NCPA - National Center for Policy Analysis

Oil-Price Drop Is Hurting Recycling Companies

April 8, 2015

Plastic is often derived from oil, and there used to be money in recycled scrap. Not anymore. The fall in oil prices has dragged down the price of virgin plastic, erasing the recyclers' advantage.

In the United States, many cities and towns pick up detergent bottles, milk jugs and other bits of household plastic and sell them to recyclers who sort, process and resell the scrap. These municipalities typically earned cash — as much as $10 a ton in parts of New Jersey — for selling recyclable materials under contracts that tie the sales price to commodities prices, with a minimum.

In recent months, some expiring contracts have been replaced with new contracts that set no such floor. That raises the possibility for some municipalities that a moneymaker could turn into a loser.

The cost of producing new plastic closely tracks the ups and downs of global oil prices. Since June, the price of a barrel of oil has fallen more than 50 percent.

At the start of this year, new polyethylene terephthalate, a type of plastic widely known as PET and used to make soft-drink and water bottles, cost 83 cents a pound, which is 15 percent higher than the cost of recycled PET. As of late March, the cost of new PET had fallen to 67 cents a pound, or 7 percent less than the recycled form, which costs 72 cents a pound.

  • In Europe, two German recyclers have gone bankrupt since December.
  • ECO Plastics Ltd., a British firm that touted in 2012 the opening of what is called "the world's largest plastics processing facility," went into administration, a form of bankruptcy.

Source: Georgi Kantchev, Serena Ng, "Recycling Becomes a Tougher Sell As Prices Drop," Wall Street Journal, April 6, 2015.

 

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