how-falling-oil-prices-impact-recycling-general-kinematicsThe recent plummet of prices at the gas pump is a universal high five. Right?

Well, it depends on the person you ask. While consumers like the low pricing, the scene is not as picture-perfect for the global economy. The positive effect of low oil prices doesn’t affect all businesses in the same way, and recycling is one such industry that has been challenged by the downswing.

Recycling Can Be Profitable

Recyclers collect materials—used soda bottles, milk cartons, salsa jars, cardboard boxes, etc. Then everything is sorted, cleaned and then finally sold to other companies to be melted down. From there, those materials are used to manufacture ‘new’ products.

Recycling isn’t just ‘a good choice’ for the earth. A for-profit business, the recycling  industry is estimated to be worth $100-billion-a-year as reported by NPR’s Planet Money team in, “How the Price of Oil Caused A Downturn in the Recycling Business”—an interview featured on Morning Edition, April 2015—and again in, “Low Oil Prices Interfere With What Recyclers Are Paid for Plastic,” in January 2016.

The Decline of Recycling’s Profitability

Recently, however, the price of plastic was cut in half in a period of only six months, as told to NPR reporter Stacey Smith in January 2016, by a Brooklyn-based recycler. In parallel, oil prices dropped from $120 a barrel to about $60 a barrel last spring. Then the price dropped again from $60 a barrel to $30 a barrel. Currently, it sits between $40-$45 a barrel, according to oil-price.net.

At the same time, recycling plants are starting to go out of business. For example, after four years of operations, UK-based Boomerang Plastics closed in February 2016 partially because of lower oil prices, according to Packaging News. That same month, 191 recycling centers run by Ontario-based RePlanet shut down, too. The company needed to close its doors due to “higher operating costs, lower state subsidies and lower prices for bulk recycling on the commodities market,” reported The Press Democrat.

What Does Recycling Have to Do with Oil?

Here is the crux: Plastic is made from oil. When the price of oil drops, making fresh, non-recycled plastic becomes more affordable. As a result, the process of creating recycled plastic (sorting, cleaning, melting, etc.) can become more expensive than simply making new plastic. Items like plastic bags have the lowest value, so recycling companies can’t afford to spend time and money to recycle that type of plastic. In the end, if a new profitable process can’t be established, those plastic bags will just end up (or continue to end up) in the landfill—even if they went to the recycling center in the first place.

So What is a Recycler to Do?

The oil market will surely continue to roller-coaster. The immediate and future costs of oil-by-the-barrel will continue to vary. When the price of oil rises, that could very well help and benefit the recycling industry. During the interim, one investment that can help to ease the financial burden that recyclers face is to invest in well-made recycling equipment. What’s the best option?

General Kinematics manufactures machines that are able to screen and recover more recovered resources, thereby generating increased profits for our customers. GK vibratory and sorting machines are unbelievably hardy and last for decades. Plus, they run efficiently, so recycling sites can sort through a greater quantity of recyclables each day. Regardless of oil prices, recycling with GK Recycling Equipment just got more lucrative!

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