Toward Efficient MRFs

Quantity and quality are usually considered to be an either-or choice. There is an assumption that you can have one but can’t have the other. There is a further assumption that the two are either unrelated or are in direct conflict with each other. In the recycling business, there are several metrics for measuring both characteristics.

In the context of recycling, quantity can refer to the amount of the overall wastestream being handled by the recycling facility or program, typically measured in tons per day or pounds per capita. Or quantity can refer to the percentage of the wastestream that consists of the material in question. A wastestream can consist largely of paper waste and similar waste types, such as newsprint, corrugated cardboard, or glossy magazines. However, this material may not be as valuable as other recycled materials (such as scrap metal) on the resale market.

This brings us to quality. Quality can also be defined two ways. High-quality recyclables themselves can be valuable (such as the scrap metal described above) or can be recycled in such a way as to produce a material with high-quality characteristics. The price that the market is willing to pay for a type of recycled material will depend on market demand. Because of the rapid expansion of newly industrialized economies in China, India, and other nations, the once highly volatile scrap metal market has seen steady increases in market value. This definition of quality is outside the control of the recycler. However, the second definition, based on the intrinsic characteristics of the final recycle materials produced, can be achieved through superior sorting and separating technologies and methods. Cross-contamination of recycled materials (wastepaper mixed in with cardboard, different colors of glass mixed together, or different types of plastics combined in one output) is what lowers the inherent quality of the recycled materials. Effectively, the buyers of these materials (usually purchased by the ton) will be paying for materials they don’t want or need, or could negatively affect their subsequent production processes.

Given the above standards, a materials recovery facility (MRF) seeking to maximize production (high quantity) cannot do so without an eye toward maximizing the quality of the final product. The successful realization of economies of scale demands that the expanded capacity of a MRF must be either matched with improved quality or focus on the production of materials already deemed valuable by the market, or the effort will be wasted. Without improving or maintaining standards of quality, the recycler will be left with nothing more than bigger piles of poorly sorted waste with little or no market value.

Economies of Scale and Cost Reductions
Economies of scale (often mislabeled “economics of scale”) are the cost savings achieved by a process, industry, or company as the direct result of expansion. As a definition, it refers to the reduction in cost per unit as more units are processed. Though primarily applied to the manufacturing sector, economy of scale is a universal concept that can also be applied to recycling. This is true even though recycling is the opposite of manufacturing. Instead of using raw materials to create finished products, recycling ideally takes discarded finished products and reduces them to their constituent raw materials.

How are economies of scale achieved? There are two ways: by the reduction in cost of materials as a result of buying in bulk, and by the spreading out of more units of production over the same fixed-cost base. Buying in bulk takes advantage of the suppliers’ economies of scale. The cost of delivering lumber, coal, iron, cotton, sugar, or any other commodity drops as the amount being delivered increases. It is the trick every shopper knows when purchasing items at a bulk discount wholesaler compared to the increased costs per item at boutique retailers. As a manufacturer increases the number of units being manufactured, he can order larger quantities of raw materials. The resultant cost savings are passed onto the consumer in the form of lower prices per unit sold.

The manufacturer and his bulk supplier achieve their respective cost savings by applying the number of units produced over a constant fixed cost of doing business. Fixed costs are those production costs that remain the same no matter how many units are processed. For example, the cost of constructing a steel mill with its floor space, warehouses, furnaces, equipment, and land may have an up-front cost of $1 billion dollars. This cost is usually paid for with a loan that applies interest rates to the cost over the duration of the loan to determine the amount of each regular monthly or annual payment. These payments are fixed and are independent of the amount of steel actually produced by the plant and equipment.

For example, if the payments on the aforementioned loan for the factory amount to $100,000 per month and the factory produces only 1 ton of steel per month, the fixed cost per ton of steel would be $100,000. However, if the factory produces 1,000 tons of steel each month, the fixed costs per ton would fall to $100. This is true up to a certain point defined by the design capacity of the process. Suppose the factory’s equipment is designed to produce no more than 10,000 tons per month, the smallest per unit fixed cost would be at least $10 per ton.

Fixed costs are the opposite of variable costs, which do increase with the amount of units being processed. Together, fixed costs plus variable costs equal the total cost per unit. In the example of the steel mill, two obvious variable costs would be cost of iron ore shipped to the factory and the cost of energy to heat up the furnaces. Each ton of steel requires several tons of iron ore and several more tons of coal. The overall cost of these raw materials varies with the amount of steel produced.

For example, if a ton of steel requires the purchase and delivery of $2,000 worth of iron ore and $3,000 worth of coal, the variable cost per unit of production would equal $5,000. So if the same steel mill produces 1 ton of steel per month, its variable costs would be $5,000 per month. If it produces 1,000 tons per month, its monthly variable costs would increase to $5,000,000. Ignoring all other costs, the above example can be illustrated by Table 1. The table represents a simplified scenario since it does not factor in any price reduction resulting from purchasing large-volume bulk quantities of iron ore and coal. For example, at a production rate of 1,000 tons per month or more, the cost of coal and iron ore may drop to below $4,000 per ton of steel. Conversely, if the manufacturer and its competitors increase production to meet increased consumer demand, the variable costs per unit may increase as demand-driven inflation drives up prices of coal and iron ore. Still, for all of its limitations, the table illustrates in simple terms how significant cost savings are achieved with economies of scale. The issue then, is how to apply this principal to recycling.

What Is Recycled—and How Much?
Recycling converts objects that would otherwise become waste into products of value. In doing so, recycling creates a host of positive environmental, social, and economic side effects. Not only does recycling result in earning through direct sales on the scrap markets, but recycling also avoids the costs of disposal or incineration. For example, if aluminum cans can be sold at a net profit of $10 per ton, the real “earnings” are the cost avoidance of having to pay a $33 per ton tipping fee at the local landfill. So the total net positive economic benefit would $43 per ton.

According to EPA data from 2003, Americans generate an average of 4 to 5 pounds of waste per person each day. With an estimated

300 million Americans, this is equal to about 675,000 tons of waste generated daily—or almost 250 million tons annually. Given that the nationwide average for tipping fees at landfills is around $33 per ton, this represents an annual market of $8.25 billion. In 2006, recycling diverted 82 million tons of waste away from landfills, an amount approximately one-third of the total wastestream (compared to only 34 million tons recycled in 1990). The recycling numbers break down as shown in Table 2 (US EPA, 2006 data).

For the most part, the percent recycled is a function of market demand. The greater demand for the material, the higher price it will bring on the scrap market and the greater the supply to meet this demand and achieve higher profitability by selling higher-priced materials.

There are three exceptions, though, to this general rule.

The first exception is automobile batteries. Because they may contain mercury, lead, or other toxic substances, automobile batteries are typically banned from landfill disposal by state law. As such, special recycling programs, artificially created by regulation and divorced from the resale market, have been imposed to manage this potentially dangerous waste product.

The second exception is yardwaste (and agricultural waste in general). Lawn clippings and collected leaves are often not allowed in landfills due to the amount of disposal volume they can take up. So, in order to increase the operational lifetime of existing landfills, bulk organic wastes are diverted to composting programs. Fortunately, yard trimmings are easily kept separated by the homeowner and do not require individual sorting, only their own special bags.

Third, tires are also kept out of landfills for operational reasons. Given their elastic characterizes, they have a tendency to work their way up through waste as it is being compacted, often reaching the surface. As they do so, they can disturb daily, intermediate, and even final cover layers. Furthermore, tires are highly flammable, and this ignitability is unaffected by the waste’s overall moisture content (unlike paper waste). Once lit, tire fires are extremely difficult to extinguish. Therefore, most landfills refuse to accept used tires, requiring that they be diverted to special stockpiles where they can be shredded and utilized as drainage materials and other replacements for aggregate.

That leaves us with metals (steel cans, aluminum cans, and other scrap-metal sources, such as construction demolition debris), paper and cardboard (various kinds), plastics (PET or HDPE, for example), and glass. These four broad categories are recycled to an extent largely determined by market demand, with valuable scrap metal taking the lead and glass taking up the rear. Paper, plastics, and glass also suffer from inherent quality problems. There are various colors of glass that need to be separated prior to resale. There are literally dozens of commercial plastics, none of which can be melted and combined with other types. Furthermore, the various types of plastic are difficult to distinguish, by color or density, making sorting a separation difficult. Paper products have an ever-greater variety, but most types are easier to separate by size, shape, and weight.

Workflow and Flexible Processing
The basic workflow for most MRFs will vary in detail, but in general it includes the following steps (though not always in the order presented). Nonrecyclable material is removed manually during the presort stage. A further disc separator can remove large cardboard items. Then old newspaper is separated by a disk separator and sent to a hopper for baling. Mixed paper continues on to another disk separator that removes containers from the wastestream. The containers get fed into a sorter line, where plastics are removed, followed by a magnetic separator, which removes ferrous metals. Aluminum is then removed by an eddy-current separator. This leaves glass, which is subsequently sorted by color. The facility’s high-capacity and multiple-waste capabilities offer the city a flexible option to complete reliance on landfills as a means of waste management.

The major problem facing recyclers is the traditional volatility of markets for recycled materials. To expand the processing capacity of a MRF without regard to the demand for the recycled materials it will produce is to place the cart before the horse. Certain categories of recyclables are in less demand simply because there is no natural shortage of these materials (glass made from silica, for example, as there is no shortage of sand). Other types of recycled materials are difficult to separate for resale, often requiring extensive manual labor that is difficult to scale up (e.g., the multiple types of plastics used for containers and other applications).

If demand is fickle, then supply is inconstant. When a source claims that a certain type of material constitutes a certain percentage of the wastestream, planners need to remember that these numbers are nationwide averages with wide variations according to location and time of year. Rural areas will have a higher percentage of yardwaste than urban areas, as will waste collected during the summer instead of during the winter. The amount of paper or scrap metal in a wastestream can vary from day to day and from neighborhood to neighborhood. Quantity also varies with time and place, with more wealthy communities usually producing more waste per capita than poorer ones.

With all of the above factors to consider, it seems a miracle that any kind of large-scale recycling project could be considered, let alone implemented. Yet, as we shall see, major urban areas have made a commitment to large-scale recycling and have successfully managed the economies of scale in these programs. The results have been impressive and, in most cases, profitable. The question then is how do they do it?

As mentioned in the example of the steel mill, fixed costs remain fixed right up to the throughput capacity of the processing system. Suppose the steel mill was designed and built to manufacture a maximum of 10,000 tons of steel each month. If production had to increase to 15,000 tons, additional plant and equipment would have to be purchased, increasing the facility’s overall fixed costs. However, unlike manufacturing, which combines multiple streams of raw materials (of known quantity and quality) to create one finished product, recycling at a MRF takes a variable source of raw materials (the waste) and transforms it into multiple products (the various raw materials separated for sale on the scrap market). A MRF can be thought of as an “anti-factory”—one that disassembles rather than assembles.

The resultant complexity can be overcome by the built-in flexibility of the materials recovery system itself and its individual components. Every stage of the MRF is designed for some peak loading for a particular type of material. For example, a magnetic separator designed to remove ferrous metal from the wastestream can be sized for a peak load where scrap metal constitutes 15% of the incoming waste tonnage, with 10% being an average load. For most of its annual operations, the magnetic separator handles scrap metal arriving at an average rate, but it has the excess capacity to manage additional tonnages from a peal load if necessary. The same is true for disk separators, air sorters, and other MRF equipment.

The overall MRF itself can be sized for peak loadings. Each component process can be sized for individual peaks that accumulate to a capacity in excess of the average waste flow. Instead of being sized to handle the amount of waste generated by a community based on an average 4.5 pounds per capita per day, the MRFs aggregate capacity could handle the equivalent of 5 or even 6 pounds per capita per day. Furthermore, by increasing its capacity, a MRF can receive waste from a much wider geographic area with greater demographic and economic diversity. The result is a wastestream whose aggregate amounts are less vulnerable to fluctuations and variations from the average wastestream values. Individual communities within the area serviced by the large-scale MRF may experience such variations, but these are counterbalanced by communities that experience smaller variations. In aggregate, larger-scale systems tend to have proportionally less variability than similar, but smaller, systems. Large-scale MRFs are perfectly designed to take advantage of this behavior characteristic.

In fact, as a result of this dampening effect, planning and operation of a large-scale MRF tends to be easier than that of a small-scale MRF whose smaller community is vulnerable to proportionally greater variations in both the quantity of waste it produces and the materials that make up the smaller wastestream.

By the Numbers: High-Capacity MRFs
So what makes a large-scale, high-capacity MRF successful? First, we have to define what is meant by “large” in the recycling business. Table 3 gives the scope of operations achieved by the truly high-production volume MRFs in North America. These top 10 facilities share several characteristics. First they are located in or near major metropolitan areas with high population densities (Boston, Chicago, San Francisco, etc.). This provides a high volume of potentially recyclable materials within a relatively small radius, reducing transportation costs and increasing overall profitability. Given the right economic and demographic conditions, the advantageous economies of scale become obvious. With the wrong conditions, large-scale recycling makes no economic sense.

Second, they have made an investment in high-capacity processing equipment (balers, shredders, magnetic- and eddy-current separators, conveyors, or air separators). This requires a further investment in enough floor space to house this equipment and manage the incoming waste flows. Half the battle of managing waste flows is providing sufficiently large, multiple shipping docks for both incoming and outgoing truck traffic. Like any other system, a MRF has a system boundary through which waste is hauled in and recycled materials are shipped out.

Third, most of the largest recycling operations are owned and operated by major waste haulers (regional or national). This allows for  vertical integration of the waste management process. It also allows the recycler to control the upstream suppliers (the waste haulers) as well as the downstream distributors (recyclable materials shippers). Such integration allows for even greater economies of scale. Cost reduction and reduced impact from competitors naturally follow. Most city and county governments lack the budget resources to provide both hauling and recycling processing services. This leaves the large-scale recycling market largely to the private sector.

Norcal Recycling Center in San Francisco (number 5 on the list), run by Norcal Waste Systems Inc. through its operating firm SF Recycling & Disposal Inc., is an excellent example of these trends. Referred to as a “total urban recycling facility,” or TURF, the facility was designed and equipped by the Enterprise Co., a manufacturer of waste-processing equipment located in Santa Ana, CA. The 200,000-square-foot, $38 million dollar facility has been in operation since 2003. With almost 5 acres of floor space, this facility can process 700 tons per day of all types (scrap paper, corrugated cardboard, ferrous metals, aluminum cans, glass bottles, and PET and HDPE plastic containers). The facility is the spear point of an effort to achieve 75% recycling rate for metropolitan San Francisco, a goal previously considered impossible. With advanced sorting equipment and seven different recycling lines, the facility utilizes a three-level conveyor and sorting system. The waste arrives largely presorted via the city’s blue-bin recycling program.

Basic economic forces will continue to drive this trend to larger-scale MRFs, at least for large urban areas. Judging from the sales of recycling equipment alone, this trend towards larger recycling facilities will continue for some time. Sales of large-capacity balers, for example, are now increasing faster than the sales of smaller balers. This will result in industry consolidation and fewer (but larger) facilities.