PreZero, ACI have $90M vision for hard

A recycling company owned by German supermarket giant Schwarz Group is making a push into the U.S. and partnering with Michigan-based ACI Plastics Inc. to invest more than $90 million in factories in California and South Carolina.

The new plants, which will start with plastic film recycling in Riverside, Calif., and mixed rigid containers in Westminster, S.C., are targeting hard-to-recycle plastics previously exported to Asia but are increasingly stuck in the U.S. after China's 2018 ban on imports of some recyclable scrap.

The companies have plans beyond that. They see demand allowing them to open several more plastics recycling plants in the U.S. annually for the next few years, said Hendrik Dullinger, vice president of Los Angeles-based PreZero US Inc., which is a subsidiary of the Neckarsulm, Germany-based Schwarz Group.

Schwarz is one of the world's largest grocery store firms, operating the Lidl chain with 11,000 stores in 32 countries, but in recent years it's been branching into waste management.

It may seem an unlikely foray, but German laws require retailers to assume significant responsibility for managing packaging waste. Schwarz executives have invested in that sector as well, buying Tönsmeier Group to become Germany's fifth-largest waste management firm.

As Schwarz has expanded its grocery operations in the U.S. — Lidl opened its first U.S. store in 2017 and has nearly 100 locations in the eastern U.S. — its PreZero environmental operations have also moved into the country. It acquired San Diego-based recycling services firm Resource Management Group in 2018.

As part of a growth strategy, ACI President Scott Melton said the two companies developed recycling systems designed to better handle streams of mixed plastic containers, mainly polyethylene and polypropylene, and plastic film.

They feel they have technology to more profitably handle that, he said.

"We have researched and invested in state-of-the-art equipment for both mixed rigid plastics and [low density PE] film," Melton said. "The use of this equipment in the right sequence allows us to obtain a higher yield, higher purity and a better pellet that will be consistent from lot to lot."

End markets include consumer product packaging, agriculture, automotive and general manufacturing, selling to both injection molders and bag blow molders.

Melton said Flint, Mich.-based ACI and PreZero started talking in March 2018, formed the partnership in early 2019 and started ordering equipment in the middle of last year.

"The time is right because there is an abundant supply of mixed rigid plastics and LDPE/LLDPE film in the market, and there is a strong desire for high-quality recycled pellets by U.S. manufacturers from domestic sources," he said.

The South Carolina operation, a $13 million investment, plans to come on stream midyear at an existing ACI facility and will be adding two extrusion lines. The facility will have capacity to process 60 million pounds a year of rigid plastic containers, tubs and lids, including sourcing from post-consumer bales of plastics 3-7.

The California plant, an $80 million investment, will also open this year, with two extrusion lines and initially focus on film recycling.

The groups plan for both factories to broaden operations: South Carolina will add film recycling late this year and California will start handling rigid containers in the first quarter of 2021, Dullinger said.

Beyond that, they're looking at other factories in the U.S.

"We would like to open a new plant a year for the next five years," Dullinger said. "We will expand strategically. These first two facilities will be in the Southwest and Southeast, respectively, so we will evaluate the Northwest, Northeast and Midwest in our next steps."

"We want to provide viable closed-loop solutions for every major region in the U.S.," he said.

Dullinger said they see potential for their U.S. investment because of demands for recycled resin from big brands, coupled with a shortage of existing infrastructure to recycle film and mixed rigids.

He said the two companies were introduced by an equipment supplier that ACI had been working with to develop a post-consumer wash line, when PreZero was scouting U.S. expansion, and quickly realized they had similar business ideas.

The coronavirus pandemic has slowed the startup of the new operations, but the companies see demand continuing.

"We have had to slow down the installation process as some of our equipment and technicians come from outside the U.S.," Melton said. "The travel ban outside the U.S. and within the U.S. has slowed down final commissioning. We believe the market is always looking for high-quality recycled pellets."

ACI started in 1986 and also has facilities in Nebraska and Arizona. Beyond recycling and related services, including in the automotive sector for recycling multilayer car instrument panels and door panels, the firm has capacity for compounding 40 million pounds of virgin resin annually.

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