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[GreenYes] INFO: materials price drives recycling

Title: [GreenYes] INFO: materials price drives recycling

Another story on how the rising cost of raw materials is impacting the
recycling business.

Prospectors sift through America's garbage in a gold rush founded on
metals, plastic and paper

Trash smells sweet to investors as soaring commodities prices result in
a boom for the US waste recycling industry. Roben Farzad reports

Sunday, 3 August 2008

Bob Cappadona, area manager of Casella Waste Systems' 65,000sq ft
recycling facility in Massachussets, can't believe the record prices his
garbage is commanding. "Aluminium cans, $900 [£450] a bale. Tin cans,
$150. No 2 clear plastic, $300. Cardboard, $70. Mixed paper, $40." He
barely conceals his glee as he explains the effects of a spike in metal
prices: "We get an extra $100 a ton."

Mr Cappadona's numbers are compelling, but the global implications of
the trash boom only really hit you when you see the enormous pallets
being carted away from the plant. You realise that recyclers can make
vast profits from combing through ordinary rubbish, processing it and
then reselling it to other companies. And that leads to another, bigger
thought: trash is no longer just an environmental liability. It is
becoming a financial asset. And it is everywhere.

Or so it would seem.

The possibilities have venture capitalists and buyout firms scrambling
to invest in a melange of quirky start-ups that might have provoked
belly laughs from these same financiers five years ago. The broad
category of "waste and recycling", which includes everything from
materials recovery to sewage biotechnology, drew a record $622m of
investment in 2007, compared with $245m a year earlier and just $20m in
2001, according to Cleantech Group, a green investing consultancy. Sober
investors are throwing money not only at established recyclers like
Cas-ella Waste, but also at bolder ventures like trash-to-ethanol
start-ups and e-waste recyclers, so confident are they that there's real
cash in trash.

More than anything, it's the commodities boom – or bubble, if you prefer
– that's nudging garbage to the asset side of earth's balance sheet. The
calculus is simple: as the prices of oil and other raw materials rise,
recycled products become more attractive.

Consider that 8 per cent of global oil production is siphoned off to
make plastic each year. Recycled plastic, however, requires 80 per cent
less energy to produce. Recycled aluminium burns up 95 per cent less
energy. Recycled iron and steel use 74 per cent less, while paper
requires 64 per cent less.

The money can pile up quickly: one ton of recycled aluminium saves an
average of $700 in electricity. The Environmental Protection Agency
estimates that if the recycling rate were to increase by just five
points, to 35 per cent, this would save the equivalent of almost two
billion gallons of gasoline annually.

The recycling industry, a loose and unruly assortment of start-ups and
multinationals, can barely keep up with demand. Today virtually all
steel made by the American giants Nucor and AK Steel comes from scrap
metal – a boon for recyclers such as Chicago's Metal Management, whose
sales jumped 40 per cent from 2006 to 2007.

The great reappraisal of trash has even prompted a Wall Street analyst
to cordon off recycling in a separate investment category, like consumer
goods or emerging markets. Eric Prouty of the Boston-based brokerage
Canaccord Adams started following recyclers full-time in 2006; now he
covers 11 publicly traded companies. Since its inception late in 2006,
Mr Prouty's six-stock "buy" list has returned 180 per cent, trouncing
the 2 per cent rise in Standard & Poor's 500 index'.

"Recycling," Mr Prouty believes, "might be the most overlooked
beneficiary of the commodities boom."

Of course, there's been similar excitement before. In the 1970s and
again in the early 1990s, oil prices zoomed and joyless austerity began
to seep into American culture. Governors signed deposit laws, and cities
and towns launched recycling programmes. Investors started buying up
scrap metal outfits, sure they were catching a big business wave. But
commodity prices tanked in the mid-Eighties and again in the early
Nineties and the movement lost steam each time. Elaborate municipal
recycling programmes no longer made economic sense and were abandoned,
even in environmentally conscious garbage havens such as New York. Scrap
metal became a joke on Wall Street. Lassitude ruled. Today's recycling
boom could still suffer a similar fate.

"If commodity prices fall, people will be unwilling to bear higher tax
rates from cities to maintain unprofitable recycling programmes," warns
John Charles, president of the Cascade Policy Institute, a non-partisan
think-tank in Oregon.

The optimists point to a new factor they say will help the industry
withstand the next commodities bust: the green movement. Global warming
has finally pierced the American popular consciousness amid a litany of
complaints from eco-activists. The US generates the world's greatest
volume of per capita waste, yet badly lags in recycling; Americans are
too thoughtless to reuse plastic water bottles; discarded computers and
cell- phones are leaching toxins into the soil; and on and on.

Methane-spewing landfills, meanwhile, are turning into battlegrounds.
Municipalities can't easily build new dumps because people refuse to
live near one. The acronym Nimby (Not In My Back Yard) is giving way to
Banana (Build Absolutely Nothing Anywhere Near Anything). Yet old
landfills are closing at an alarming rate: in 1988 there were some 8,000
operating in the US; today there are just over 1,700. In some parts of
the world the clashes are turning violent. Italy's Prime Minister,
Silvio Berlusconi, dispatched soldiers to Naples, where demonstrators
were protesting against his efforts to open a big new landfill. Since
last year, when that city declared all of its dumps full, ranges of
trash have piled up.

But while the world's swelling garbage pile would seem to be a
can't-miss opportunity for recyclers, one issue threatens their
long-term growth prospects. Oddly enough, they can't get enough garbage,
or at least the right kind. That's because all waste, like all politics,
is local – which means idiosyncrasies in recycling laws and a failure on
the part of politicians to see the big picture. Recycling "has
historically been dominated by staid, stubborn and inefficient
industries", says Cleantech's managing partner, John Balbach. "There's
lots of money to be saved – and made – in waste if financial discipline
and profit-mindedness take hold."

That's Wall Street's bet, anyway.

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