BioCycle November 2008, Vol. 49, No. 11, p. 54
RECYCLING markets in the U.S. recently succumbed to the volatility of the global economy. Virtually every major recycled commodity saw dramatic price reductions at the end of October. Fiber products in particular have taken a gigantic hit. Cardboard in the Northeast crashed from $120/ton to $30/ton in one week. Mixed paper dropped from about $50/ton to $5/ton. Newsprint also has fallen from about $60/ton to $5/ton. Metal prices have tumbled too. Light iron is down more than 90 percent, sitting at around $10/ton. Plastics are the latest to take a huge price hit.
This precipitous fall in prices is already having major effects. It essentially means that processors and brokers cannot move a good deal of their material without losing an immense amount of money. Some are warehousing their product. Some are putting recycling accounts on hold. Some are now charging inflated prices to accept material at their docks.
Most of my colleagues in government and the recycling industry are not surprised by this situation. Global demand for manufactured goods has decreased. China and India have effectively stopped buying recycled material from overseas and are willing to survive on inventories built up over the past year. Shipping costs are extreme and credit is tight. No one knows yet if we have hit the bottom here, or if we are in for further price reductions.
The biggest shock in the current recycling economy comes to those dependent on export transactions. Recyclers with domestic mill accounts can at least move material even if they aren’t going to make much money. Domestic mills are very likely ecstatic that they can now get feedstock at such cut-rate prices. This means, of course, they can pick and choose who they do business with and demand only the highest quality materials.
KEEP PROGRAMS RUNNING
What is important to remember amidst this market chaos is that recycling economics for businesses and facilities is first and foremost about saving money on trash disposal. Over the next year or so, you may not get those rebate checks that are always a blessing. You may in fact have to pay a bit more for recycling services. But if you’re smart, you will not have to pay high fees to landfill or incinerate your recyclables.
Allowing a recycling program to falter or fade away because of additional cost would be a mistake, because you’ll just pay more to dispose of material that is now trash. And, of course, the markets will indeed eventually turn around. Fluctuating prices for these materials should not, cannot, lead to the temporary collapse of recycling programs: It’s costly and time consuming to ramp up to speed again.
And there are numerous other benefits to keep in mind. Recycled content products are more energy efficient than products made from virgin resources. Recycling is part of our energy independence equation – and part of the fight against global warming.
Develop a more transparent and rational pricing scheme. The waste and recycling hauling industries need to change the current pricing scheme. Getting “free” service for your recyclables only works when markets are booming. A better system is one where you pay a contracted hauling/processing fee and then agree with your vendor to a shared revenue index that floats with market rates. Large companies and most municipal governments have done this for years. It’s a way to protect the hauler and to share the risk of volatile recycling markets. Moving the industry toward weight-based pricing technologies is a key to recycling’s future.
Create a new paradigm for recycling services and markets. The cost of disposal alone should be a reason for businesses to recycle, but even for large companies those costs are often overlooked. Cooperative marketing and the power of group purchasing is a way to drive the markets in a completely different manner. Industry groups and small business associations would find the logistics and economics of recycling more customer-friendly with cooperative marketing opportunities. We need to capture the millions of tons of readily recyclable material landfilled every year. Tough times can lead to new solutions.
Single stream recycling isn’t always the best model. So-called single stream recycling means mixing all recyclables together, which reduces the quality of material for processors and brokers and, therefore, the value of that material. In some cases, single stream may be necessary due to space problems or logistics, but in many other cases separating those recyclables – especially with commercial recycling – may very well provide the more cost-effective solutions. We need to retool and revamp some of our recycling programs to maximize the value of recovered material.
What’s the bottom line? Hang in there. Markets will bounce back. We are about to see great changes in this country. And we should all, regardless of our politics, work to make this a better world, make that our mission and our challenge from here on out. The first step is for everyone to recycle everything they possibly can.
David Biddle is Executive Director of the Greater Philadelphia Commercial Recycling Council. Information on the GPCRC can be found at www.gpcrc.com.
November 24, 2008 | General
Recycling Market Woes
BioCycle November 2008, Vol. 49, No. 11, p. 54