Capital Markets Conference: State of the recycling industry

Capital Markets Conference: State of the recycling industry

Lower secondary commodity pricing affects companies' bottom lines and municipal budgets.

October 31, 2018

Pictured above: Seth Cunningham of Burns & McDonnell

Attendees of the inaugural Capital Markets Conference, a Waste Today event held in Chicago Oct. 17-18, 2018, heard from presenters with viewpoints on how the lower value of collected recyclables is affecting the bottom line of waste and recycling firms.

Bill Moore, president of Atlanta-based Moore & Associates; Seth Cunningham, project manager of the Kansas City, Missouri-based consulting firm Burns & McDonnell; and Peter Keller, vice president of Phoenix-based waste and recycling firm Republic Services, discussed market conditions recyclers are facing in the fourth quarter of 2018.

Moore said China’s decision to curtail the import of recyclables from outside the country, especially recovered fiber and plastic scrap, means many recyclers are confronted with declining prices and fewer end markets for the material.

The drop in the value of recyclables has not only had a negative impact on private recycling firms, but also municipalities that have signed contracts with these recyclers to process materials and share in the revenue generated. With the drop in prices, many of these cities are seeing increased processing costs rather than revenue, and glass is being dropped from curbside programs in some places.

Moore said that while prices for many paper grades are flat, old corrugated containers (OCC) demand is increasing, and the growth of e-commerce is shifting more OCC from distribution centers to residences. This trend is expected to continue and will result in municipal recycling processors being able to pull more OCC from curbside collection programs.

On the down side, mixed paper, which traditionally was created at municipal material recovery facilities (MRFs) and sought after by Chinese mills, continues to experience depressed pricing after China’s move to curtail most mixed paper import shipments.

For plastics, Moore said there is a burgeoning anti-plastic movement, which is forcing more companies to develop ways to reduce plastic’s environmental footprint. He said prices for many plastic scrap grades will see downward pressure due to an oversupply of resin on the global market.

Cunningham of Burns & McDonnell said after commodity prices plummeted during the global recession of 2008 and 2009 prices had rebounded before the Chinese restrictions were announced. He said now there are other factors affecting pricing for many recyclables, including contamination in residentially collected material, which he said “is a big cost.”

“Moving forward,” Cunningham commented, “we will have to reset expectations. One thing that needs to be done is reducing contamination. This will require more education.”

Cunningham said the traditional revenue model many municipalities operated under with recyclers needs to change. The high costs of processing and the slumping prices make it more difficult for recyclers to honor contracts when they may be losing a significant amount of money.

Republic’s Keller gave a snapshot of his company’s operations and steps it has taken to work through the challenges of the 2018 market.

The 2018 Capital Markets Conference, organized by Waste Today Events, was Oct. 17-18 at the Marriott Magnificent Mile in Chicago.