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[GreenYes] Wellman

Plastics Recycling update will publish the following story this week:

Wellman to get out of recycling

In a major announcement, Wellman Inc. (Shrewsbury, New Jersey) will close its Johnsonville, South Carolina recycled PET processing plant as a strategic step to move the company back toward profitability. Wellman is the second largest PET reclaimer in the U.S., remanufacturing PET into fiber fill for sale to pillow and furniture manufacturers. Fiber operations will be consolidated at the Palmetto plant in Darlington, South Carolina. The firm determined polyester fiber could be manufactured at the Palmetto facility using virgin materials at a much more competitive price when operating at the full 500 million pounds a year capacity. The nylon recycling system at Johnsonville, which is thought to be highly profitable, will remain in operation. This system produces up to 60 million pounds per year of recycled product.

Wellman has suffered financial losses in recent years, forcing management to look at opportunities to improve efficiency. According to Tom Duff, Chairman and CEO of Wellman, "Business [at the Johnsonville facility] continued to be cash negative at what should be the strongest point of its cycle." Duff attributed the continued poor performance of the facility with competition from rising Asian imports which topped one billion pounds in 2005. The need to carry large bale inventories at the recycling plant because of fluctuations in supply as compared to manufacturing facilities using raw materials was another factor challenging the profitability of the plant.

The company is not selling the Johnsonville fiber making assets, as it does not want help a competitor.

Wellman, however, is seeking a buyer for the recycling line, with Glen Odom handling the negotiations. Although the line is slightly outdated (it lacks a PVC-flake removal system, for instance), it is thought to be the world's largest single line, at 25,000 pounds per hour. Industry insiders report that several firms, "big and small, traditional and nontraditional," have expressed interest, with much speculation centering on the potential purchase of the plant by Shaw Industries (Dalton, Georgia). Included in a potential sale are other elements of Wellman's recycling division.

A significant bale supply exists today at the Johnsonville plant. The bottle cleaning operations will run through November and fiber production will close by the end of December. About 300 employees will lose their positions with the company when the company closes the doors. Phil Ammons has agreed to work for the firm until the end of the year, when he will then form a brokerage firm to handle PET bales, and clean and dirty flake.

The closure of the recycling facility is having an immediate negative effect on its largest contracted bale supplier, Waste Management (Houston). Although WMI has been operating under a five-year agreement to supply the plant, Wellman gave WMI two-weeks notice, saying that shipments would need to end in early October. The lawyers for both firms are battling it out over contractual elements of the relationship.

Jerry Powell
Resource Recycling
E-Scrap News
Plastics Recycling Update
PO Box 42270
Portland, OR 97242-0270
(503) 233-1305
(503) 233-1356 fax

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