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Coronavirus threatens US plastics recycling as states cancel collections

  • Featuring
  • Sarah Schneider
  • Commodity
  • Petrochemicals

The coronavirus pandemic has created a wave of complications for the recycled plastics industry and hampered short-term supply of plastic waste, with several US areas suspending recycling programs, and concerns about transmission creating problems for waste processors.

Ten states in the US currently have “bottle bills”, or mandatory container buyback programs. Now, eight of these ten states – Connecticut, Iowa, Maine, Massachusetts, Michigan, Oregon, New York, and Vermont – have temporarily halted enforcements that require retailers to participate in these container redemption programs. This means that residents in these states are no longer able to redeem their used beverage bottles for deposit value.

However, the remaining two bottle-bill states – California and Hawaii– are not immune to disruptions to their redemption programs as more shelter-in-place directives are being enacted across the country.

Go deeper: Visit Platts Live for more insights on how coronavirus is affecting commodity markets

"People are hoarding food and beverages, some of which are packaged in PET," noted a California recycler. Polyethylene terephthalate, or PET, is best known as the material of choice for plastic drinks bottles, and one of the most widely recycled plastics.

"People here will keep their empty PET containers to collect the CRV when they feel comfortable going out. The problem is that this inventory may not make it into the recycling system right away," the recycler added.

Curbside recycling programs in over a dozen municipalities across the country have also come to a halt, with many more closing drop-off sites, limiting service hours, and cutting the amount of acceptable materials for collection, such as bulky, mixed, or yard waste.

Residents living in cities that have not deemed recycling as "an essential service" and have elected to direct public funds elsewhere, are now being told to trash their regular recyclables and use blue or green bins for additional garbage.

At the same time, residential waste volumes have notably increased as more people stay home. Spring cleaning has become an issue for waste haulers across the country, putting additional strain on already insufficient collection crews. Many cities across the country are asking residents to refrain from partaking in major cleaning projects during this time.

Recyclers face labor, transmission worries

These service changes are largely due to staffing issues as more policies, such as social distancing, are being enforced to reduce the spread of the virus and ensure worker safety.

“We need to change these services, because we have found we cannot maintain the sanitizing and social distancing procedures,” said Cindie Langston, the solid waste manager of Casper, Wyoming, in a press release late last week. The city has postponed all collection services at nine of its recycling facilities.

Medical researchers are still trying to understand how coronavirus is transmitted and how long it can remain viable on inanimate objects. Therefore, many operators cannot rule out the possibility that used containers might carry and transmit the virus to workers.

As a result, many measures have been enacted to reduce face-to-face and container contact between consumers and employees, including increased paid leave, rotating shifts, and a "six-foot distance" rule. CLYNK, a redemption company, operating in both New York and Maine, has implemented three-day container holds where residents are asked to fill clear bags with used containers and wait three days before these bags are to be marked with colored string and brought to a drop-off site.

However, despite these precautions and heightened safety measures, worker shortages are on the rise as more employees fall ill. Moratoriums on the use of inmate labor have also been implemented as jails across the country go on lockdown, to avoid exposing "high-risk populations" to the virus, according to statements from several municipal governments.

Recycled plastics supply impact

The recycling market outlook remains uncertain as industry players consider the global impacts on supply caused by the coronavirus, both short term and long term.

As nationwide recycling programs continue to be curtailed, manufacturers are concerned about the availability of post-consumer bottles which are used to produce PET bottle bales. These bales are the feedstock for recycled food-grade resin which is widely used by food and beverage companies that have made sustainability commitments.

Go deeper: Factbox - The drop in US post-consumer bottle bale supply

"Bale supply is going to keep going down and eventually disappear for the most part until this blows over but obviously no one knows how long that will be," said a California buyer.

Prior to the coronavirus outbreak, the recycled plastics industry in the US had already been plagued by extremely cheap virgin PET prices, high fixed processing costs, and export restrictions, which had led to calls for systemic and policy reform initiatives across the supply chain. In 2019, recycling programs gained traction as more governments introduced bottle-bill legislation and single-use plastic bans swept the nation.

In addition, the year 2019 saw a surge of public pledges from large beverage companies, such as Coca-Cola, Pepsi, and Nestle, to incorporate an ever-increasing amount of minimum recycled content in their consumer goods.

recycled PET demand

Now, as the US focuses on containing the pandemic, sources suggest that many sustainability efforts will be put on hold for the foreseeable future.

"Companies are in survival mode so they probably are not going to worry about paying more for recycled content when their business and the entire energy value chain is at risk," said Rob Stier, an analyst at S&P Global Platts.

At the same time, virgin prices have plummeted in recent weeks on the back of weak upstream crude prices amid the ongoing price war between Russia and Saudi Arabia. Therefore, many manufacturers have an incentive to use cheaper virgin material over recycled flake and pellets now priced at a premium.

Last Wednesday, Platts assessed import and domestic PET prices at 43 cents/lb and 50 cents/lb, respectively, both markets falling to the lowest levels seen since the company began the assessments in 2006.

"Sadly, we're transitioning away from a green story to one of cheap virgin material," commented a Midwest recycler.

Beverage sector eyes weaker summer

The outlook for the virgin and recycled resin market remains unclear as the coronavirus continues to hinder global supply chains and alter demand trends.

Domestic demand for supplies packaged in PET remains robust, as Americans continue to stock up on food and other necessities.

However, the postponements or cancellations of major festivals and sporting events, including the 2020 Tokyo Olympics, has led to demand uncertainty and has raised the question of whether consumer demand, particularly in the important beverage sector, will move from the entertainment and leisure sector to retail purchases or whether that demand will simply evaporate.

Peak bottling season for both virgin and recycled PET market is in the months leading up to summer as beverage companies prepare for heightened demand driven by warmer weather and increased outdoor activity.

Now, with collection rates continuing to drop and talk of social distancing lasting well into the summer, which would mean lower consumption of bottled beverages as people stay home, market participants have expressed bearish sentiment for the supply of recycled PET for several months to come. Therefore, many brand owners may be left with no choice but to switch to cheaper, readily-available virgin material.

"Securing a reliable supply of recycled plastics at a fair price will be challenging as the petrochemical industry heads into a period of low prices," added Stier. "Price transparency will be more important than ever to monitor the availability and quality of recycled materials."