The National Association for PET Container Resources recently released a report on the state of the PET recycling industry in the United States. The report is intended to give the reader an overview of the recycling of injection, stretch blow molded PET containers in the United States.
Information contained in this report was obtained through surveys conducted by the Association of Postconsumer Plastic Recyclers, R.W. Beck, Moore Recycling Associates, the U.S. Department of Commerce and data generated internally by the National Association for PET Container Resources.
In order to present as accurate a picture of these activities as possible, additional data and information was obtained through discussions with individual collectors, intermediate processors, reclaimers, converters, brokers, exporters, resin producers, bottle manufacturers, public recycling officials, consultants and key industry members.
The rate of growth for PET bottles and jars in 2003 was just slightly higher than 2002 at 6.5 percent. Considering the disastrous sales of beverages posted in May and June due to bad weather this could have been a much better number. Once again most of the growth was attributable to around a 23 percent increase in water bottle sales and almost 10 percent in isotonics with CSD being flat or less.
While a number of new PET packages were seen in the market, none were in high volume opportunities such as beer and single serve soft drinks. These applications, which require increased barriers, are developing more slowly than expected as end-users continue to evaluate the performance and economics of the multitude of available barrier enhancing technologies.
NAPCOR has determined that the total number of pounds of PET bottles and jars available in the United States for recycling in 2003 was 4.292 billion. This number reflects the total amount of PET bottle resin used by domestic bottle manufacturers from U.S., foreign and recycled sources less scrap generated and not reused, exported bottles and preforms and bottles less than eight ounces in size. This number is used in this report as the denominator in determining both the recycling and utilization rates.
The amount of post consumer PET bottles collected for recycling and sold in the U.S. was 841 million pounds last year. The breakdown of buyers is as follows: 518 mmlbs. purchased by U.S. reclaimers; 321 mmlbs purchased by export markets; and 2 mmlbs purchased for composite applications.
U.S. reclamation companies reported purchasing slightly fewer post consumer bottles in 2003 than in 2002. Conversely, the 321 mmlbs. of post consumer bottles exported consisting of 22.5 mmlbs. to Canada with the balance going to China. This represents a 16.7 percent increase over the record set in 2002. Thirty one million pounds of the total exported was in the form of dirty flake, a reflection that traders are trying to comply with the Chinese ban on the importation of post-consumer plastic bales.
U.S. reclamation companies continued to supplement their purchase of the U.S. post consumer bottles with bottles imported from Canada, Mexico and Europe totaling 61.8 mmlbs., as well as purchasing alternative feedstocks, totaling 42.4 mmlbs.
The stability seen in the bale markets during 2002 continued for the first four months of 2003 then yielded to a dramatic increase in pricing even while virgin prices were falling.
This phenomenon was brought on by aggressive pricing by Chinese buyers throughout the country; US reclaimers were confronted with the choice of competing or having nothing to run. Prices hovered near $.20/lb during the second half of the year for most large suppliers with export prices on the east coast sometimes exceeding those on the west coast. The aggressive export markets produced another oddity during the second half of the year when much deposit material was priced lower than curbside, a result of contracts tied to virgin pricing.
During 2003, 14 US reclamation plants produced clean RPET flake from post-consumer bottles. The total capacity of 877 million pounds gross weight in represents a slight increase over 2002 a result of two expansions and several de-bottlenecking projects. The plants consumed post consumer bottles, pre consumer bottles, post consumer strapping and other feedstock totaling 622 mmlbs for a capacity utilization rate of 71 percent. Six are vertically integrated back to end product (2 bottles, 2 carpet, 2 strapping) and account for slightly more than 55 percent of total capacity. Six plants have technologies that have received letters of non-objection (LNO) from the Food and Drug Administration, which allows the RPET produced to be used in direct contact with various food and beverage products.
2003 saw RPET consumption by US converters drop to 552 mmlbs - its lowest level since 1996. Even so, domestic reclaimers supplied 83.5 percent or 461 mmlbs of the demand, the balance coming from Canadian, European, South American, and Mexican reclaimers in that order. This reflected the inability of reclaimers to stay competitive with alternative feed stocks the second half of the year and a poor economy. Caught between escalating bale costs caused by aggressive export buyers and falling VPET prices due to new plant capacity, many reclaimers cut back production and /or built inventory.
While fiber applications continue to use the majority of RPET produced, its market share dropped for the third straight year. This directly reflects the dramatic reduction of textile customer applications due to foreign competition. What’s left in the way of carpet applications, industrial non-wovens and fiber fill should hopefully stay competitive near term.
And unexpected jump in RPET demand from sheet producers stemmed directly from high price and lack of availability of Q2 VPET during the second and third quarters.
RPET sale into engineered resins remained flat, indicating that this may be the threshold volume as buyers purchased for customers demanding a post consumer pedigree and little else.
The jump in RPET use for food and beverage bottles directly reflects increased use by Coke and Pepsi.
The dramatic drop in RPET consumption in non-food bottles was caused by the growing awareness that the 25 percent content required by California would probably not be necessary. This combined with favorable Q2 VPET contracts made the RPET alternative less attractive.
The miscellaneous or other category includes all other applications including coatings, color carriers, composites, thermal and chemical. The increase came from a number of new applications most of them involved in the TOP Bottle Project and new market penetration of existing technologies.
The amount of bottles available in 2003 for recycling increased to almost 4,300 mmlbs. The majority of this growth was posted in single serve water and isotonic containers.
Bottle volumes collected for recycling increased 44 mmlbs most of which reflected a huge increase in market share (but not recycling rate) in California and the reinstatement of plastics recycling in New York City. All of this additional volume, however, found its way to Chinese markets. While US and Canadian reclaimers essentially purchased the same volumes as 2002, Chinese buyers became the price leaders from the second quarter on and ended up buying an estimated 299 mmlbs or 35 percent of the total 841 mmlbs collected in the US. This calculates to a recycling rate of about 19.5 percent, slightly down from 2002.
Business-wise, the year started well for most market segments of the PET bottle recycling industry but ended on a decidedly sour note. First quarter VPET price increases allowed reclaimers to re-establish diminished margins while taking advantage of relatively low bale pricing in the $.08/lb range. However, by the second quarter a combination unanticipated excess VPET inventories caused by the bad weather that dramatically reduced beverage sales in much of the country during May and June and the re-emergence of aggressive export bale buyers began to negatively impact the RPET market economics. This dynamic of shrinking VPET prices and increased bale prices continued for the rest of the year. While most of the intermediate processors applauded this run-up of bale prices that by third quarter had doubled the price and by fourth quarter had put many suppliers in the $.20/lb range, the price for RPET flake remained price bound as VPET prices continued to slip.
The only bright spot for VPET and RPET producers was unexpected demand from the sheet market during the late second and early third quarter. This allowed Q2 virgin to stabilize even while Q1 pricing was beginning to erode and made RPET pricing once again attractive. Most merchant reclaimers were able to fend off price reductions from the bottle markets by shifting sales to sheet producers, but by the fourth quarter this opportunity has largely been dissipated by the wave of new resin production.
The oversupply of VPET resulting from these new plants caused significant VPET price deterioration until the end of the year when price increases in chemical raw materials forced resin makers to seek commensurate increases. By the third quarter most reclaimer margins were so squeezed that most cut back production leaving export buyers to compete mostly among themselves for bales.
One bright spot for resin producers was the tightness of raw materials globally that resulted in even higher prices for Asian resin producers and rendered them less competitive in North American markets.
However by years end no part of the PET bottle market was experiencing very profitable conditions, not the resin producers, not the bottle manufacturers, and certainly not the reclaimers.