The recycling of plastics involves various separate activities. These are: collection; sorting; cleaning and granulation; and re-processing. Typically, each of these different activities are undertaken by different firms or public bodies. They are very different activities from those of firms involved in virgin plastics production, with much less technological sophistication. This is not to say that there are not difficult problems associated with separation.
Factors affecting the profitability of recycling include the price paid to the collector or intermediate processor, processing costs, and selling price. The price paid to the collector is dependent on the collection method used and the distance from generation to the intermediate processor or recycler. Processing costs are determined by the quality of the material and the throughput of the facility. The price paid by the plastic product manufacturer for the processed resin is generally lower than that of competing resins. Vertical integration and economies of scale realised in virgin resin production are not generally available to recycled plastics processors and compounders, making the margin that they work in very narrow.
How the recycling industry is organised depends significantly upon government rules and regulations and so varies from an integrated system such as that in Germany to a decentralised scheme such as is found in the United States, although there is a considerable difference between different states. Many of these firms are relatively small. Re-processing firms are typically SMEs in the range 5 000-20 000 tonnes per annum. One explanation for this is the diversity of polymers and products, especially in comparison to steel and aluminium. Another explanation is the scale of investment required to set up in business. For the United Kingdom, direct capital requirements for mechanical recycling fall in the range £10 000 to £1.5 m. In the UK in 1996 there were over 100 re-processor companies.
Reclaimers tend to be the smallest of the enterprises involved. However they are at the heart of the recycling process. The problem that follows from this is the ability of these small firms to withstand the financial shocks that arise from price volatility. While the volatility may be not that much greater for recycled plastic prices than for virgin, the size of the enterprises involved in virgin production means that they are better able to smooth out profits and losses. Indeed, it is almost always the case that the cost of collecting, sorting and transporting plastic bottles to reprocessors usually exceeds revenue generated by the sale of recovered bottles. This is usually supported by some form of subsidy or other financial transfer such as the payments made by DSD in Germany (see below).
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