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The plastics recycling industry has seen many market cycles throughout the past 30 years, each downturn caused by a unique set of circumstances that brought about a market correction and eventual rebound.

When markets began to weaken in 2016, it looked like a familiar cycle. However, as compounding factors continued to erode market conditions well into 2017, it became apparent this was not an average cycle. One of the starkest indicators of this is perhaps the casualties of plastics recyclers that continue to mount. A number of factors have contributed to what many believe is the perfect storm for a downward cycle that may forever leave its impression on the industry.

With enough distance behind us since this storm first hit in 2015, we are beginning to get a sense of what kind of industry will emerge once the storm passes. If all conditions hold steady, the plastics recycling industry is coming to terms with the fact that pricing relief likely is not imminent, as prime resin pricing is not expected to trend upward in the next few years and the domestic supply of recycled plastics could increase significantly. This means recyclers are looking at unique ways to maximize value along the value chain.

In this time of transformation that has put numerous recyclers out of business, others see a path forward to creating new value and are doing more than simply surviving; they are investing and thriving. What sets these recyclers apart, and how are they uniquely positioned to not just weather the storm but to use it to set a new direction for their businesses?

The Plastics Industry Association (PLASTICS) interviewed two recyclers and an equipment supplier to the industry to learn how these past 18 months have shaped their businesses and what factors are converging to make their experiences positive.

Equipment sales post a healthy rebound

Felix Hottenstein of Nashville, Tennessee-based MSS Inc., the optical sorting division of San Diego-based CP Group, offers that company’s perspective as an equipment supplier.

Hottenstein reports that overall sales for MSS have increased significantly over the past months, attributing the gain mostly to recycled commodity prices for paper, old corrugated containers (OCC) and metals coming out of their slumps last year. Material recovery facilities (MRFs) are seeking to improve their efficiencies and sorting capabilities to further extract value from those streams. Recovery of plastics may benefit as other materials are better sorted and recovered.

“Compared to last year’s sales, 2017 will be much better,” Hottenstein says.

He’s not ready to say if this is a clear signal of general market optimism or improved equipment capabilities, “but it does look like customers expect more consistent and stable prices,” he says.

It’s not just MSS’ customers that expect more consistency and stability; the banks that finance these expansions also feel more comfortable as well.

MRFs in particular again are investing in automated sorting technology for a few reasons. First and foremost, near-infrared (NIR) sorters, in particular, can perform detailed resin identification functions that mechanical or human sorters cannot perform. Secondly, operators are looking to improve the overall efficiency of a facility or a sorting step and to save on manual labor costs. In today’s market, with lower unemployment rates, MRFs are having difficulty finding and retaining laborers.

MRF operators also are revisiting bale quality as a business strategy, as they rightly have been expecting the Chinese market to shut down imports.

The increasing variety of plastics packaging also has created the need for more automation for effective sortation, which will help MRF operators improve quality and competitiveness.

Overall, people understand that recycling markets fluctuate and that, when there’s a down cycle, companies have to push through until the industry rebounds. It can be very difficult to project how long these downturns can be.

In Hottenstein’s experience, people do not tend to invest in down markets. He says he sees the uptick in equipment sales resulting from better pricing for certain commodities and demand for higher quality recyclables and reduced labor costs.

For MSS, the competitive strategy is multipronged:

  • Leaps in innovation occur every three-to-five years in sensor-based sorting technology. MSS says it ensures it designs and manufactures equipment that meets current and anticipated customer needs in the future.
  • For MRFs, it’s not just about optical sorting units; rather, it’s more about the overall package into which that technology is integrated. MSS and its parent company, CP Group, say they are committed to providing that larger technology package that offers optimized solutions to customers. Optical sorters are just one piece of about half a dozen other key technologies that make up a MRF.
  • Unlike more straightforward technologies, such as magnets, that haven’t changed significantly over time, optical sorting manufacturers constantly are challenged to innovate because of evolving forms of packaging. MSS is confident it is staying ahead of that curve, Hottenstein says.

He sees technology advancement opportunities in several emerging areas. One of the more recent developments has been a more comprehensive optical sorting solution for flexible packaging. If a MRF is designed properly, he says he believes the automated sorting technologies of today can handle this packaging type, particularly as demonstration projects such as the Materials Recovery for the Future (MRFF, www.materialsrecovery forthefuture.com) suggest.

In other areas, for example, it remains to be seen whether it will become economically feasible to sort black plastics by resin type and how emerging artificial intelligence (AI) technologies can be applied to automated sorting systems.

Recyclers get creative in producing new value

Jon Stephens of Avangard Innovative, headquartered in Houston, says that company has doubled down in two particular areas: first, with installation of two low-density polyethylene (LDPE) recycing lines and, second, with the launch of its Sustayn analytics platform. Both of these efforts create a unique value proposition that Stephens says he believes will give Avangard a unique edge with customers that will yield mutual benefits for Avangard and its clients going forward.

Avangard has purchased two LDPE film recycling lines, each with capacity of about 3,000 pounds per hour. Line one was on schedule to begin operating in August, while the second line will be operational in December 2017.

Stephens says he believes the company’s emphasis on upfront sorting systems for these lines will be key to the success of its expansion. Its elaborate processing system includes a Vecoplan shredder that can handle 7,000 pounds per hour, followed by MSS sorters that address contamination and remove much more paper than Avangard anticipated being present, he says, which helps reduce odor. Once shredded and sorted, the material is run through one of two Starlinger recoSTAR Dynamic 165 C-VAC extruders that use a devolitizing technology to remove odor and the burnt paper smell that might result from small amounts of paper contamination. That technology is combined with blenders that can handle 25,000 pounds. Avangard plans to blend and quality control (QC) test each lot it produces to meet tight quality specifications, something that no one on the market is doing today, Stephens says.

In addition to driving quality within the company’s LDPE recycling facility, Avangard has committed to driving quality at the point of generation in partnership with its customers. Avangard launched its Sustayn analytics platform in 2016, which is a technology platform to track and manage waste and recyclables at the source. Sustayn technology starts with smart balers and floor scales at customers’ sites. Each bale is weighed, and cameras photograph each bale to make sure it’s consistent with how the operator has coded the material for sale. The system then prints a bar code for inventory purposes. Photos are uploaded to the cloud, so Avangard can measure productivity and track quality. This reduces potential loss and miscommunication in the transaction, according to the company.

Sustayn gives power to clients to use technology to make a real-time difference in their programs,” Stephens says. “It also allows Avangard to focus on capture percentage rate rather than diversion rate,” he adds.

To date, Sustayn is active at about six of the company’s clients, who see an average improvement of from 25 percent to 30 percent in their programs from landfill cost savings and increased recovery, which translates to profit.

Stephens says he believes Avangard has been uniquely positioned to make these changes for a variety of reasons. First and foremost, the company has made its name as a recycling and waste optimization company, managing the material streams for its clients because it isn’t tied to one commodity exclusively. Avangard also sells equipment, such as foam densifiers and smart balers, and acts as a distributor of other equipment manufacturer’s balers and compactors. Its equipment division has seen steady sales with a slight movement upward. Avangard also has a brokerage business.

Stephens says commodity trading is getting more difficult every year. To be successful in this tightening market, brokers need to look at how they can create partnerships to try to grow the business; but, Stephens adds, it has been “hard to build a long-term strategy around that.”

Despite these innovations to date, Stephens says room for further growth and expansion remains. “There’s always the potential for that next plant, but [our] biggest plans for growth will likely be outside of the plant, at customer sites,” he says.

The company will continue to look for opportunities to use optimization technology in a way that will yield growth. Stephens says Avangard is hopeful major retailers and brand owners will bring significant growth to the portfolio.

In the end, Stephens says, “Avangard will keep evolving to stay competitive and cutting edge.”

He continues, “The company’s experience over the years has been a huge asset. Avangard has weathered many down cycles. We know how to manage these dips and each cycle Avangard goes through. With each cycle, we suffer a little less and make fewer mistakes. We are confident we know how to navigate this one and will continue to grow using the right strategy.”

Compounding becomes key

Jim Angelopoulos, president of Toronto-headquartered Antek Madison, says compounding presents a growth opportunity for his company.

Antek, which traditionally has been a collector and exporter, is evolving into a processor and compounder, which has been a “big evolution,” he says. “This was not an evolution that was required just a short time ago but became necessary to surviving in this environment if you can afford to do it.”

That means putting in new equipment, such as extruders, to the tune of millions of dollars.

“When you are a material supplier, be diversified with multiple avenues to sell your product so you are insulated from volatility.” – Jim Angelopoulos, Antek Madison

The reality is that outlets for the material Antek was bringing in could disappear in a down market. Making a product that has superior or premium properties gives Antek an advantage in this market against competitors. As part of that, the company has had to add better sorting technologies, blending systems and loading systems to create value using problematic materials. Better technology and enhanced efficiency and processing also improve the bottom line.

On the back end, Antek also has invested in broader testing capabilities, such as a Fourier-transform infrared (FTIR) spectometer and equipment to do melt indexing and impact testing, etc., for improved quality control to meet tight customer specifications.

Angelopoulos says he believes the key to Antek’s success has been persistence and market knowledge.

His recommendation to others in the plastics recycling industry: “When you are a material supplier, be diversified with multiple avenues to sell your product so you are insulated from volatility. We are busier now than we ever have been, and that’s because competition is getting decimated. You can’t be successful doing just one thing or being a ‘one hit’ wonder.”

Angelopoulos says he believes a plan for continuous improvement is key to future growth. In terms of specific growth strategies, he says he is leaving that up to the market. “The market will drive us toward which way we proceed. Agility is required to survive this cycle,” he says.

The ever-evolving game of recycling

If there’s one thing we’ve learned collectively from the recycling market fluctuations over the years it is that very little remains static, particularly for the plastics recycling industry. However, with each cycle the question becomes, “How much adaptation is required to survive the cycle?”

Recyclers are being forced to look at new opportunities in the recycle value chain to cut costs or to bring added value that can justify the material costs of recycled resins. This means enhanced relationships with customers that will drive better quality and efficiency, introducing automated sorting technologies that will help reduce labor costs and produce materials that meet tight customer specifications and can truly perform at near-virgin-like levels. Agility will be the key to evolving quickly enough to weather the conditions of this market cycle, which may be shaping up to the perfect storm for plastics recycling in the U.S.

The author is the vice president of sustainability for the Washington-based Plastics Industry Association (PLASTICS). She can be contacted at kholmes@plasticindustry.com.

For more information: Antek Madison, 416-321-1170, www.antekmadison.com; Avangard Innovative, 281-528-0700, www.avaicg.com; MSS Inc., 800-462-5311, www.mssoptical.com