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Low Oil Prices Take Their Toll On Recycling Sector

Low Oil Prices Take Their Toll On Recycling Sector

“Plastics,” Mr. McGuire tells Ben Braddock in the 1967 film “The Graduate.” He was impressing on the young man the importance of one of the chief branches of the oil industry: Virtually every item available at the time contained plastic, or was packaged in it. So a career in plastics meant you always had something to sell.

That’s just as true today, despite many changes in societal priorities. Plastics are still ubiquitous, whether they’re made from oil or recycled from scrap. But a major change has come over the past 19 months, and there’s no telling how long it will be with us: The price of oil has fallen so low that it’s now less expensive to make plastic than to recycle it.

And this is hurting recycling, which is more than a social movement, it’s a $100 billion-a-year business in the United States. And it’s a complex one. One company sorts and cleans items such as used water bottles and food containers, then sells them to other companies that melt them down to make new items ranging from grocery bags to more water bottles. Related: Cheap Oil Hits Housing In North Dakota, Texas, and Others

Now with the price of oil below $40 per barrel – down dramatically from more than $110 per barrel in June 2014 – it’s gotten to the point where making new plastic from oil makes more sense because there’s no additional process of cleaning and sorting, according to Tom Outerbridge, the general manager of Sims Municipal Recycling in Brooklyn, N.Y.

In an interview with National Public Radio, Outerbridge said negotiating with other companies over the price of cleaned and sorted plastics had become brutal over the past year. “You’re negotiating around a penny or a half-penny a pound,” he said.

That kind of pricing is particularly tough in New York, but isn’t exclusive to other cities with much lower costs of living. Take ReCommunity Recycling of Philadelphia, which includes operations across the Delaware River in Camden County, N.J. Its regional business development manager, Bob Anderson, says his company’s business is being hurt too. Related: How Texas Oil Turned America Into A Superpower

“[T]he commodity markets have been at historic lows, and we’ve seen dramatic reduction in the value of scrap materials,” he told the Press of Atlantic City. Only months ago, he said, scrap plastic was selling at $2,000 per ton; now it’s $30 per ton.

Things are even worse at Genesee ARC of Genesee County, N.Y., one of 55 outlets in the state that provide employment opportunities – in this case, recycling employment opportunities – to disabled New Yorkers. Next month it will be forced to lay off 14 disabled workers and two full time staff supervisors because the low price of oil is crippling its business.

“This is probably the hardest decision of my executive years since 2004,” said Donna Saskowski, ARC’s executive director. “The big factor was fiscal. We’ve hit the bottom of the business. Prices have dropped 40 to 60 percent. We tried to bid out for higher prices, but every larger place, such as Waste Management, is facing the same issues.” Related: EIA Forecasts Miss the Mark, But Do Better Than Most

So what can recycling operations do to survive? Kim Holmes, the senior director of recycling and diversion at SPI: The Plastics Industry Trade Association, said recycling companies for the time being should at least seek out companies that want to work specifically with recycled materials.

“There are good reasons to still use it,” Holmes said, “and we hope that those other driving reasons are going to be enough to use it while we’re still in this pricing slump and people don’t anticipate that this will be forever.”

But Anderson of ReCommunity isn’t so sure. He said his advisers tell him to they expect the price of oil will stay low for at least another three years.

By Andy Tully of Oilprice.com

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