Low Oil Prices Interfere With What Recyclers Are Paid For Plastic
DAVID GREENE, HOST:
The price of oil has been on a downward dive for a couple years now, and one business hit especially hard by low oil prices is the recycling business. Here's Stacey Vanek Smith from our Planet Money team.
STACEY VANEK SMITH, BYLINE: Last spring, oil prices had just dropped in half from $120 a barrel to about $60 a barrel, and all of these recycling plants were going out of business. To figure out why, I visited Tom Outerbridge at Sims Recycling in Brooklyn, right near where live.
My garbage comes here - or my recycling. Sorry.
TOM OUTERBRIDGE: Yeah, your (inaudible).
SMITH: Is that bad to call it garbage?
OUTERBRIDGE: Yeah, well, we don't call it garbage because we're not really in the garbage business. People make that mistake all the time.
OUTERBRIDGE: It's OK.
SMITH: Recycling is a for-profit business. Recyclers collect our yogurt containers and soda bottles. They sort them, clean them and then sell them to companies that melt that plastic down and use it to make new things, like toothbrushes and fleece jackets. It's a $100-billion-a-year business, but Outerbridge told me the price he was getting for plastic had dropped in half in just six months. Plastic is made from oil, so when oil gets cheap, it gets really cheap to make fresh plastic. When the price of oil gets really low, using recycled plastic can actually be more expensive because it has to be sorted and cleaned. Last March, demand for recycled plastic was plunging, and Outerbridge was in all of these brutal price negotiations.
OUTERBRIDGE: You're negotiating around a penny or a half-penny a pound. That's really where you're negotiating.
SMITH: As profit margins get slimmer, some things just don't make sense to recycle anymore.
(SOUNDBITE OF MACHINERY NOISE)
SMITH: Outerbridge took me to see the huge conveyor belt where the plastic bags are sorted. It was like a river of them.
And there, we've got, like, bubble wrap and a target bag and a Dunkin' Donuts bag.
OUTERBRIDGE: Yeah. (Inaudible).
SMITH: It costs about as much to clean and sort a plastic bag as it does a detergent bottle, but you get way less plastic from the bag.
OUTERBRIDGE: This is really the bottom of the barrel in terms of the plastics market. The value of it is relatively low, which means we can't afford to put a lot of time and money into trying to recycle it.
SMITH: And so then what happens to the plastic bags if you can't sell them?
OUTERBRIDGE: We will certainly - you can get to the point where these are going to the landfill.
SMITH: But Outerbridge hated the idea of plastic bags becoming trash, so he made a bet. He figured if he could offer super clean plastic bags, he could charge a little premium. So he hired a guy called a picker to stand at the plastic bag conveyor belt and pick out anything that didn't belong, like food or receipts. He thought this investment could make plastic bags worth it, even with those low oil prices, but those low oil prices got even lower. They dropped in half again from $60 a barrel to around $30 a barrel.
SMITH: Hi, Tom. How are you? It's Stacey from NPR.
OUTERBRIDGE: Hi, Stacey.
SMITH: So I checked back in.
Do you still have that picker?
OUTERBRIDGE: No, we were not able to find a customer for whom that extra step and upgrade in material justified the cost.
SMITH: Outerbridge says he can find a buyer for his plastic bags about half the time. The other half of the time, the bags go to a landfill. And even super high quality plastic isn't really making money now. Outerbridge says the whole industry is struggling.
OUTERBRIDGE: I have heard of some consolidation plants that may be shut down and materials diverted to another plant.
SMITH: With rivals going under, plants like his that are still standing get more plastic to sell. And that is good for business, but Outerbridge says things won't really turn around until the price of oil starts going up. Stacey Vanek Smith, NPR News.
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