Oil slump hurting plastic recyclers too

Environmental experts agree there is a need for the Government to intervene in the matter. They highlighted possible environmental implications should plastic recycling firms be forced to close.
Environmental experts agree there is a need for the Government to intervene in the matter. They highlighted possible environmental implications should plastic recycling firms be forced to close.ST FILE PHOTO

Low prices make it cheaper to produce new plastic, drive down demand for recycled stuff

Polysin Plastic has been in the plastic recycling business since 1982 but is currently facing its worst period of business.

"Our recycled plastics business profit is near zero. What we earn is barely enough to pay for all the expenses," said owner Peh Beng Yong.

Likewise, Mr K. F. Chong, operations manager at Hock Lim Plastic Industry & Traders, said: "We collect only from our regulars now, because we are contract-bound.

"People call me up and say 'come over and collect for free', but if the quantity is too small, I can't even break even because of the transport costs."

Low oil prices have hit the 15 or so companies here that collect scrap plastic and turn it into pellets that can be melted and moulded to form new plastic products. The price of crude oil has plunged from US$107.09 a barrel about two years ago to US$32.80 yesterday.

When oil - a main ingredient in making plastic - becomes cheap, it makes the production of new plastic cheaper, so there is less interest in recycled plastic.

"The price of new and recycled plastic is about the same now," said Mr Loh Chin Lit, sales manager at Everwin Plastic Trading and Enterprise. The price of new plastic material is now $1,600 per tonne, compared with $1,900 last October.

Everwin now buys 80 per cent less recycled plastic than before.

"There's almost no one buying recycled plastic now," said Mr Chia Koi Oon, sales manager at plastic recycling company Wong Meng Plastic Industries.

The situation has led to layoffs at another recycling firm, SunnyJaya Engineering. "The company has been so badly affected that we've had to lay off three people and now there are only five of us left," said its human resource manager, Ms Mandy Tan.

Several of the affected firms are hoping for government help.

Mr Chong said: "This is not a charity business. Recycling firms need to make a profit."

Mr Peh said he understood that a downturn is part of doing business, but he hopes to receive help in reducing rental and labour costs.

In response to queries, the National Environment Agency said it has not received any feedback from plastic recycling firms on the impact of low oil prices.

Environmental experts agreed on the need for government intervention and highlighted possible environmental implications should the firms close.

Assistant Professor of Economics Chang Youngho at Nanyang Technological University said: "If those plastic recycling companies go bust, collected used plastic will not be processed and the incentive to collect used plastic for recycling will diminish."

Noting that Singapore's plastic recycling rate in 2014 was 9 per cent, Mr Eugene Tay, director at consultancy Green Future Solutions, said: "Plastic recycling still has much room to grow and contribute to the 2030 target of a 70 per cent overall recycling rate."

A version of this article appeared in the print edition of The Straits Times on March 01, 2016, with the headline 'Oil slump hurting plastic recyclers too'. Print Edition | Subscribe