Why Are Low Oil Prices Bad for the Recycling Industry?

Motorists may love the plummet in oil prices but for the recycling industry it could seriously jeopardise operations. Closed Loop is the UK's biggest plastic milk bottle recycler but in the wake of oil price drops and supermarket price wars, the company is on the verge of collapse.

In the UK, Closed Loop produces over 80% of the nations recycled plastic used to make milk bottles. Yet despite its vast market share, the company’s chief executive admits that without government support, administration is “inevitable.” The company has found itself wedged in-between a crash in global oil prices and a fierce supermarket price war that could force its entire enterprise to collapse.

“We are the collateral damage from the drop in the oil price,” said Chris Dow, chief executive of Closed Loop.

Virgin vs recycled

To attract and retain clientele, Closed Loop keeps a close eye on the market cost of virgin plastic and prices its products accordingly. Yet the falling value of oil has led to sales of recycled material dropping by a huge 40% over the past nine months. Why? Because higher oil prices have caused the cost of reprocessed plastic to soar by £300 to £500 per tonne.

Dow stresses that the company is in dire need of financial support, explaining “Our customers want to buy recycled plastic but they don’t want to pay more [than virgin plastic]. Without the support of the industry or the government it is inevitable we will go into administration.”

What are the consequences?

Should the company shut down, it would seriously jeopardise the current Dairy Roadmap scheme which sees major retailers voluntarily use recycled plastic for 30% of milk bottles. Emergency meetings are currently underway to save Closed Loop, with resource minister Dan Rogerson doing everything he can to secure industry backing. 

Government-backed Waste Resources Action Programme (WRAP) is also stressing that action needs to be taken immediately. Representative Marcus Gover maintains that “If we can agree something then maybe we can save this company.” While there may be short term savings in using virgin high-density polyethylene, he explains that “Commodity prices go up and down. Recycled food-grade [plastic] will be a good buy again. But if we don’t stick with it now, there won’t be any to buy in the UK and that would be a real loss for us all.”

Can Closed Loop be saved?

So what will it take to save Closed Loop from collapse? According to Dow, an investment of just 0.1p per two-pint plastic milk bottle would see the company through these hard times. Without the support, the collapse would be a major knock-back to the government’s commitment to creating a “circular economy” where Britain reuses and recycles wherever possible.

To read more about the effects of plummeting oil prices, read the following article: What Are the Pros & Cons of Plummeting Oil Prices?