March/April 1991
Increasingly, scrap processors are handling a commodity they know little about: plastics. Here is an explanation of the answers to how the scrap plastic industry compares to the business for other scrap materials.
By David J. Kaplan
David J. Kaplan is a senior sales associate for Maine Plastics Inc. (North Chicago, Ill.), a scrap plastic broker/wholesaler/processor affiliated with Maine Scrap Metal Inc. (Des Plaines, Ill.).
With increased public awareness in ecology and the environment, recycling--particularly plastic recycling--is receiving more and more attention. Fueled by both the public and private sector, plastic recycling is more than just a passing fad. It's big business.
For those of us whose roots are in scrap metal or paper recycling, it's our customers who are pushing us into the plastic business. Because of financial and mechanical considerations, manufacturers that once made everything from metal have expanded their material list to include many types of plastics. As secondary material processors, we must move in this direction also.
Recycling plastics is not, however, the same as recycling metals. Classification, marketing, contamination, and pricing of plastics vary greatly from the strategies involved in metallic scrap. Thus, in order to be successful in the plastic recycling business, these four areas must be “relearned."
Even within the plastic recycling industry, these strategies can differ depending on whether it's postconsumer or postindustrial plastics being handled.
In the postconsumer plastic arena--which includes such items as high-density polyethylene milk jugs and polyethylene terephthalate soda bottles--local government regulations, collection procedures, and marketing dictate a different way of doing business than is necessary for postindustrial plastic recycling.
Postindustrial plastics are those materials taken straight from the manufacturing facility prior to their intended use. They may be in the form of regrinds (ground-up scrap), purgings, cutoffs, virgin pellets, film, and so forth. Postindustrial plastics include both commodity and engineering resins. Commodity resins such as polyethylene, polyvinyl chloride, polypropylene, and polystyrene are both less expensive and more widely used than engineering resins. Examples of engineering resins are polyester, nylon, and acrylonitrile-butadiene-styrene.
What follows are answers to some of the basic questions regarding postindustrial plastic recycling.
Can’t I Mix All the Black Plastics Together?
The most apparent difference between the plastic and metal scrap businesses is the sheer number of different grades that must be kept separate. On any given day, your walk-in business may bring you an average of 10 to 12 different grades of metals. Some of these grades can be mixed together and the batch will still be marketable.
There are a dozen or so common classes of plastic resins, which, except in very rare cases, must be kept separate. Furthermore, within each class, there can be thousands of different grades. For example, currently there are more than 1,700 grades of polypropylene on the market, most of which can't be mixed together.
Now That I Own It, Can I Sell It?
Because of the vast number of plastics and the variation between them, marketing can be difficult, if not impossible. The problem is not money but, more often, fining a limited market.
In most of the scrap metal business, you can sell virtually anything in your inventory within a 500-mile radius of your plant, if you choose to accept the price, Thus, aside from exporting, which is common to both industries, metal recycling is a much more regional business than plastic recycling.
In the plastic business, it is necessary to market across the country, sometimes to no avail. There are several plastics you May never be able to sell because customer requirements or government regulations prohibit use of regrinds. In addition, if the virgin material was manufactured for a specific customer or industry that can't use their own scrap, marketing can be quite challenging.
Is a Little Contamination OK?
Foreign materials or contaminants are treated differently in plastics than in metals. For example, say you sell a load of brass to a smelter that reports a small percentage of dirt in the material. You dicker back and forth and agree on a price. You may not be happy with the deduction, but the load has been sold and you move on to bigger and better things. If the consumer wants too great of a discount, you may be able to locate a better price at another smelter.
In scrap plastics, there is no such thing as "a little contamination." You can't sell polystyrene with "some" polyvinyl chloride. Nor can you sell polycarbonate with just 5 percent acrylonitrile-butadiene-styrene. Only in very few instances are plastics containing foreign materials--including different plastics, wood, paper, and metals--marketable. Thus, it's vital to know your customer's needs and tolerances before you buy.
The biggest problem with cross contamination is the loss of integrity of the load. If you send out 44 gaylords of regrind polyethylene and one gaylord contains just 1 percent polyvinyl chloride, Murphy's Law suggests that the buyer is going to choose that gaylord to sample. And odds are that the consumer will be so afraid of the added expense from downtime due to bad material that the entire load will be rejected. In this scenario, not only would you have to resell the load, but you likely would have to resell your customer on your ability to provide usable scrap.
Don't take chances! When selling contaminated material, the only people who win are the truckers.
What’s My Material Worth?
Another difference between the scrap plastic and metal markets relates to pricing. Metals are internationally traded commodities with well-established market standards. Published prices are used as guidelines across the country. If you want to know what No. 1 copper is selling for on the East Coast, for example, all you have to do is look in the latest issue of the American Metal Market. The same is true for other metals.
Life is not so simple in the plastic scrap business. When selling plastics, the material simply is worth what someone will pay for it. There was a time when first-generation regrind sold for 50 percent of the prime virgin price. All you had to do to know what to charge your customer was to call a major producer or look in the latest virgin price schedule and cut it in half.
But this theory is only valid during certain economic times. Two-and-a-half years ago, for example, during a prime-resin shortage, regrind polyethylene was selling for 5 to 7 cents per pound less than virgin--which translates to about 80 percent of the virgin price.
On the downside of the cycle, when prime and secondary plastics are both prevalent, it's a buyer's market. This past year, for example, polyethylene regrind sold for 25 to 30 percent of prime virgin.
Who Can I Sell To?
As with the scrap metal business, there are several different levels in the scrap plastic industry in which to sell. Imagine a pyramid with the end user at the apex. This is the molder or extruder that must use a specific plastic or, if you're lucky, a specific grade of plastic. These users might be compared to specialty steelmakers: They have the most limited range of materials they'll purchase.
Somewhere in the middle of the pyramid is the compounder. Like a smelter, a plastic compounder buys several grades of similar scrap and blends them together in order to manufacture new material-in this case, a plastic resin.
At the broadest part of the pyramid is the plastic resin broker/wholesaler, which buys many grades of plastics. This is the buyer that likely can help you the most in the beginning of your entrance into scrap plastics. When choosing a broker, look for a large operation that can buy all types of plastics and can warehouse its inventory. In addition to being able to buy large quantities, such brokers have the ability to purchase and accumulate less-than-full truckloads.
A good broker can direct you in your purchasing as well. Every day I get calls from people fairly new to the plastic business who were talked into buying some exotic plastic alloy with limited markets. Others are persuaded to purchase good material, but it's in a form that needs so much work to make it marketable, it costs far more than its prime counterpart.
Thus, it's essential to know where you can sell material and how much it's worth before you buy. Collect representative samples and be able to correctly identify the material. Don't be afraid to ask the customer why they're selling the scrap; contamination should always be in the back of your mind. By asking questions and proceeding step-by-step, there are big profits to be made in plastic recycling.•
Increasingly, scrap processors are handling a commodity they know little about: plastics. Here is an explanation of the answers to how the scrap plastic industry compares to the business for other scrap materials.