© Anthony Baggett - dreamstime.com
A variety of changes in recent years have spurred the recycling industry to advance and provide better business conditions overall. Some changes being made include those related to recycling contract formats, material recovery facility (MRF) technology, end market development, export market opportunities and various policies.
“The major changes that are being driven today are about how can we get to a place where this is a better quality business from a business standpoint and meet all of the social and societal changes that are coming within the business model,” said Michael Hoffman, managing director at St. Louis-based Stifel Financial Corp., during the keynote presentation titled “OK, the Recycling Business Model Is Changing – Now What Happens, How and When” at the Southeast Recycling Conference. The event took place Aug. 8-10 in Orlando, Florida.
Changing contract models
Hoffman said one major change is many large haulers and processors, such as Waste Management, Republic Services and GFL, are moving away from commodity-driven business models and toward a processing fee model in their contracts. He said China’s National Sword was the catalyst that prompted this change a few years ago.
Prices for many commodities processed at MRFs were lower after National Sword as well. However, Hoffman said this year pricing for most commodities processed at MRFs are trending well above where they were one year ago. Hoffman reported that old corrugated containers (OCC) prices are 84 percent higher than they were one year ago; mixed paper prices are 400 percent higher than they were one year ago; polyethylene terephthalate (PET) prices are up 137 percent year over year; high-density polyethylene (HDPE) prices are up 400 percent year over year; and heavy-melting steel (HMS) is up 89 percent year over year.
Although commodity prices are up compared with one year ago, Hoffman said many of these prices are still below pre-National Sword prices. As a result, he said many haulers and processors are switching to process fee models for their contracts rather than relying on commodity markets.
Changing markets and policies
Another change on the horizon for recycling is that market development initiatives are moving quickly, particularly as consumer packaged goods (CPG) companies are making big commitments to use recycled content in their products and packaging.
Betsy Dorn, a principal at the Circular Matters LLC, a consultancy based in Winter Park, Florida, said there have been more than 500 companies that have made commitments to sustainability in recent years. Many of these firms have set 2025 targets for increasing their use of recycled content or improving on recyclability of their products and packaging.
While many brands have made these commitments, Hoffman said he’s skeptical about the willingness of these companies to truly reduce, recycle and reuse.
He said, “There’s fear [from CPGs] of market share losses if added cost is passed through and that consumers aren’t willing to pay more” for products that incorporate recycled content. He continued, “We have to help corporations get past the fear of loss of market share; we have to help show there’s a willingness to pay on the part of the consumer to have a product that has packaging content that can truly be recovered.”
Dorn said she agreed that of the 500 companies that have made commitments to sustainability, “not a lot of them are as specific as maybe we would like them to be.”
She added, “But it’s hard to be specific when you’re a company and you don’t have control over supply or other factors. We can’t totally fault them.”
While new commitments are exciting, Dorn said market development initiatives also need to target existing consumers of recycled content to ensure those markets remain and grow.
She said several solutions can help advance end markets, including information and technical assistance, financial assistance, regulations and policies and financial incentives or disincentives. On the policy front, she said she expects more states will pass and introduce extended producer responsibility (EPR) legislation to help with market development, particularly as Maine and Oregon both passed EPR bills this summer.
“There was a time when nobody in this country thought we’d ever see EPR policy or that producers would become responsible for end-of-life management of products,” she said. “Now, this is going to become a reality in the United States.”
Dorn noted that EPR laws will likely vary—and she said the Maine and Oregon laws have slight differences—but she said she hopes the federal government will provide guidelines or policy framework to help states to develop their own EPR regulations.
Export markets are another major change in the recycling industry. Daryl Arias, CEO and president of Miami-based Nix Waste, said China used to be the dominant market for recovered materials but that’s no longer the case. He said processors need to look to other export destinations to fill that gap today. Arias said he sees opportunities for investing in Latin America, in particular.