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NEWS ANALYSIS Plastics recycling: The bottle Falling oil prices and the supermarket price war has led to market failure in the recycled plastics sector. A new analysis forecasts tough times ahead. David Burrows reports. ack in November 2013, the plastic bottle recycler Closed Loop announced plans to increase the capacity at its Dagenham plant from 35,000 to 55,000 tonnes per year. "The increased demand for recycled content is an example of the whole industry working together […] to implement an ambitious plan," said CEO Chris Dow. "This has created a sustainable business model with enormous potential for the future." So the news in March that the country's biggest recycler of plastic bottles was on the brink of collapse may have come as a shock. After all, recycling of milk bottles has been one of the industry's success stories. But caught between the sharp pincers of the fiercely competitive supermarkets and the global market for oil, Closed Loop 6 Local Authority Waste & Recycling May 2015 B is not the first recycler to stare into the abyss of administration – and it won't be the last. "Tremendous progress has been made by the UK plastic recycling industry over recent years," says Packaging and Films Association chief executive Barry Turner. "However, no one could have foreseen the way raw materials prices have fallen and the indirect effect of these on operating margins of reprocessors." Indeed, April's profit report from Plimsoll Publishing suggests that 227 (32%) of the UK's top 715 recycling firms are recording a loss (see box). For more than half of those it's the second year in a row – and it's these serial loss- makers that are adding to the congestion in the market, undercutting others and driving down profit margins, explains Plimsoll senior analyst David Pattison. "At first glance, the consequences of Plimsoll analysis in April shows that 218 of the UK's top 715 recycling companies are in the financial danger zone. On the brink not delivering a profit would seem quite minor. However, with 134 firms recording their second year of successive losses and 218 firms rated as now being at high financial risk, time may well be running out for some of these firms." At the end of March, Closed Loop told retail trade magazine The Grocer that it was one them, urging ministers to find a political solution – and quickly. Earlier that month, Defra minister Dan Rogerson had brought the supply chain together in a crisis meeting to hear about the problems first hand. The focus of the meeting, reportedly, was how the oil price slump had left recycled plastics uncompetitive with virgin material – a situation further amplified in the HPDE market after supply disruptions in the US pushed prices for recovered plastic HDPE bottles in Europe even higher. This had left retailers and manufacturers tempted to revert to packaging made with virgin polymers. Heads turned Through initiatives like the Courtauld Commitment and the Dairy Road Map, businesses have committed to using higher levels of recycled plastics in their packaging. Signatories of the latter committed to a target of 30% recycled material in packaging by 2015 and 50% by 2020. These public commitments provided "real confidence to the markets", says Jane Goodwin, CEO at Wrap, which has been heavily involved in a number of industry-wide voluntary waste agreements. Some have already publicised their continued support for recycled plastics. A spokesperson for Dairy Crest, one of the largest processors in the diary sector, says the company "remains committed to rHDPE" whilst The Co-operative Food has "no plans to move away from Strong Companies Good Companies Mediocre Companies Caution Companies Danger Companies 218 64 70 72 291 Plastics recycling: The bottle

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