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Plastic Recycling Suffers from Lingering Low Oil Price

leonkaye headshotWords by Leon Kaye
Investment & Markets
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While solar and wind power continue to become more competitive in price to fossil fuels, even despite decreasing oil prices, the same is not holding true for plastics. The sudden drop in fossil fuel prices over the last several months has sent plastic recyclers scrambling to save their businesses. From China to Quebec, recycling companies have been struggling to stay in the black, even though more municipalities are mandating recycling for either waste diversion purposes or to stay compliant with a local sustainability plan.

Recycled plastic, particularly PET (polyethylene terephthalate), the plastic of choice for beverage companies, already had its challenges because of perceptions its quality does not match that of virgin PET. But the business case for using the recycled option made sense when the cost of recycled plastic was less than that of its virgin alternative. According to a plastic industry trade publication, virgin pet costs about 67 cents a pound as of late March; the recycled option now is at 72 cents a pound. At the beginning of this year, virgin PET was priced 15 percent higher than the recycled material.

More companies, including Unilever and P&G, are doing what they can to incorporate more recycled plastic within their supply chain. But overall, if recycling is no longer cost effective, more municipalities may stop mandating curbside collection of plastics—as what occurred over a decade ago when New York City suspended the recycling of glass and plastic. Because the northeastern United States has diminishing landfill space, plastic recycling could still remain the norm, but do not expect the same in other regions of the country where land is still plentiful.

And despite the landfill tax across the pond in the United Kingdom, plastic recycling companies are closing their doors as the price of oil has cratered. Those worried about a surge of plastics ending up in landfill, and the concurrent environmental risks, can fret all they want. But when recycling companies are bickering over a half cent or cent difference per pound, the stubborn pact persists that there is simply far less of a market than there was a year ago.

The effects are being felt across the world, and other factors are not helping. The strong U.S. dollar, according to another plastics trade publication, has pushed China, the largest purchaser of American recyclers, to source such materials elsewhere.

Recycling has its environmental benefits, but most companies are in it for the money, which explains why in recent years the sector’s total value reached $100 billion annually. Surely, fossil prices will rise again, but in the meantime, it may just be up to large companies to use their market prowess to keep recycling a viable business for the long term. And businesses and governments will have to work together to find ways to treat plastic like a precious resource, not just pesky waste.

Image credit: Matthewdikmans

Leon Kaye headshotLeon Kaye

Leon Kaye, Executive Editor, has written for Triple Pundit since 2010. He is also the Director of Social Media and Engagement for 3BL Media, and the Editor in Chief of CR Magazine. His previous work can be found at The GuardianSustainable Brands and CleanTechnica. Kaye is based in Fresno, CA, from where he happily explores California’s stellar Central Coast and the national parks in the Sierra Nevadas.

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