology needed to do so, are concerns for those seeking to grow markets for those resins. “Materials in mixed bales have good value, but not when they’re all mixed up. We’re looking at how we can change the value of materials with no or negative value,” Holmes says. PLASTICS recently led a collaborative effort studying how secondary MRFs could boost material value and demand in the northwestern United States. The project collected PET, HDPE, low-density polyethylene, polypropylene, polystyrene, gable-top cartons, and aseptic cartons from four West Coast MRFs. A secondary MRF sorted the materials into six streams and prepared the majority of it for sale into domestic markets, “which already exist for many of these plastic packaging products, so long as the packaging can be sorted by resin type,” Holmes says.
The study’s results suggest that if the collection programs stay the same, and people continue the same recycling behavior, adding a secondary MRF in that region could recover an additional 50,000 tons of material each year that now goes to the landfill, Holmes says. “If we look at the additional sortation capabilities afforded by the secondary sorting process, we could eventually look at growing the accepted list of plastic packaging products”—such as by adding cold-drink cups made of PP—“and greatly increase the potential recovery number.” A regional secondary MRF allows multiple MRFs in a region to share the costs and benefits of investing in new sorting equipment, she adds.
Film faces demand-side challenges as well. “There’s an enormous amount of film available for recycling that used to get exported … and there’s not enough domestic capacity to process it,” Quinn says. EFS wants to increase its film processing capacity, but that’s hard to justify until true end-market demand grows to meet this excess supply, she says. “There are solid end markets that we have been selling to for 10-plus years, but they are not growing at the same rate that the supply is growing,” she says.
Contamination prevents the large amounts of film the United States generates from being in high demand, says Gene Jones, CEO of the Southern Waste Information eXchange (Tallahassee, Fla.). “The clean films definitely are still sought after. But the dirty films [such as agricultural films] are problematic … and we generate a tremendous amount of it here in the United States,” he says.
Across the recycled plastics industry, China’s stricter contamination standards for scrap spurred increased global interest in higher-quality material—but at a price that’s comparable to virgin material. “That’s tough to get your hands on,” Quinn says. Others are optimistic that North American recyclers will soon resolve any quality questions. “The quality of material available for recyclers will be improving exponentially here in the next 12 to 18 months,” says APR President Steve Alexander. He anticipates that improved residential recycling education and adjustments to MRF work processes will soon result in improved material quality coming from the residential stream to plastics processors and consumers. “Communities and haulers will adjust to the new market reality and will increase the quality and value of the material they’re baling,” he says.
The Price Problem
The biggest obstacle to increasing demand for recycled plastic may be price. Low oil and gas prices are causing virgin resin costs to dip, making recycled resins less competitive. At the same time, prices for natural HDPE bales, “the commodity that generates an attractive feedstock to potentially displace virgin [material],” have gone way up, Butler says. “The price for postconsumer resin suitable for food-contact applications far surpasses virgin resin right now. It simply costs more to reprocess scrap plastic” than it does to purchase virgin resin, she says.
“There is a relatively small pool of material fit for use, and a growing volume of products that require more content,” Butler says. “We need to collect more HDPE bottles, but even if we maxed out collection, there isn’t enough to meet the demand needed for recycled content in applications beyond bottles. Converters are using PCR from bottles in other rigid and flexible applications.”
Meanwhile, for the less in-demand plastics, “nearly all the resin we (and many of our competitors) sell today is [priced] below virgin pricing,” Quinn says, “However, that is becoming increasingly difficult as virgin prices continue to decline.” Butler says she understands companies’ reluctance to increase their costs by using recycled material. “It forces a privately held company to be irresponsible fiduciarily to their stakeholders,” she says. Quinn concurs: “A lot of our longstanding customers … have really felt the pressure to look for the cheaper virgin alternatives right now,” she says. “Markets for colored, non-food-grade PE and PP are currently strong, but the quickly declining virgin resin pricing is putting these markets in potential jeopardy.”
Even when brands commit to using more recycled material, they sometimes hesitate to purchase the material—at least in considerable quantities—because they can’t find recycled resins with the quality and functionality they want at a price comparable to virgin material. That’s why Butler has her doubts that these sustainability pledges will result in greater overall demand. “If you want [recycled material] at price parity, and you want functional equality [with virgin material], there’s not true demand,” she says.
More than a half-dozen North American plastics processing facilities have announced new or expanded capacity during the past 18 months. (For capacity growth in chemical recycling of plastics, see “A Promising Formula” in the September/October 2019 issue of Scrap.) The IHS Markit report says that participants throughout the plastics value chain are “re-assessing their business models and either considering or already implementing vertical and/or horizontal integration plans,” such as virgin polymer producers adding recycled resins to their portfolio, or brand owners becoming plastic scrap processors as well as consumers. “We’re seeing [brand owners] investing in technology … some of them are getting directly involved in reclamations as well,” Holmes says.
For example, Nestlé Waters North America has partnered with CarbonLITE to produce PET bottles with recycled content. This winter, CarbonLITE is opening its third bottle-to-bottle PET processing facility, near Allentown, Pa., primarily to serve Nestlé, although it has other customers as well. With a projected annual processing volume of 120 million to 130 million pounds, CarbonLITE’s Pennsylvania facility will be larger than its other two, which are in California and Texas. “We want to expand as our core customer base requires,” Farahnik says.
Foreign-owned companies are investing in North American processing facilities as well. “Some of the Chinese facilities are starting to set up operations here in the U.S. since they can’t get product at home,” Jones says. For example, Roy Tech Environ (Decatur, Ala.), a subsidiary of a Shanghai-based plastics processor, purchased an 80,000-square-foot facility in Alabama to process scrap that it plans to sell to Southeast Asian customers. A similar scenario is unfolding in South Carolina, where Ecomelida, a U.S. subsidiary of China-based scrap importer Zhangzhou Sanlida Environmental Technology Corp., is building its first North American facility to process postconsumer plastic and paper.
Bangkok-based Indorama Ventures has invested in numerous North American facilities, including retrofits at Loop Industries’ Spartanburg, S.C., plant for manufacturing PET and polyester fiber; a new PET bottle recycling facility in Guadalajara, Mexico; and purchases of PET recycling facilities in Alabama and California. Indorama recently partnered with The Recycling Partnership (Falls Church, Va.) to improve U.S. residential recycling rates and committed to investing $1.5 billion across the globe to improve recycling.
Saunders sees new PE and PP processing capacity coming online in North America in 2020, but he cautions that it can have a downside: “Hopefully the new capacity won’t force prices so low that there’s no way to compete with them.”
Industry watchers have some ideas about why recycled plastics consuming capacity doesn’t appear to be growing as quickly—or as publicly—as recovered fiber consuming capacity. First, the paper recycling industry established itself decades ago, therefore it has “a tremendous time advantage … Plastic is a younger product with younger infrastructure,” Miller says. That might be one reason why recovered fiber consumers largely have been transparent about facility openings and expansions, whereas plastic recyclers and consumers are more tight-lipped about their plans. “I’m very comfortable with the data NERC has released on paper expansions. I’m not as comfortable with the data we’ve accumulated on plastic,” Miller says. Butler concurs: “I’m not getting really solid information, either,” she says. The lack of information creates uncertainty about which capacity expansion projects have come to fruition as announced and which have been delayed, undergone scope changes, or been canceled. But Alexander is optimistic. “We see a very robust market for recycled resin demand over the next five to 10 years,” he says.
Plastics recyclers are altering their business strategies to sell scrap domestically rather than search for new overseas markets. For nearly three decades, GDB International (New Brunswick, N.J.) shipped much of its plastic scrap overseas, with China its largest export destination. After China announced its import restrictions, “we saw the writing on the wall. We knew if our biggest market is getting affected in a blanket manner, our sales will be affected,” says GDB President Sunil Bagaria. In March 2019, the company invested in machinery to clean and pelletize some of the plastics it previously exported.
Experimenting with this new venture proved nerve-wracking, Bagaria says. “Because virgin prices have gone down continuously … that has put a strain on our profit margin.” Thus far GDB has not experienced the kind of return from selling pelletized recycled plastics as it did from exporting plastic scrap, “but we’re not giving up,” he says. It plans to scale up the operation with more equipment purchases, with the additional capacity expected to come online at a second GDB facility early this year. “Once we scale up, the economies of scale will come into play, and we’ll see the return on all the hard work our company is putting into this,” Bagaria says.
Supporting the Market
Processors and consumers of recycled plastics, as well as stakeholders outside of the recycling industry, are considering what else can further develop the North American recycled plastics market. Some want to increase the supply of recovered plastics. The American Chemistry Council (Washington, D.C.) launched a public relations campaign encouraging Americans to recycle plastics—and to recycle them correctly—to ensure a steady supply of feedstock for plastics recyclers. For the most in-demand resins, material collection is a barrier to growth, many industry participants say. Plastics recyclers have ample capacity to process postconsumer plastics from MRFs, APR’s Alexander says, and “there is plenty of investment that’s sitting on the sidelines, waiting to build new processing capacity in the United States, but they’re waiting for more material to be collected.” Thus, he suggests focusing on collection and MRF sorting infrastructure. Postconsumer plastics are considered more difficult to collect than other postconsumer materials for multiple reasons, including their light weight. It takes more collection of plastics to get a ton of material. “Once we hammer down and fix PET collection, there won’t be enough plants to recycle all the potential volume,” CarbonLITE’s Farahnik says.
Other industry participants would like to see government action drive greater demand for recycled plastics. “The time has come when … some federal help may be required for plastic recycling to continue,” Bagaria says. “Demand for recycled resin has to increase … Otherwise, the recycling industry’s biggest fears will become true: that we have the capacity, and there is no home for [the material]. That would be a disaster.” The government can and should create demand to foster an environment where plastic recycling is profitable, he says.
Farahnik notes that states with bottle-deposit laws have three to four times the recycling rates of non-deposit states. He suggests that a national bottle-deposit bill would increase PET collection. 2019 was a banner year for state lawmakers introducing bottle bill legislation—CRI’s Collins estimates 10 states introduced legislation, compared with the usual three or four annually.
Federal laws would move the needle on recycling faster and in a more uniform fashion, some industry participants say. Sen. Tom Udall (D-N.M.) and Rep. Alan Lowenthal (D-Calif.) introduced draft federal legislation in October 2019 that would impose a nationwide 10-cent container deposit law on beverage containers, regardless of material. It also would place extended producer responsibility requirements on plastics producers to design, manage, and finance a program to process plastics that might otherwise be landfilled. Funds from unclaimed deposits would go to the beverage producers to use for their EPR programs. Other parts of the proposal would ban certain single-use plastics, impose a fee on single-use carryout bags, and set a minimum recycled-content mandate on containers.
ISRI submitted comments in response to the proposal that support market incentives when markets do not yet exist. The comments also note that requiring manufacturers to design products so that they can be recycled is a “more effective way to reduce plastic waste.” It also voiced support for efforts to improve labeling, raise awareness about proper recycling, and increase recycled content in plastic products.
Mandatory minimum postconsumer recycled content levels for manufactured plastic products have the support even of those who customarily oppose government intervention. California’s Assembly Bill 792, introduced last year, would have required beverage producers to use 10% recycled content in their bottles by 2021 and 50% by 2030. The bill passed both branches of the state legislature, but Gov. Gavin Newsom vetoed it because he believed amendments to the bill would have allowed manufacturers to shirk their responsibilities to meet the recycled-content requirements.
A federal recycled-content mandate could achieve results more effectively and quickly than state mandates, sources say. Miller cautions, however, that “if all it does is shift buyers from one recycled material market to another … it’s meaningless.” He explains that “plastic fiber is currently the biggest market for recycled PET,” for example. “If [recycled content] requirements simply cause recycled plastic to be bought by bottlemakers instead of plastic fiber companies, we are not expanding the market for recycled plastic.”
Federal lawmakers have proposed other initiatives to advance plastics recycling and demand for recycled plastics. In November, U.S. senators Rob Portman (R-Ohio) and Debbie Stabenow (D-Mich.) introduced the RECYCLE Act, which would create a new federal grant program through the U.S. Environmental Protection Agency to help communities improve recycling education and outreach. It also calls for the EPA to more frequently review and revise its comprehensive procurement guidelines, which set recommended recycled content guidelines for federal agency purchases. ISRI applauded the bill’s introduction. “Through the consumer recycling education and outreach program, we hope to see improvements in the quality of the material entering the stream. And with a stronger procurement process, the federal government is in a position to help drive demand for recyclable materials,” ISRI President Robin Wiener says in a press release about the act’s introduction.
In December, members of Congress launched the Congressional Plastics Solutions Task Force, a coalition that plans to work with state and local officials and industry leaders to promote investment and education related to plastics recycling technologies and plastics recovery. Rep. Haley Stevens (D-Mich.), one of the founders, says in a statement that she hopes to build momentum around emerging technologies that are “being developed to increase the efficiency and availability of plastics recycling, repurpose more recycled plastics into high-value products, and ultimately, reduce the impact of plastic on the environment and human health.” Other federal interventions could include government subsidies or tax incentive loans for installing new plastics processing equipment.
Meanwhile, recyclers hope the sustainability movement will continue to put pressure on brand owners to use recycled content in their products and packaging. “People don’t realize the power they have when they decide to buy something with recycled content,” Quinn says.
Katie Pyzyk is a contributing writer for Scrap.
Both the public and manufacturers want products that contain more recycled plastics. Quality and pricing remain a challenge for some resins while demand lags for others.