Maya Ellison
Recycling, especially plastic, is a profitable business that has been under attack due to the economics involved in the process. The recycling industry is facing challenges due to the decreasing profitability model as oil prices have gone down, making it less profitable for petrochemical companies that produce plastics to rely on recyclables. Sorting and cleaning plastics is a costly process, and with the price of recycled plastics declining, recycling is becoming less profitable. However, the pandemic has driven up prices for recycled plastic, making it profitable for some municipalities for the first time. The demand for recycled plastic has increased, with companies like Nine Dragons investing in recycled paper and plastics recycling facilities.
| Characteristics | Values |
|---|---|
| Sorting plastics is a costly job | The careful sorting and cleaning of plastics that contain food remnants, labels, and other debris to get the quality of plastics needed for reprocessing into pellets is expensive |
| Sorting takes time | The more intensive sorting process takes too long to process the scrap profitably |
| Oil prices | When oil prices are low, petrochemical companies that make plastics rely less on recyclables |
| Imported recyclables | Restrictions around the world on imported recyclables weigh on the sector |
| Demand | The demand for recycled plastics is high due to the pandemic |
| Market pricing | Market pricing for curbside recycled plastic in July 2021 was up between 166 and 1200% from the previous year, depending on the type of plastic |
| "Lightweighting" of packages | Packages with less physical material and more complexity as a result of design challenges are less profitable to recycle |
| Paper recycling | With the price of recycled plastics declining, paper recycling is becoming more popular |
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What You'll Learn
Sorting plastics is costly
Sorting plastics is a crucial but challenging aspect of the recycling process. The complexity of sorting plastics is due to the existence of hundreds of different types of plastics, each with unique characteristics such as colour, shape, structure, toughness, adaptability, and melting point. This diversity of plastic types necessitates meticulous sorting to prevent cross-contamination and ensure effective recycling.
The sorting process is essential for recycling companies, as it helps increase the value of the recycled materials. Sorting plastics to a high degree of purity allows polymers to be reused and retain their value. However, the task of sorting is made more intricate by packaging design, as certain features, such as black plastic, plastic sleeves on PET bottles, and products with multiple layers, can lead to the disposal of valuable materials.
The sorting process itself can be intricate and time-consuming. Objects to be sorted move swiftly on conveyor belts in recycling facilities, reaching speeds of around three metres per second. Sorting involves separating light plastics, such as polyethylene (PE) and polypropylene (PP) films, from heavier and more rigid plastics. Additionally, near-infrared systems are employed to differentiate between various polymer types.
The cost of sorting plastics is a significant factor in the overall economics of recycling. The optimisation of the sorting process is crucial for reducing costs and improving efficiency. Various strategies, such as the utilisation of novel optimisation models, are being explored to minimise the overall cost of plastic waste sorting systems while enhancing recycling efficiency. These strategies consider factors like the overall cost, revenue obtained from selling recycled plastics, and the potential for cross-contamination.
Furthermore, the sorting process is influenced by factors such as the time of year, impacting the types and quantities of plastic items to be recycled. For example, there may be an increased number of plant pots recycled during the summer months. This seasonal variation underscores the dynamic nature of the sorting process and the need for flexible and adaptable strategies.
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The price of recycled plastic is declining
The ""lightweighting" of packages, which results in less physical material and more complexity, also makes them less profitable to recycle. Additionally, China's decision to stop importing recyclable waste in 2018 has had a significant impact on the business model of recycling. The demand for recycled materials has decreased, affecting the profitability of recycling companies.
However, it is important to note that the profitability of recycled plastic can fluctuate. For example, during the pandemic, there was a sudden boom in plastics recycling, with market pricing for curbside recycled plastic increasing significantly. This was attributed to pandemic-squeezed supply chains and increased demand. Nevertheless, experts predict that market prices for recycled plastic will eventually fall, as they have done in the past.
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Oil prices impact recycling profitability
Oil prices have a significant impact on the profitability of the recycling industry. Plastic is derived from oil, and when the price of oil drops, the production of new plastic becomes more affordable. This poses a challenge to the recycling industry as the process of creating recycled plastic can become more expensive than simply making new plastic. The profitability of the recycling model decreases as oil prices go down.
The recycling industry is a for-profit business, estimated to be worth $100 billion a year. When oil prices are high, recycled plastic becomes a more affordable alternative for manufacturers. However, when oil prices fall, virgin plastics become more appealing to consumers and manufacturers due to their lower cost. This shift in preference can lead to a decrease in demand for recycled materials, negatively impacting the profitability of the recycling industry.
During periods of low oil prices, recycling companies may struggle to compete with the cheaper option of virgin plastics. In some cases, they may be forced to shut down their plastic recycling activities or face higher operating costs. This can result in a decrease in recycling capabilities and a potential setback for sustainable practices.
On the other hand, high oil prices can benefit the recycling industry. When oil prices rise, recycled plastic can become a more cost-effective option for manufacturers, increasing the demand for recycled materials. Additionally, high oil prices contribute to expensive plastic products, making recycled alternatives more attractive to consumers and manufacturers.
It is worth noting that other factors, such as consumer demand, government policies, and advancements in recycling technology, also play a role in the profitability of the recycling industry. While oil prices have a significant influence, they are not the sole determinant of the industry's success.
In conclusion, the impact of oil prices on the profitability of the recycling industry is complex. While low oil prices can make virgin plastics more affordable and appealing, high oil prices can drive up the demand for recycled materials. The recycling industry's profitability is influenced by a combination of market trends, consumer preferences, and the cost of alternative materials.
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Demand for recycled plastic is increasing
The demand for recycled plastic is increasing, and this is reflected in the market pricing for curbside recycled plastic, which was up between 166 and 1200 percent in July 2021 from a year prior. This demand is driven by the pandemic-squeezed supply chains, which have driven up prices for recycled plastic. For example, the prices that the Ulster County Resource Recovery Agency (UCCRA) could fetch from manufacturers for "natural" plastic (i.e. undyed milk jugs) were 42 cents a pound in July 2020 and peaked in May 2021 at 94 cents a pound. Color plastics (i.e. a dyed laundry detergent bottle) were 4 cents a pound in August 2020 and 40 cents a pound in April 2021.
This increase in demand has also led to a reopening and expansion of U.S. mills to accommodate recycled paper. One of the world's largest papermakers, the Chinese recycled-paper giant Nine Dragons, bought several mills in the U.S. in 2018 and 2019 to adapt them to process more recycled material. Another Shanghai-based company, Roy Tech Environ, opened a plastics recycling facility in Alabama in 2018. Ecomelida, a Chinese recycler, is opening a plastics and paper recycling facility in South Carolina.
However, it is important to note that the profitability of recycling plastic is dependent on various factors, such as the cost of sorting and cleaning plastics, the price of oil, and the demand for recycled materials. The sorting and cleaning of plastics that contain food remnants, labels, and other debris is a costly and time-consuming process. The profitability of recycling plastic is also impacted by the price of oil, as petrochemical companies that make plastics rely less on recyclables when the price of oil is lower. Additionally, the demand for recycled materials can be affected by restrictions on imported recyclables and the availability of alternative sources of raw materials, such as China's decision to stop importing recyclable waste in 2018.
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Recycling is a challenging business
The profitability of recycling is also impacted by the price of oil, which is the core commodity of petrochemicals companies that make plastics. When oil prices are low, these companies rely less on recyclables. Additionally, the demand for recycled materials can affect the profitability of recycling businesses. For example, China's decision to stop importing recyclable waste in 2018 hurt the business construct for recycling companies, as they lost a significant buyer of their recycled materials.
Furthermore, the recycling process itself is complex and energy-intensive, especially for plastics. The value of post-consumer plastic scrap often lies in the BTUs it can deliver as energy, rather than its potential to be recycled. As a result, most plastic ends up in landfills, and even when consumers recycle an item, it does not always get recycled in the end. The success of recycling programs also depends on consumer and business demand for products made from recycled materials, which may not always be present.
Despite these challenges, some companies are still finding ways to make recycling profitable. For instance, the Coca-Cola Company's plant in South Carolina recycles old soda bottles into new ones, and some municipalities are seeing profits from their plastic recycling programs for the first time due to increased demand during the pandemic. However, the history of the recycling pricing market suggests that these high prices may not last, and recycling will once again become less profitable.
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Frequently asked questions
Recycling is profitable for plastics companies when the price of oil is high, as plastic is made from processed oil. When the price of oil is low, recycling becomes less profitable for these companies.
When the price of oil is low, petrochemicals companies that produce plastic rely less on recycled materials.
Sorting and cleaning plastic is a costly process, and the lightweighting of packages has made recycling certain materials less profitable.
