A Cahners Publication May 1993

~ Polyethylene prices will stay low p.24

~ Powder & bulk solids handling p.29

~ Transaction price survey results p.47

~ .•--

the company, it is the CommercialProducts division that leads the"closed loop" recycling effort in low-density polyethylene (LDPE) and lin-ear low-density polyethylene(LLDPE) stretch wrap. "It is closedloop in the sense that the market sec-tor that used the stretch wrap gets itback in the form of a new productinstead of putting it in a landfill,"says Charles Lancelot, director oftechnology and business develop-ment for Rubbermaid CommercialProducts.

Lancelot, who oversees supplierselection and sourcing of recycledmaterials, says that in 1993 the divi-sion will use about 6 million lb ofrecycled LDPEjLLDPE in more than50 styles of refuse containers andother products, all of which will have20% or more recycled content by theend of the year. "Rubbermaid Com-mercial Products is converting, onthe average, a product a week to recy-cled content and is on target to use 9-10 million lbjyr of recycled LDPE by1995," he says. He says the emphasison recycled LDPEjLLDPE makessense for Rubbermaid from a practi-cal and an economical viewpoint.

"A variety of our refuse containersare molded from LDPE, and it is

How buyers can helpsalvage recycling

Left with thin, if any, profit margins on some of theirproducts, recyclers look for ways to increase marketdemand for recycled plastics. Rubbermaid helps thecause by "closing the loop JJ in LDFE stretch film

By John Conway / Senior Editor

RUbbermaid, a worldwide mar-keter and manufacturer ofplastic and rubber products for

household and commercial usesbased in Wooster, Ohio, views the useof recycled plastics in its merchan-dise as more than just the environ-mentally correct thing to do.

"It goes beyond the altruism ofrecycling that everybody is into thesedays," says Joe Ramos, general man-ager of Rubbermaid Commercialproducts Inc. in Winchester, Va. "It isfundamental to our business and willdetermine our ability to competeover the long term." Ramos says thatin the not-too-distant future con-sumers will be demanding plasticproducts with recycled content, mak-ing it imperative for businesses toproduce quality products with recy-

cled resins.While Rubbermaid's House-

wares Products division is thelargest potential consumer ofpost-consumer resins (PCR) in

Charles Laacelot, director oftechnology and business develop-ment at Rubbermaid Commer-cial Products, leans on one of thecompany's refuse containersmade with recycled materials.

always best to match as closely aspossible recycled resins to the origi-nal virgin resins," says Lancelot."Another advantage is that virtuallyall stretch wrap is colorless, whichmeans we can manufacture productsin standard colors. It also is a hightonnage material, making it econom-ical to collect. Stretch wrap doesn'thave the visibility of HDPE (high-density polyethylene) containers, butit is easier to incorporate into ourtypes of products."

"Razor thin margin" in HDPEAt this point in time, Rubber-

maid's success in recycling stretchwrap appears to be the exception tothe rule as many companies in theplastics recycling industry have hit asnag called profits.

"The reality is that there are anumber of recyclers who are hangingon by their fingertips," says DennisSabourin, vice president of post-con-sumer procurement and recyclingindustry affairs at Wellman Inc.,Shrewsbury, N.J., as well as chair-man of the Association of PlasticsRecyclers (APR), a trade group with60-plus members.

In strict dollars and cents, it costsmore for manufacturers to use sometypes of PCR than it does to use vir-gin materials. For example, recycledHDPE, perhaps most recognizable inthe form of plastic milk jugs, cur-rently is priced about l Ocjlb higherthan virgin HDPE.Few in the recycling industry would

dispute the fact that recycled natural-grade HDPE should sell for 35-40~/lb.Even before actual processing begins,costs can be 8-12~/lb to collect, sortand bale the HDPE bottles, and com-panies still have the bulk of theirexpenses in grinding, washing, dry-ing' pelletizing and shipping. Duringmost of 1991 and 1992, buyers werepaying closer to 8~/lb for top-qualitynatural-grade HDPE bales.

This year, however, began withdemand for natural-grade HDPEbales rising, mainly due to exports.With demand up, recyclers foundthemselves paying closer to 12~/lb."It's tough," says Roger Prevot, pres-

More than 50 stylesof Rubbermaid /s

refuse containers willhave 200/0 or more

recycled LDPE/LLDPEby year-end.

ident of Graham Recycling Co. inYork, Pa. "If there is a 2-3~/lbincrease in raw material costs, thereis really no way to get relief on theselling price, especially with virginprices at or near historic lows."

According to exclusive data fromCPI Purchasing's Transaction PriceSurvey, virgin HDPE, blow-moldinggrade, averaged 30~/lb in the firstquarter of this year. To put this in per-spective' the first quarter average in1991 was 46.5~/lbi in 1990, the firstquarter average was 45~/lbi in 1989,it was 52~/lb and in 1988, it was43~/lb. "In order to compete, mostsuppliers have had to sell recycledHDPE at the same price level as vir-gin materials," says Lancelot. "Thatleaves a razor thin, if any, margin."

Bruce Fortin, general manager atEnviroplastics in Auburn, Mass., saysthe selling price of recycled resins,while heavily influenced by virginprices, is dictated by quality. "If yourrecycled material is of high enoughquality, you can compete with virginprices," he says. He says Enviroplas-tics has proprietary technology thatallows the company to produce cost-

competitive recycled resins.Wellman, at one time a major play-

er in recycling HDPE, has all butdropped out of the market. "We'restill recycling HDPE base caps andwe have the capacity to get back intoit," says Sabourin. "But it simply wasno longer economically viable for usto produce large volumes. Right now,the market is being driven by virginHDPE, and we can't adequately com-pete at those prices." Sabourin saysWellman is concentrating on poly-ethylene terephthalate (PET), wherethe company is vertically integrated.

Also making PET an attractivemarket is the fact that the recyclinginfrastructure is more established.The bottle bill has been around sincethe late 1970s, making end-use mar-kets for recycled PET well developed.Prices for recycled PET range from35-55~/lb, depending on quality ofthe material. Clarity is the biggestissue when it comes to recycled PET.But with virgin PET prices hoveringaround 65~/lb, new markets for recy-cled PET should continue to develop.

As for virgin HDPE, there is nosign that prices will return to pastlevels. CPI Purchasing's six-monthforecast calls for prices to rise slight-ly, but to remain in the 29-32~/lbrange. Longer term, prices may dipbelow 29~/lb because several capaci-ty expansions recently have beenannounced. (See polyethylene articlethat begins on page 24.)

Recyclers report they are busy, butthat profits are at a minimum."Demand is quite robust, but I don'tcare much for the price we're get-ting," says Bruce Perlson, manager ofplastics environmental affairs forQuantum Chemical, Cincinnati,Ohio. Perlson says that the currentglut of virgin PE capacity combinedwith a slow economy means that vir-gin prices are under pressure.

A win-win-win situationWhile the economics surrounding

HDPE make it difficult for recyclersto compete and, in some cases, createan atmosphere of cut-throat negotia-tions, Rubbermaid's recycling effortsin the stretch film area offer a refresh-

PLASTICS RECYCLING

ing combination of cooperation andoptimism. "It works out that every-body involved in the loop makessome money, and we're all part ofkeeping this material out of the land-fill," says Lancelot. He points outthat about 500 million lb of stretchwrap is used each year in the U.S.,with only 10-15% being recovered.

One of the issues that makes recy-cling of stretch wrap economicallyviable is the collection process.Whereas the HDPE collectionprocess often begins with communi-ty residents putting a variety of bot-tles in a curbside bin, stretch wrapcollection usually is centered aroundbusinesses. Among others, Rubber-maid works with Giant Foods, amajor food retailer, which has a dis-tribution center in Jessup, Md. Mostincoming deliveries are packaged instretch wrap, generating 40,000 lb ofbaled material every six weeks.

Giant Foods, which already wasrecycling corrugated from this loca-tion, welcomed the idea of collectingthe stretch film. If We pay them 2¢/lb,or about $40/ton, with freight at ourexpense," says Lancelot. "GiantFoods is happy because this elimi-nates the $60/ton tipping fee theywere paying to landfill it and greatlyreduces hauling costs. Together,these generate a $20,000 per year cashflow, net of baling costs, and turnsdisposal costs into a profit. If

Lancelot says one of the keys to thestretch wrap collection process isthat there are few steps involved."The material is baled on site andloaded into an over-the-road trailer,"he says. "Forty thousand pound loadsgo directly to Resource Plastics Corp.in Brantford, Ontario." ResourcePlastics acts as a toll converter, turn-ing the stretch wrap into pellets andthen selling the material back to Rub-bermaid for use in its refuse contain-ers. Giant Foods can use these recy-cled containers at its site, closing therecycling loop. Lancelot adds thatRubbermaid worked with ResourcePlastics on this particular project formore than a year and that this was a"true management by partnership"arrangement.

If This type of operating partner-ship is an indispensable feature of acost-effective closed recycling loop,"says Lancelot. If Among other things,we work closely with Resource Plas-tics to establish waste film bale spec-ifications, reclaim pellet specifica-tions, and to provide importantfeedback to waste film sourcesregarding contaminants, density ofbales, etc."

guaranteeing our con-sumers the highestquality products," saysAndrea Reisman, envi-ronmental manager atHelene Curtis inChicago, Ill. "We areworking to extend thistechnology to ourother products."

Cornell, who isbased at Silgan's tech-nical center inNorcross, Ga., says pro-ducing the three-layerbottle and matching itsdistinctive coral color

"was technically very difficult. Itwas truly a three-way project,with everyone working together tomeet Helene Curtis' needs."

Diane Mesinger, procurementmanager at Union CarbidePlastics Recycling in Piscataway,N.J., says advanced recycling tech-nology, including new pre-rinseequipment, as well as great atten-tion to detail in the sorting, wash-ing and grinding stages in theHDPE recycling process, allowsthe company to produce high-quality recycled resins.

"We're extremely satisfied withthe product we've seen," saysGeorge Amann, director of pack-aging/new product developmentat Helene Curtis,which also pro-duces Suave and Finesseshampoos and conditioners.If Union Carbide is providing post-consumer resins that can be usedwithout sacrificing the high quali-ty for which Helene Curtis isknown."

Recycling plastics withconsumer appeal

Three-way partnership produces tri -layeishampoo bottle with 25 % recycled content

Stephen W. Cornellvice president

Silgan Plastics Corp.

In the personal caremarket, "consumerappeal is one thingcompanies are unwill-ing to sacrifice," saysStephen W. Cornell,vice president oftechnology at SilganPlastics Corp., a majormanufacturer of plasticbottles for personal careproducts.

Put another way,attractive packaging isone product trait a com-pany involved incompetitive consumermarkets will not sacrifice, even ifthat means not using"environmentally desirable"(recycled) plastics in its packaging.Helene Curtis, a personal careproducts company with $1 billionin sales in 1992, worked closelywith Silgan Plastics and UnionCarbide Plastics Recycling Corp.to overcome the appearance prob-lems that are common in packag-ing made of recycled plastics.

This three-way partnership hasworked well enough for HeleneCurtis to sell its Salon Selectivesbrand shampoo and conditioner inbottles made with 25% post-con-sumer resins (PCR). The coral-col-ored IS-ounce bottles consist ofthree layers, with virgin high-den-sity polyethylene (HDPE) on theinner and outer layers and PCR inthe middle. The PCR is from recy-cled milk containers.

"This tri-layer packaging tech-nology makes it possible for us tosafely use recycled plastic, while

The fact that all parties involvedare pleased with this three-way part-nership is reason enough for opti-mism' but it also is encouraging thatrecycled stretch wrap does not posethe same pricing problem as itsHDPE counterpart. Industry sourcessay recycled stretch wrap sells forapproximately 2S¢/lbj virgin LDPE,film-liner grade, averaged 35. 7¢/lb inthe first quarter of this year, accord-ing to CPI Purchasing's exclusiveTransaction Price Survey.

Barry Wood, president of ResourcePlastics, recognizes the potential for

increasing stretch wrap recycling, butpoints out some hindrances to wide-spread production. "As far as techni-cal difficulty goes, stretch wrap isking of the hill," he says. Becausestretch film is an octene-based mate-rial, it presents processing challengesunlike other polyethylene resins.And paper labels and adhesives canattract surface dirt, making contam-ination a concern.

Resource Plastics' relationshipwith Rubbermaid is an example of agrowing trend in the recycling indus-try of companies working together

PLASTICS RECYCLING

for a common cause. In fact, due inpart to Rubbermaid's projectedgrowth in the stretch film area,Resource Plastics is undergoing amajor expansion. "We started out asa small player, with about 15 millionlb/yr capacity," says Wood. "But thisexpansion will give us 68 millionlb/yr capacity if we were to do onlyrigid plastics, and 40 million lb/yr ifwe split between rigid and film,which is what we will be doing."

Recycling partnershipsIn addition to this relationship

with Rubbermaid, Resource Plasticsalso has a contract with Dow Canadato procure materials for the companyand then sell recycled pellets to them.While this is somewhat of a uniquerelationship, it may be a harbinger ofthings to come. "Dow recognizedthat they are really not geared to thecustom activities we're involved in,"says Wood. "Dow is better in dealingwith chemistry, which is heavily cap-ital intensive; recycling is more laborintensive. "

He says the relationship hasworked extremely well, withResource Plastics taking advantage ofDow's technical, marketing and dis-tributing skills, and Dow reaping thebenefits of Resource's improved prod-ucts and service. "We get to useDow's lab facilities, which is some-thing we could never afford on ourown," says Wood. "This is veryimportant, because we are producinga material that is a substitute for vir-gin materials so we have to matchtechnical skills. Recyclers have togear themselves to be cost-effective,quality producers, and creating rela-tionships like this is one way to goabout it."

What's interesting about this rela-tionship is that other virgin polyeth-ylene producers, like Quantum,Phillips, Union Carbide and HoechstCelanese, have chosen a differentpath than Dow Canada. Recognizingthat, over time, recycled materialwill replace more and more virginresins, each of these companies hasits own recycling unit.

"Our principal motivation for get-ting into the recycled resin businessis that we see ourselves as a broad-based polyolefin supplier to our cus-tomers," says Quantum Chemical'sPerlson. "If our customer base wantsto be able to purchase recycled poly-olefin resins, then we want to be ableto supply them."

Virgin polyethylene producersbring more than visibility to the recy-cling market; they also bring large-

IIBuy Recycled Campaign"The National Recycling Coali-

tion' in a joint effort with U.S.businesses, has started a "BuyRecycled Campaign" to encour-age the purchase of recycled con-tent products. Endorsed by theNational Association of Purchas-ing Managers (NAPM), the cam-paign's purpose is to develop andexpand markets for recycledmaterials, including plastics andpaper.

Member companies in the BuyRecycled Business Allianceinclude Coca-Cola Co., Du Pont,James River Corp., Johnson &

scale production units. In an industrywhere economies of scale are critical,this in and of itself gives larger com-panies an advantage. But recyclingplastics is not the same as processingvirgin materials, and this leaves plen-ty of opportunities for smaller, effi-ciently run recyclers to succeed.

"I think there is enough businessout there for everyone who is costcompetitive," says Graham Recy-cling's Prevot. Prevot says in today'senvironment it is important to run atfull capacity, a luxury Graham Recy-cling has because of its relationshipwith Graham Packaging Co. GrahamRecycling and Graham Packaging areoperating units of The Graham Com-panies. Graham Recycling suppliesthe packaging arm with most of itsrecycled resins and sells very little onthe open market.

George Glenn, president and chiefexecutive officer at East Coast Recy-clers Associates, Inc. in Millville,NI, formerly a division of WheatonIndustries, says smaller companieshave the versatility that larger com-panies do not. "We don't have theoverhead, and we can make decisionsquickly without waiting for approvalfrom someone else," he says. He alsosays that smaller companies need toprovide top quality materials eachand every time. "One or two badshipments can mean the fall of myentire business," he says.

Looking aheadThere is little doubt that con-

sumers, manufacturers and legisla-tors need to support recycling effortsif the industry is to prosper. Purchas-ing professionals also can playa rolein solving the industry's currentpredicament. Buyers of recycledresins should look not only at theblack and white of price, quality andavailability, but also at the recycling

Reprinted from CPI PURCHASING May, 1993© 1993 by CAHNERS PUBLISHING COMPANY

Johnson, Lever Bros.,McDonald's, Rubbermaid andWellman. In 1992, the Alliance,with approximately 30 members,purchased nearly $3 billion ofrecycled materials and recycledcontent products.

"The purchasing power ofbusinesses could move recyclingin this country," says KathleenMeade, director of communicat-ions for the Coalition. For moreinformation on the campaign,contact the National RecyclingCoalition, Washington, D.C., at202-625-6406.

industry as a whole. By understand-ing the ins and outs of what is, by allaccounts, a relatively young industry,buyers are in a position to help plas-tics recycling emerge into the growthindustry many have projected it to be.

Whenever solutions to currentrecycling problems are addressed, leg-islation rises to the top of the list.Says Sabourin, "The industry is in aposition right now where it does needassistance if it is going to be sus-tained," he says. He says the APRsupports legislation on the demandside-"initiatives to insist recycledmaterials be used."

Hal Yoh, president of Day Productsin Bridgeport, N.J., says what makesit so difficult for recyclers today isthat there is legislation based on theneed to recycle. "It's required thatmaterials be picked up, but there isnothing in place that says recycledmaterials have to be used," he says."But legislation would have to bepractical, not overbearing."

Many industry observers considerlegislation the wild card in the futureof recycling. For now, programs likeRubbermaid's stretch film recyclinghelp create new markets for recycledmaterials. "Over time, we designedsorting and processing equipment todeal with stretch film," says Wood ofResource Plastics. "Essentially, instretch film, you're talking about cre-ating a whole new infrastructure-from collection and processingthrough reselling-and any time youwant to do that, it's a tall order."

Lancelot says creating demand iswhat this particular recycling pro-gram is all about. "We need to swingthe pendulum the other way," hesays. "We have systems in place tocollect and recycle, but we don't havethe market demand. With this pro-gram, the lack of market demand isthe gap that we are trying to close."~

Rubbermaid®

Commercial Products

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