News: Analysis & Commentary: INDUSTRIES
THERE'S GOLD IN THOSE HILLS OF SODA BOTTLES
The next time you drain that two-liter Coke or a big Gatorade, don't toss the empty in the trash. Yes, it clogs landfills. But these days, "the dirty plastic bottle is worth a lot of money," says James F. Martin, chief executive of recycler Martin Color-Fi Inc.
Martin ought to know. His Edgefield (S.C.) company, like recyclers across the nation, is paying top dollar for all the discards it can find. Demand for polyethylene-terephthalate (PET) containers, which make up 95% of all plastic bottles, is growing by 21% a year, and prices have more than tripled since last November. It's all part of a chain of events involving everything from blue jeans to European food packages.
The frenzy in PET prices is largely because of rising cotton prices, which has driven foreign manufacturers to cheaper cotton substitutes. Early this year, poor cotton crops in China, Pakistan, and India tightened worldwide supplies of the natural fiber, driving U.S. cotton prices in May to $1.15 a pound. Even at 80 cents a pound recently, it's still 33% costlier than a year ago.
SQUEEZED. In response to the runup, Asian mills hiked their use of synthetic fibers, especially polyester. That intensified shortages in the world market for virgin polyester--already in scant supply because of a dearth of the chemical raw material needed to make PET. PET itself can be made into polyester fibers and resins. U.S. virgin-polyester prices spiked 25% in the past 12 months.
The phenomenon had two immediate effects. First, it squeezed apparel makers. Dallas-based Haggar Corp. says higher cotton and polyester prices have pushed its fabric costs up about 5% this year over last, resulting in added costs of 25 cents to 30 cents a garment. Haggar President Frank D. Bracken says the company has been able to pass along only about 2% of those costs to retailers. Fort Worth-based Williamson-Dickie Manufacturing Co. says retail prices of its jeans have jumped an average of $2 as a result.
The polyester pinch also drove textile producers into America's used-PET-bottle market, where recycled containers are used to make polyester fibers that are then spun into everything from sweaters to upholstery. As a result, bottle prices shot from as low as 10 cents a pound a year ago to as much as 40 cents last spring, says Clifford J. Christenson, COO of Wellman Inc., the country's largest plastics recycler.
PET-bottle prices have since settled back to around 30 cents a pound as textile manufacturers cut back on purchases in anticipation of new polyester capacity coming on line by yearend. Still, demand for discards isn't expected to wither soon. In recent years, PET has grabbed an increasing share of the food-packaging market from glass and aluminum cans, particularly in Europe. Wellman execs estimate that by 1999, PET bottle
use in the U.S. will reach 3.4 billion pounds, an increase of 62% over 1995.
In anticipation of increased demand, recyclers are boosting capacity. Wellman, based in Shrewsbury, N.J., is adding 600 million pounds a year to bring total capacity to more than 1 billion pounds a year by the end of 1998. Martin Color-Fi is boosting capacity by 17%, to 175 million pounds, by the end of 1996.
WASTED WASTE. For now, all that new capacity is going mostly unused, since recyclers can't get their hands on enough bottles. Jerry Powell, editor of trade journal Resource Recycling, figures about half of the industry's existing 1.1 billion pounds of recycling capacity sits idle.
That's because more than half of the containers still go straight into landfills or incinerators, says Luke B. Schmidt, president of the National Association for Plastic Container Recovery, a group of PET container recyclers. Last year, he says, 565 million pounds of PET plastic containers were recycled. "But the market demand was 800 million pounds. We simply are not doing enough recycling to fill the demand," he says.
Schmidt and others hope the recent runup in prices for used PET bottles will help the recycling effort by boosting curbside collection programs throughout the country. "We're paying more money [for used PET bottles], so cities and states should realize that curbside collections could be very profitable for them," says Martin Color-Fi's Martin.
Some have. Portland, Ore., expanded curbside collection of all plastic containers in July, in large part because a new sorting facility makes collection more feasible. But Bruce Walker, Portland's recycling-program manager, concedes that escalating PET prices is "part of the equation." Portland's recycling effort brings in profits of about $160,000 annually. Even if such fortune lasts only until the next decent cotton harvest, it's not bad for a pile of dirty plastic.By Stephanie Anderson Forest in Dallas