November/December 2008
Demand for recycled PET bottles is strong, driving up prices and generating interest in the commodity. And with a collection rate of only 24 percent, this market has plenty of room for growth.
By Ann C. Logue
Picture a plastic soda bottle, a Mylar balloon, and a polar fleece jacket. These items appear very different, but they're actually the same: They're all made from polyethylene terephthalate—PET or PETE for short. One of the most popular consumer plastics, PET is in bottles and jackets, insulation and carpeting, packaging and strapping. PET plastic bottles are replacing glass and aluminum containers at a rapid rate, and the market for recycled PET is strong as well. High PET prices are creating opportunities for recyclers who can find ways to pull more of it out of the waste stream and into the recycling stream. As Marty Davis, president of Midland Davis Corp. (Moline, Ill.), puts it, "At the price of PET, I wish I had more."
PET on the Shelves
Though PET appears in a wide range of industrial and consumer products, most postconsumer recycling has targeted the "injection stretch blow molded PET container"—also known as the plastic bottle. About 5.4 billion pounds of PET plastic bottles and jars was produced in 2006, the last year for which data are available, according to the National Association for PET Container Resources (NAPCOR), based in Sonoma, Calif. That's up 7 percent from the previous year and nearly two and a half times the volume produced one decade earlier. PET proponents tout the bottle's durability and light weight—attributes that reduce manufacturing, shipping, and handling expenses—as reasons for the market's growth.
There has been some pushback against plastic bottles recently, specifically those containing bottled water. Environmentalists and a viral marketing campaign (www.tappening.com) have railed against bottled water, arguing that because water is readily obtainable from a fountain or tap, it's a waste of money, energy, and resources to bottle and transport it for anything other than emergency purposes. In the past few years, the mayors of San Francisco, Los Angeles, and Seattle have banned the purchase of bottled water with city funds. Chicago instituted a 5 cent-per-bottle tax on bottled water on Jan. 1, though industry groups have challenged the tax. This bottle backlash has yet to make a dent in consumer demand: The Beverage Marketing Corp. expects Americans to spend $12.6 billion on 9.4 billion gallons of bottled water in 2008, up 7 percent from 2007.
At the same time more manufacturers are using PET bottles, some are switching to bottles that use less material. Coca-Cola Co. (Atlanta) reports its PET bottles and caps now use 32 percent less plastic than they did when first introduced; PepsiCo (Purchase, N.Y.) and Nestlé USA (Glendale, Calif.) also report reducing the PET in their bottled beverage containers, making them lighter and easier to bale.
Collection Challenges
The vast majority of recycled PET in the United States is made from postconsumer bottles, but collection is a weak link in the PET recycling chain. The United States recycled less than 1 out of every 4 pounds of PET bottles generated in 2006, NAPCOR reports. That rate is on the upswing, but it has not kept pace with the wave of PET products entering the market.
Back in 1995, the United States recycled nearly 40 percent of the 1.9 billion pounds of PET bottles on the market. Over the next eight years, however, collections remained stagnant while the bottle supply more than doubled, bringing the recycling rate below 20 percent in 2003. Collections grew steadily between 2003 and 2006, reaching about 1.3 billion pounds, a 24-percent rate. With a 2006 average price of 15 cents a pound, however, that means $623 million worth of material went into landfills. Clearly, there's an opportunity for recyclers to capture more of this material to meet market demand.
"The creative recyclers are finding ways to capture a lot of material that has been going to landfills," says Steve Grossman of Grossman Environmental Recycling, a scrap broker in Westerville, Ohio. That's easier now, he says, because several years of high commodity prices have given recyclers the profits to invest in new markets, and the strong prices for PET give them an incentive to explore new ways to collect it. Many recyclers are ordering equipment and investing in their plants so that they can handle more containers, he says.
A report on PET bottle recycling best practices created for the state of Washington identifies four collection avenues: returnable container programs (bottle bills), curbside collection, drop-off centers, and buy-back centers—the report's term for the traditional scrapyard business model of purchasing scrap materials from suppliers. In that model, the payment is the incentive for the supplier to collect the material, says Michael Schedler, NAPCOR's director of technology. But that does not work well in the U.S. plastics market, he says, because it takes a lot of bottles to make up one pound of PET. Further, the value of the material is still low compared with, say, aluminum cans. For plastic, "buy-back works in China and it works in Brazil, but that's because the standard of living [there] is so much lower," Schedler says.
If there's value to be had, however, you can be sure scrap recyclers are thinking about how to make the most of it. The PET bottle drive might not replace the aluminum can drive any time soon, but U.S. recyclers "are becoming a lot smarter" about sourcing PET, Grossman says. They're finding customers that generate substantial quantities of bottles along with other recyclables, such as stadiums and schools.
Of the other three collection methods, curbside recycling is likely to play a large part in increasing the postconsumer PET recycling rate. The NAPCOR report points to the installation of 26 automatic sorting systems at material recovery facilities as one reason collections were up in 2006. The Portage County, Ohio, Solid Waste Management District reports that it collected 565,285 pounds of PET in 2007 through its MRF, the largest publicly owned and operated one in the state. "We're seeing an increase in all recyclables, and we're not having a difficult time selling anything," says William Steiner, the district's director. Public education has been essential to boosting residential recycling in his county, Steiner says. He spends a lot of time educating people on the importance of recycling and how it generates revenue for the county.
Midland Davis has been managing the curbside recycling programs in Pekin and East Peoria, Ill., for three years, and the company began providing the service in Moline, Ill., in April. Participation is high in Moline, Davis says, approaching 90 percent. To what does he attribute that success? Participation is easy, he says, and residents are billed for the service whether or not they use it. All told, Midland Davis handles about 35,000 pounds of PET each month.
The potential of increased curbside collection is mitigated somewhat by the contamination problems that seem inherent in that collection method. Well-meaning consumers throw all different types of plastics in their bin, and those other plastics end up as contaminants in PET bales. Further, PET recyclers echo the paper recyclers' concerns about glass particles that get mixed into their materials via single-stream collections. The state of Washington's best practices report recommends collecting glass separately, or at least not compacting truckloads of mixed recyclables, which can crush the glass and exacerbate the problem.
Plastics recycling will only grow with the support of public policy in the United States, NAPCOR's Schedler says. Portage County took a step in that direction this year: It told food vendors at the county fair they had to recycle if they hoped to return the following year. With vendor spaces sold out and new vendors on a waiting list, the incentive worked, Steiner says.
The PET Recycling Process
Scrap processors that collect PET containers typically separate them by color—clear plastic, with the fewest contaminants from coloring agents, has the most value—and bale them for sale to specialized plastics recyclers or reclaimers. Those companies granulate the plastic into what's called "dirty" flake. They might sell it at that stage or continue processing it into "clean" flake by washing it and removing contaminants such as paper, metal, and other plastics. A reclaimer can melt the clean flake and form it into a new product, or it can deconstruct the material further via depolymerization, a process that uses glycolysis and methanolysis to break polymers into their individual chemical components, and rebuild it via repolymerization, which turns the components back into a repeating macromolecule. Repolymerized PET can become beverage bottles, the highest-value use, though lesser grades of PET also are much in demand. The bulk of recycled PET becomes fiber, for example—a use that can accommodate a lower quality of reclaimed material than direct-contact food packaging.
Because the flake processing technique is more important than the source of the feedstock, recycled material can be used in almost any PET product. The U.S. Food and Drug Administration has studied the use of postconsumer PET in food-contact packaging for nearly 20 years, and its Web site lists dozens of approved applications for using recycled PET in food and drink containers.
A shortage of PET reclamation capacity can explain part of the gap between the postconsumer PET supply and the volume of PET recycled in the United States, says NAPCOR's Schedler. More reclamation capacity can lead to more demand, which can drive up PET prices and create more incentive for the material's collection. Even though the industry saw two plant expansions in 2006, those new ventures did not fully offset the closure of two reclamation facilities. As a result, reclamation capacity fell by 100 million pounds from the previous year, to 817 million pounds.
Demand and Prices
If the United States were to build more PET collection and recycling capacity, would there be enough demand for the material? The sales volume of U.S. postconsumer PET bottles has grown for five consecutive years, NAPCOR reports, rising about 60 percent from 2002 to 2006, from 797 million pounds to nearly 1.3 billion pounds. The vast majority of that growth came from demand outside the United States. Exports more than doubled in the five-year period, rising from 275 million pounds to 653 million pounds, including PET in bales of mixed plastics. Excluding the mixed plastics, recycled PET exports reached 618 million pounds in 2006. The bulk of the exported material went to China, Canada, Vietnam, and India.
The domestic picture showed modest growth in that same five-year period. Though demand fell about 9 percent from 2005 to 2006, U.S. reclaimers purchased 24 percent more bottles in 2006 than they did five years earlier. Facing competition from Asia for the domestic supply of recycled PET, the reclaimers are meeting some of their demand with imports, bringing in 97 million pounds of recycled PET in 2006, about 80 percent of which came from Canada and Mexico.
About half the recycled PET consumed in the United States goes into fiber, though that category fell slightly from 2005 to 2006, to 422 million pounds. The greatest growth in demand that year came from food and beverage containers, which used 139 million pounds, or 16 percent, of U.S. recycled PET. That's up from 115 million pounds and 13 percent in 2005. Strapping comprises another 15 percent of the domestic market, followed by sheet and film (9 percent) and nonfood bottles (6 percent).
The demand for recycled PET is growing despite a surplus in the supply of virgin PET, one industry insider notes. He believes the market "could absorb twice as much [recycled PET] as is being produced now," in large part because customers are demanding products made from recycled materials. Because of the strong demand, recycled PET prices have been reaching historic highs and approaching the price of virgin PET. In mid-September, a bale of clear scrap PET sold for around 24 cents to 28 cents a pound. That's more than double the 13-cents-a-pound average price in September 2006.
High oil prices are likely another factor raising recycled PET prices. Virgin PET producers must compete directly with gasoline producers for paraxylene, which is derived from crude oil. (Paraxylene is further refined into purified terephthalic acid, or PTA, one of the two components of PET.) As oil prices rise, so do prices for its derivatives: paraxylene, PTA, and PET. Because virgin PET prices essentially set the ceiling for recycled PET, as they go up, PET reclaimers can implement price increases as well. Grossman doesn't expect prices to continue going up indefinitely, though. "We see them starting to level off," he says, in part due to corrections after dramatic increases, as well as the weakening of the economy. He's seeing slight slowdowns from exporters and domestic buyers alike.
One significant development in the PET recycling world is Coca-Cola's establishment of what it calls the world's largest bottle-to-bottle reclamation facility. This venture with United Resource Recovery, a plastics recycler in Spartanburg, S.C., which is scheduled to open at the end of this year, will recycle 100 million pounds of postconsumer PET bottles annually, the company reports. In early 2008, the company launched a line of T-shirts made from a blend of cotton and recycled PET fiber and sold at Wal-Mart under the "Drink 2 Wear" brand. Each shirt is made from the equivalent of three or four 20-ounce soda bottles. The entire industry might see the effects of Coca-Cola working the publicity machine that made it one of the world's most recognized brands to promote products made from this recycled commodity. •
Ann C. Logue is a writer based in Chicago.
Demand for recycled PET bottles is strong, driving up prices and generating interest in the commodity. And with a collection rate of only 24 percent, this market has plenty of room for growth.