How to succeed in recycling.

Plastics recycling isn't the Gold Rush some newcomers expected. But despite recession and low resin prices, a few recyclers are making money. Here's a look at how they do it.

Buy low, sell high. Basically, succeeding in recycling is no harder than surviving in any other highly competitive business environment. In fact, while recyclers do a lot of crying about competition from low resin prices, the profit margins of successful recyclers are considerably healthier than the margins highly competitive injection molders have lived with for years. Success all boils down to being the highest-quality, lowest-cost producer with the highest-value end market.

To find successful recyclers, PLASTICS TECHNOLOGY spent days visiting and talking to recyclers across the country. There are four types: commercial producers, big resin companies, waste companies, and vertically integrated processors. Of the four, commercial brokers are strained the most, especially in HDPE (PET margins are better), and many are developing their own downstream products or striking alliances with resin companies. Resin companies may have initially ventured into recycling as show-and-tell, but the larger ventures claim they expect recycling to be profitable. Resin companies have deep pockets, understand cyclical businesses, and can afford to wait for recycle prices to turn upward.

Waste haulers frequently get involved in recycling because they are required to by contract. They may lose money on recycling but recoup it in some other scrap opportunity. For instance, Mindis Recycling Inc. in Atlanta, a div. of Atwoods PLC in the U.K., bought a defunct car assembly plant a year ago to house a 200 million lb/yr recycling venture (see PT, Aug. '91, p. 104).

The original 200-million-lb deal is off and a 30 million lb/yr recycling line is up and running. In the meantime, stripping scrap iron from the old assembly plant was an added incentive.

Only the vertically integrated processors who recycle for their own use are really in a position to make money in a falling market. They gain two ways: They have a captive market, and their recycled product is priced independent of virgin resin prices. Over the past year, as prices for baled or ground bottles slid as much as 10|cents~/lb, integrated recyclers enjoyed lower material costs.

Aside from such big strategy differences, recyclers have different technologies and feedstock strategies. And those who are succeeding do some basic things right:

* Ship consistent quality. * Control cleaning. * Maximize capacity/cost ratio. * Raise throughput. * Cut operating costs. * Upgrade feedstock. * Minimize handling. * Seek higher-value markets.

RULE 1. SHIP CONSISTENT QUALITY

Product consistency is the single most important factor for success, recyclers say. "If I ship one box that's of fantastic quality and three that are so-so, that won't make happy customers," says sales manager Kyle Wright at Eaglebrook Plastics Inc. in Chicago, the largest commercial post-consumer HDPE recycler in the country and a large dealer in industrial scrap. "Customers want consistency. There's a lot of competition out there waiting for us to slip up just once."

So product consistency demands stringent testing of both incoming bales or granulate and of outgoing flake or pellet before delivery to a customer. Eaglebrook has its own lab and says it tests each box produced for melt index, density and contaminants. "The most important piece of advice I can give is to test each box using the same method your customer uses," Wright says. "Otherwise, you'll inevitably have arguments."

In PET recycling, contamination from PVC bottles, which can be mistaken for PET on a sorting line, is the major quality issue. More than 200 ppm of PVC in PET flake renders the material nearly worthless. Two financially successful PET recyclers, Day Products Inc. in Bridgeport, N.J. (which licenses a process from Rutgers University in New Brunswick, N.J.) and wTe Recycling in Albany, N.Y. (which licenses a process from Du Pont Co., Wilmington, Del.), recently beefed up lab staffs and product testing. Day expanded from four to six full-time lab technicians. wTe went from one full-time and one part-time person in its lab to two full- and four part-time workers. Both staff their labs 24 hours a day, seven days a week, and say they test every box of material for PVC twice.

Both Day and wTe use only bottles returned for deposit because they say curbside material is too contaminated to process profitably. Day, which doesn't buy granulated bottles because of the PVC-contamination risk, tests washed flake for PVC before extrusion and for melt index after pelletizing. It has developed a five-point sampling method that only removes a few grams of material from a gaylord. Day president Terry Williams says Day was the first recycler to use sophisticated rheometers to measure PET degradation during drying and pelletizing, though he says other recyclers are now considering it.

wTe, which buys both ground and baled bottles, tests every box of incoming flake and every other box of finished flake before pelletizing. If contamination is found, the in-between boxes are thrown out too, since they're statistically certain to be contaminated. wTe takes three cores, diagonally and down the middle of a box, totaling about 1 lb of sample. Vinyl contamination may not show up in the first test because it could be just one ground bottle. But in processing, those flakes disperse through six to eight gaylords of finished flake.

Inconsistent quality loses customers. It has driven some big buyers of recycled resin to recycle for themselves rather than buy from commercial sources. For instance, Master Mark, a div. of family-owned Avon Plastics Inc. in Avon, Minn., was first a buyer of industrial scrap and then of mixed-colored, post-consumer HDPE to make garden products like lawn edging (it has half the U.S. market). But Master Mark couldn't handle widely fluctuating qualities of PCR, says president Mark Reum, so two years ago it set up in-house recycling. "We needed to go this route. When we bought PCR from other people it varied all over the map. Now it's steady," says Reum. In the last two years, he says, the company's $500,000 recycling investment has more than paid off. Master Mark now recycles 10 million lb/yr, using 80% internally and selling the rest back to its former PCR supplier.

RULE 2. CONTROL CLEANING

Contamination isn't just a sourcing and sorting issue. Metal, other resins, glue, labels, and dirt are separated from flake with greater or less efficiency by processing. And the end-use application determines how clean recycle must be. The most demanding HDPE application is blown film, both for brightness and absence of microscopic paper fibers, which may cause gels. Next most demanding are monolayer containers, then coextruded containers, which can tolerate some PP contamination but no paper. Drainage tile and extruded garden products tolerate paper contamination and pigmented feedstock, but pipe won't tolerate PP, which lowers density. And the most forgiving are lumber products. In PET recycling, clear sheet for thermoformed packaging is the most demanding application, since a speck of PVC in sheet chars with the higher heat of forming PET and makes a black dot. Clear blown bottles are equally demanding. But PVC contamination of up to 200 ppm may be tolerated in some black injection molded office products or in coarse carpet fiber. Methanolysis applications also can't tolerate PVC much more than 10 ppm.

RULE 3. MAXIMIZE CAPACITY/COST RATIO

As a rule of thumb, profitable plants can make at least 5 lb/yr per dollar of construction cost. The higher the ratio of capacity to capital cost the better, with very high ratios possible for systems that do only partial recycling. "For just washing equipment, you might get a 20:1 ratio, while if you add extrusion and solid stating |for PET~, you might be at a 3:1 ratio," notes Day's Williams.

The high-priced approach for HDPE is exemplified by Phillips Plastics Recycling Partnership, which recently opened a plant in Tulsa, Okla., that has a capacity of 18 million lb/yr and cost about $5 million to develop--a ratio of 3.6:1. Union Carbide Corp.'s two turnkey recycling lines from Sorema Srl, with 50 million lb/yr capacity, cost about $10 million for a 5:1 ratio. Graham Recycling in York, Pa., has capacity of about 35 million lb/yr that cost about $5 million (exclusive of land and building) for a 7:1 ratio. Three turnkey recycling plants from the Plastics Recycling Systems Div. of John Brown Inc., Providence, R.I., have a 7-8:1 ratio. Quantum Chemical Corp.'s 35-million-lb/yr recycling plant in Heath, Ohio, with blending and storage equipment, cost about $5 million for a 7:1 ratio. Envirothene's 15-million-lb/yr plant in Chino, Calif., cost $1.7 million for an 8.75:1 ratio, while Enviro Plastics Corp.'s 15-million-lb/yr plant in Auburn, Mass., which is about 30% customized, cost slightly more for about an 8:1 ratio.

But there are some far lower-cost systems out there. A home-built line at United Resource Recovery Inc. in Kenton, Ohio, has a capacity of 9 million lb/yr and cost about $650,000 to build for a 13.8:1 ratio (exclusive of staff development time). A $300,000 expansion will bring it to 18 million lb/yr for an 18:1 ratio. It serves monolayer bottle markets and blown film. Master Mark's home-built line has a capacity of about 15 million lb/yr and cost $500,000, for a ratio of 30:1. And Desbro Polymers (Canada) Inc., a year-old commercial HDPE recycler in Toronto, has a 17.5 million lb/yr line that also cost $500,000 for a ratio of 35:1.

Why did these installations cost so much less? United Resource, Master Mark and Desbro are all parts of old family molding businesses, with at least two generations of experience devising and sourcing economical processing systems. United Resource and Master Mark both built a lot of the equipment themselves and bought used components. Remarkably, United Resource has a grinder, cyclone, air classifier and extruder. Master Mark and Desbro don't grind but start with flake. Also, both use extra long float-sink tanks, high-attrition washers with relatively long cycles, and caustic cleaners. And Desbro has no extruder. But compared with elaborate turnkey recycling systems often costing several million dollars, such abbreviated systems give a 3-4|cents~/lb advantage in lower depreciation costs. They also have maintenance cost advantages. In short, there's a lot less to go wrong.

HOW ABBREVIATED SYSTEMS WORK

Abbreviated systems at Master Mark and Desbro have many similarities--although Master Mark separates before washing while Desbro does so afterward. Also, Desbro doesn't pelletize. At Master Mark, gaylords of flake are tipped into a 40-ft long float/sink trough with a dozen slowly turning paddles, which sink heavier metal, PVC and PET. "Recyclers usually aim for 3/8-in. granulate, but I want a minimum of 1/2-in. because you have no fines with big flake," says Master Mark's Reum. Flake then goes to a commercial attrition scrubber with a small amount of caustic. Aggressive washing reduces paper to a pulp, which is removed by rinsing the flake with boiling water as an auger conveyor lifts it up an inclined cage. Large flake is important for this rinse stage because small flake would wash out through the screen. Rinsed flake goes to a commercial Carter-Day centrifugal dryer. Because that reportedly leaves about 20% moisture in the flake, Master Mark designed and built its own gas-fired hot-air dryer, which is modeled on grain-drying equipment as a secondary drying stage. After drying, flake is extruded and pelletized on second-hand equipment which Master Mark intends to upgrade.

Desbro's abbreviated washing line is Japanese-engineered and is based on a batch, 180-gal industrial wash unit. Flake is tipped from gaylords onto a conveyor, which feeds a top-loading, cold-water prewash tub with agitation. Each batch is about 750 lb, and the cycle is 10 min. Flake is then augerfed to a hot-wash tank with caustic (orange-peel based) and taken by a variable-speed dewatering auger to a rinsing machine. After rinsing, flake goes into the first of two open 12-ft troughs, the second slightly below the first. This creates a lip or weir, holding back most of the heavy contamination in the first tank. Desbro made the tanks out of welded half-inch clear PP sheet since this was cheaper than stainless steel and just as strong (it also lets operators watch flake circulate). Each tank has one paddle.

RULE 4. RAISE THROUGHPUT

To be profitable, many recyclers say they must raise throughput rate. "If you put a low-investment system into a building already used for other operations, you can run a 10-million-lb recycling line profitably," says Gerry Claes, director of environmental programs at Graham Recycling. "But if you put a turnkey system into a dedicated facility, you have to have 25 million lb/yr to be successful. Otherwise, overhead on the building will kill you because all your other costs are fixed--rent, light, phones." Graham expanded its own system's capacity by about 30% through debottlenecking. Then this year, Graham added a second line, bringing the production to 25 million lb/yr on a five-day basis (on a seven-day basis it is 35 million lb).

Even recyclers with grinders of their own, like Eaglebrook and wTe, buy granulated material these days. It is cheaper to process and it raises throughput. It also cuts handling costs in half because a 1000-lb gaylord of PET flake takes half the space of the equivalent in bales. "At first we felt we had to secure sources of bales and have them toll-ground, but MRF quality is now good enough that we feel safe dealing with |HDPE~ flake," says Master Mark's Reum. Flake size also affects throughput. Desbro, for instance, requires 3/8-in. flake because throughput is 10-15% higher than 1/2-in. (A gaylord of 3/8-in. HDPE flake weighs 650-700 lb vs. 450-500 lb for 1/2-in.) And Resource Energy Management in Niles, Mich., an HDPE recycler that started last October, requires 1/4-in. flake for the same reason.

Successful expansions are invariably in one location. Several recyclers have tried regional expansions and failed because they doubled operating costs without generating increased regional sales. In the late '80s, Eaglebrook set up an Eastern division in Middletown, N.Y., but closed it after a year. Wellman tried recycling HDPE in Allentown, Pa., with PET in Johnsonville, S.C., only to move the Allentown line to Johnsonville a year later. Wellman's investor relations manager Jill Rea, says its planned 90-million-lb/yr PET expansion will entail additional equipment in its existing plant and a new facility to be built next to the first plant. Original plans for the Du Pont/Waste Management Inc. Plastics Recycling Alliance called for five regional plants starting with Chicago and Philadelphia. Now ITW Signode Corp., Glenview, Ill., which is buying the assets of the two plants, is combining them in the Chicago facility.

RULE 5. CUT OPERATING COSTS

Costs for water, electricity and labor vary by region. Costs are higher in the cities, and the South is generally cheaper than anywhere else. But processes also differ greatly in utility use. Water discharge has varied from under 2 gal/min to as much as 60 gal/min, with average use around 25 gal/min. Graham's 17-million-lb/yr line discharges 25 gal/min, as does Wheaton Plastic Recycling's similarly sized line in Millville, N.J. A turnkey John Brown line uses 35 gal/min; with water treatment this drops to 15 gal/min, says John Brown engineer Charles Pollock. Envirothene's John Brown system with water treatment uses 12 gal/min.

United Resource Recovery's in-house engineered line with water filtration may be the most water-efficient: with 10 million lb/yr production, it originally discharged 3 gal/min, but by routing rinse water back through the wash station, effluent is down to 1.75 gal/min. Master Mark discharges only 4 gal/min, also by reusing water from back to front in its wash line. Fresh water enters the system as boiling rinse water, is then reused in the wash tank while still warm, and used again (by now it contains paper pulp and caustic) in the float/sink tank. There the metals and heavy resins settle out (along with some paper pulp) and are pulled off and augerfed to a gaylord for dumping. The whole line is flushed once a week. Master Mark is adding water treatment from Sweco Inc., Florence, Ky., to filter paper fiber out of the water in order to reduce effluent even more.

Desbro Polymers has water filtration and discharges 3 gal/min. A high water user is Du Pont's technology. Du Pont's system at the two PRA plants with capacity of 30 million lb/yr (on a seven-day basis) each originally used 60 gal/min, but were improved to 40 gal/min. Du Pont technology at wTe also used to be "thirsty" (90 gal/min.), but now uses only 27 gal/min.

RULE 6. UPGRADE FEEDSTOCK

Several successful recyclers say they track incoming material by lot numbers through their lines and deduct from payments to suppliers for excessive contamination. United Resource says it accepts up to 3% contamination, adjusts the price over 5%, and sends it back over 15%. Desbro also specifies no more than 3% contamination and deducts a penalty, but gets 30% contamination in some Canadian MRF material. Desbro matches incoming and finished weight and figures the difference is contamination. The penalty doesn't really compensate for what contamination costs in lower throughput, but it's an incentive for MRFs to clean up.

Eaglebrook takes a similar approach to baled HDPE bottles. A truckload of baled bottles is so often different from what's stated on either the bill of lading or purchase order that Eaglebrook has a system of backdating purchase orders so bales are correctly priced according to contamination. "We weigh and check bales as they come off the truck and then write the PO," says Eaglebrook's Wright.

The opposite approach to punishing suppliers for contaminated feedstock proved a costly mistake for the Du Pont/Waste Management PRA venture, which ran as high as 20-25% contamination. Instead of withholding payment to Waste Management for bringing contaminated material, PRA paid a 6|cents~/lb premium to Waste Management (and then paid them 5|cents~/lb again to landfill the contamination). PRA also sold to Du Pont at a comparable discount. By buying high and selling low, there was little way the venture could ever have made money. After their joint venture dissolved in late '91, PRA got better quality (contamination dropped to 2-3%) and costs went down. Du Pont's ultimate cost for HDPE was 25|cents~/lb plus the cost of bales. But Du Pont had to sell competitively at 20-23|cents~/lb.

RULE 7. MINIMIZE HANDLING

Material handling--transportation, sorting, baling, unbaling and grinding--are major recycling costs. In fact, many recyclers say labor is their single biggest expense. And a struggle is taking place now with collectors trying to push sorting costs onto recyclers by supplying only commingled plastic bales. In turn, recyclers are pushing costs onto collectors by seeking sorted, ground bottles, sometimes for the same price as bales.

Still, some sorting efficiencies are possible even with commingled bales. Resource Energy has an ingenious and mutually beneficial arrangement with its collector. Resource Energy gets commingled bales brought in and waste hauled away for free. After taking out the plastic it wants, Resource Energy greatly reduces the waste by grinding it for its waste hauler. The company also devised double-ended canvas bags like gaylords that can load from the top and open at the bottom. These sacks move with overhead hoists for loading into the washer. That compares with recyclers like Eaglebrook, which rely on a far costlier fleet of forklift trucks to move gaylords.

Resource Energy, which has produced 6 million lb since last October, works three shifts of seven people each: a supervisor, two operators and four sorters. It will soon go to two 12-hr shifts. Graham and Day raise sorting efficiency by running two lines off one sort station. At the high end, Union Carbide uses two shifts of 18 sorters each, for roughly 12 million lb production (still in startup).

Such handling costs are greatly reduced by starting with flake or otherwise presorted material. That's the attraction of auto batteries, industrial scrap and deposit-return bottles. All are known, uniform material. Tiny Turtle Plastics in Cleveland, an 11-year-old vertically integrated recycler with $2 million in sales, is developing unusual variations on this theme. A pilot program at Turtle plans to take 5000 worn-out blue vinyl rafts a year from Disney World's "Typhoon Lagoon" ride, cut off the handles, grind and wash the rest, and send it to an injection molder to make floor tiles, which are sold back to Disney. Turtle's staple business is converting about 2 million lb/yr of contaminated plant scrap from vinyl automotive side trim with adhesive on the back and metalized PET film on the front into black industrial floor tiles.

Savings from just-in-time approaches to recycling are possible in areas where recyclers cluster. Near Albany, N.Y., three recyclers cooperate to ship each other material often on a one-day call. Clearvue Resource Management Ltd., in Amsterdam, N.Y., with a home-built low-cost system, processes vinyl for Occidental Chemical, BF Goodrich and Georgia Gulf, as well as HDPE for sale as flake or pellets. It gets rigid HDPE from nearby North American Plastic Recycling in Fort Edward, N.Y., and basecup HDPE from nearby wTe, along with any PVC its neighbors find. North American takes PE film from the other two recyclers, both of which are outlets for other collected materials. And wTe takes PET from the other two.

Clearvue, which started up four years ago as an incubator company from Rensselaer Polytechnic Institute, Troy, N.Y., keeps feedstock for about 48 hours' running time and maintains only three to four truckloads of finished goods on-site. "Right now, if we can't sell it, we don't make it. We know we can't afford the storage," says Clearvue partner David McGraw. Inventory costs can kill you, as both PRA and Graham found out. At one time or another, each found itself in the red on storage and handling costs.

RULE 8. SEEK HIGHER-VALUE MARKETS

The success of vertical integration can be measured by the quiet expansion of so many vertically integrated bottle, fiber, carpet, and trash bag makers' recycling operations despite tough market conditions (PT, July '92, p. 99). Wellman v.p. Dennis Sabourin says the point is "to have an end use that competes with virgin resin or better. The point of competition shouldn't be industrial grade."

Wellman, the granddaddy of vertically integrated recyclers, uses all its 120 million lb/yr of recycled PET in fiberfill and carpet fiber, both of which sell for more per pound than virgin PET. Commercial PET recyclers, however, must undersell virgin. Wellman also makes even higher-end, polyester textile fiber, and is testing prototype equipment that could, if successful, upgrade PCR to this higher-value fiber.

In a difficult market, many recyclers say only the highest quality suppliers and those with high-value end markets will survive. "If you started in business in 1990 and made a good product, you'd have been profitable the first year," says general manager Hank Traweek of United Resource. "In '92, if you don't have a superior product, you'll be a loser."