Investment in US rPET industry critical to avert ‘demise’

By Rory Harrington

- Last updated on GMT

Related tags Polyethylene terephthalate U.s.

Investment in US rPET industry critical to avert ‘demise’
The US recycled polyethylene terephthalate (rPET) industry could go into decline unless vital investment is made in collection and reclamation capacity, leading trade bodies have warned.

Last year was one “like no other”​ for the US PET industry as bottle volume sales fell for the first time in almost 30 years - while demand for thermoformed packing and recycling rates both increased, said the National Association for PET Container Resources (NAPCOR), the Association of Postconsumer Plastic Recyclers (APR), and the PET Resin Association (PETRA) in the 2008 Report on Postconsumer PET Container Recycling Activity.

The study also revealed that demand for PET thermoformed packaging saw 10 per cent growth, while consumption of rPET bottles in the food and beverage sectors increased only marginally.

PET collection and reclamation

The number of reclamation plants in the US fell from 14 in 2007 to 13 last year. These had a total capacity of 847 million pounds (MMlbs).​In addition, there were six​semi-operational plants, processing material sporadically by the end of the year with a total capacity of 182 MMlbs. About two thirds of the 847 MMlbs capacity was vertically integrated, producing material for internal company consumption in the manufacture of carpet, strapping, bottles or sheet; with only one third made available to the merchant market

At the same time, the collection rate for PET in 2008 reached its highest level since 1997 with 1,451 MMlbs (659.5 million kg) reclaimed and sold - 27 per cent of the 5,366 MMlbs of bottles on US shelves. In 2007, the recycling rate was 24.6 per cent – with 1,396MMlbs recycled from an available total of 5,683MMlbs.

NAPCOR chairman and president Tom Busard said: “It is very satisfying to see this significant jump in the PET recycling rate.”

But the headline figures could not obscure that 2008 was a tough year for the reclamation side of the industry as the number of reclamation plants across the US fell in 2008 compared to previous year.

“The bigger news is what didn’t happen in 2008: no significant new investments in reclamation capacity,” ​said the report authors. “Several smaller plants were in and out of production, and two new plants were under construction at year’s end, but none of this prevented a collapse in the bale market during the last two months of the year when Chinese exporters pulled out of the East Coast market.”

The report said there were too many bales and not enough reclamation capacity, which was “perplexing”​ since profits for reclaimers in the region had been very good since 2004. There were indications by the end of the year, however, of capital investment to boost efficiency of food grade RPET but not capacity, it added.

“While this will surely lead to more cost-effective production and pricing of food grade RPET, it will not address the growing overall demand imbalance”, ​cautioned the report.

PET Volumes

The amount of PET bottles available for collection dropped by 317 MMlbs (144 million kg) – or 5.6 per cent – compared to 2007. Containers from the tea and vitamin water categories were the only exceptions to this negative trend.

“The growth in PET bottles and jars sold in the U.S. hit the wall and reversed itself in

2008,”​ said the report. “A perfect storm of significant light-weighting by major brands, the bad economy, and continued consumer environmental and dietary concerns, combined to end what had been almost thirty years of non-stop growth.”

But the report forecast that continued interest by the food and non-food sectors to use PET containers should secure future industry growth as the economy recovered and consumer spending increased.

rPET consumption

Total US converter consumption of rPET reached 915 MMlbs – making 2008 rPET end use the highest ever, said the report.

While demand from the carpet, strapping and automotive industries fell, it remained strong elsewhere – particularly from PET sheet buyers. However, there was only a slight increase in rPET bottle use in the food and beverage sectors from 136 MMlbs in 2007 to 141 MMlbs in 2008. This increase was offset by a fall in demand for non-food rPET bottles meaning total bottle use stagnated at 196 MMlbs.

Industry survival

The report said greater investment in reclamation capacity was vital “if there is to be any chance of meeting the increased demand from the packaging sector”​ as well as others. Confusing market messages, no agreed business model for this part of the industry and the inability of US players to compete with Chinese buyers for bottle bales are the main reasons, said the report.

But the authors warned: “When this reticence to invest under today’s market conditions is combined with the current and projected demand for rPET, it’s apparent that significantly more bottle collection is needed, not simply to meet demand, but to spur and justify the needed reclamation investments.

“Without a sizeable expansion in reclamation capacity and bottle supply, concerns about the industry’s demise through the current export/domestic market dynamic may be self-fulfilling.”

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