Monica, et al:
We have seen cardboard and paper recycling
refund rates drop 200% in less than 2 months. Recycling is becoming a
great way for businesses to reduce their costs (disposal cost avoidance), etc.
in the short term but which bring with them environmental costs in a global
economy (fuel to ship to markets abroad - China). Longer term, we need to
move our manufacturers in the US and abroad toward product and packaging
"end-of-life" design at the beginning of the product lifecycle. In
this way, we will be promoting a more sustainable and cradle-to-cradle approach
to how we use products.
Principal & V.P. Business Solutions
WIH Resource Group
Environmental & Logistical SolutionsTM
Phone: 480.241.9994 ~ Fax: 623.505.2634
[mailto:GreenYes@no.address] On Behalf Of Monica Wilson
Sent: Monday, November 03, 2008 6:59 PM
Subject: [GreenYes] Re: Markets Tanking
Dear Greenyes-ers –
This discussion has been a real eye opener for those of us
following recycling, but not involved in day-to-day market activity.
Today’s Contra Costa Times ran a front page article called
“Recycling in the dumps” about the local impact of recycling
commodities prices falling (article included below).
This seems like a potential crisis for recycling and zero waste
if prices hold in the long term.
How are you talking about the future of recycling? What do you
expect the next year will bring, or is there any way to predict this? What
might it mean for potential growth in new recycling programs and new jobs in
Thanks for your thoughts,
Monica Wilson, GAIA
Recycling in the dumps
By Matthias Gafni
Contra Costa Times
Launched: 11/02/2008 09:15:25 PM PST
BENICIA -- As a forklift stacked two more bales of recycled newspaper on a
growing paper mountain, Steve Moore frantically searched for warehouse space to
store the suddenly worthless commodity.
The pile of paper — mostly from central Contra
Costa residents' recycling bins — represents an international problem
that could raise homeowners' garbage rates and dent the drive to cut waste sent
Moore's stack has reached its height limit at 16 feet and
1,000 tons. He has squeezed a week's worth of paper into the shrinking open
space behind his Benicia recycling facility.
"Our forklifts can only go so high," he
said, only halfjoking.
Moore, Pacific Rim Recycling's owner, has taken the
unprecedented step of leasing two acres in Oakland to store some of Contra
Costa's recycled waste, and he is searching for more warehouse space.
He is not alone.
The dominos-like collapse of the housing, credit,
stock market and commodity collapses click-clacked into the recycling industry,
and it fell fast. In six weeks, the price for recycled cardboard has gone from
just under $200 a ton to $30 to $40 a ton — if you can find a buyer,
"This isn't volatility — this is the bottom
falling out," said Paul Morsen, executive director of Central Contra Costa
Solid Waste Authority, which contracts with Pacific Rim to take its
Recycling plants nationwide are debating whether to
charge disposal companies for the recycled goods that garbage companies bring in.
Most recyclers pay for the materials, then sell them for a profit.
If recyclers start charging, disposal companies likely
would raise garbage residential rates. With storage space dwindling and
material shelf life limited, it is possible that recycled materials will be
sent directly to landfills, which could violate state regulations and set back
The global economic slowdown, particularly in China,
has tanked the market during a historically peak period — Halloween and
Christmas seasons. China, the largest consumer for West Coast recyclers, has
almost stopped buying paper and most other recyclables, industry analysts say,
creating a raw materials bottleneck.
In some instances, ships full of recycled materials
sit anchored off the Chinese coast with no buyers. In other cases, Chinese
buyers break contracts and force sellers into taking bargain-basement prices,
industry analysts and brokers said.
"The entire industry is upside down right
now," Moore said. "The question is how long people can hold on for or
will they have to close their doors."
Commodities recycling exploded as the world's economy
thrived a few years ago.
Recycling plants found endless customers who paid top
dollar for raw materials, particularly in booming Asian markets. The trade kept
waste out of landfills, increased efficiency and created a lucrative industry.
California mandated that municipalities divert half
their waste from landfills. Central Contra Costa's waste authority received a
cut of recycling proceeds — $2.33 million this past fiscal year. It used
the money for new recycling programs, such as a test of turning restaurant food
waste into electricity.
Pacific Rim receives 5,000 to 6,000 tons of recycled
materials a month, three-quarters of it paper products. Moore estimated that
earlier this year he could sell his materials for about $800,000 a month.
"The industry has enjoyed very good success the
last few years," he said.
About the only problem the industry had was a sharp
increase in metal thefts. Thieves have been stealing suddenly valuable metals
off just about anything, sometimes even war memorials and gravestones, to sell
When China opened its Nine Dragons paper mill in 1995,
recycled cardboard prices jumped within months from below $25 a ton to more
than $225 a ton. China is the No. 1 consumer of recycled fiber. Other Asian
countries, such as South Korea and Japan, used to purchase recyclables but now
buy internally. China, however, needs recycled paper because it has few forests
and its economy is based on exporting products that need packaging, said Brook
Edwards, author of The Brown Sheet, a paper recycling industry newsletter.
Typically, China buys the bulk of its paper from
October to December, to prepare packaging for all the toys, electronics and
other products exported for the holidays.
But as the world economy stiffened and China sold
fewer products, a backlog began. Normally, Chinese buyers could take out loans
to bridge the gap, but the credit crunch prevented that, said Bob Wallace of
WIH Resource Group, a Phoenix-based waste management, recycling and logistical
Declining construction and car sales sent metal prices
plummeting, as steel was no longer in demand, he said.
China began playing hardball, Edwards said.
"They don't want to buy anything until they know
we're at a bottom," he said.
On Thursday, recycling broker Jim Fagelson was forced to drop the price of two
shipments of cardboard heading to China by $10 a ton, two weeks after it left
Los Angeles with a set agreement. Rather than argue the point with his Chinese
buyers and risk having the price drop to today's rate of about $80 a ton,
Fagelson reluctantly agreed to sell for $120 a ton.
"They kind of have you," said Fagelson, vice
president of Newport CF Intl., a Southern California recycling brokerage firm.
"It's truly unethical and borderline illegal. But to tackle it in the
courts and overseas isn't practical."
Taking advantage of the recycled materials glut,
Chinese buyers are wielding a powerful ax. Buyers will find a small mistake in
letters of credit and quote a lower price to brokers once shipments are halfway
across the Pacific Ocean. With few other options, most brokers are forced to
accept it, Fagelson said.
Some speculators shipped tons of scrap metal and
materials to China hoping to negotiate prices once there. This was not a
problem during the good days, but now ships full of recycled materials are
anchored off China's coast with no buyers.
"It's about as bad as I've seen it, and I've been
doing this my entire life," said Fagelson, a 35-year industry veteran.
The domestic market for recyclables is small and other
options have been exhausted, Edwards said. For instance, once the Chinese
market slowed, trains with Midwest recycled waste were diverted from Los
Angeles to Mexico. Now, Mexico is taking no more materials, he said.
Joe Recycled Sixpack pays
Moore needs a warehouse to keep his paper dry; waterlogged bales are useless.
Storage costs money.
"I'm losing a lot of money right now "... a
lot of money right now," he said.
Moore has some financial leeway, but he sayid that
smaller "scrappers" and other recycling plants, many of which can not
get credit, will shutter.
The facilities that stay open may have to pass costs
on to others.
Pacific Rim pays the Central Contra Costa waste agency
$30 a ton for recycled materials picked up from homes mostly along the
Interstate 680 corridor. That price fluctuates, but may flip Pacific Rim asks
the waste authority to pay to take the materials.
"That's a very serious concern of ours and we're
watching the market very closely, hoping it will loosen up," said Morsen,
the waste authority executive. "If it eats into the operational budget
then customers "... will wind up paying more."
Many recycling centers are renegotiating their
contracts with cities, said Wallace, who consults recycling facilities across
Green no more
If Moore cannot sell his materials, he may have to send recyclables to
landfills when he runs out of storage space.
That prospect does not make Morsen happy.
"In terms of a green approach, paper's very
recyclable. If you take something that good and such a rich commodity and stick
it in a landfill "... that would be a giant step back," he said.
It also might violate state law. The state requires
half of all waste from cities and counties to go somewhere other than into
landfills, with the percentage scheduled to rise in the next few years. The
state could fine non-complying cities or counties $10,000 a day.
"We will work with local jurisdictions to help
them be in compliance," said Beatriz Sandoval, a spokeswoman for the
state's Integrated Waste Management Board.
One benefit of the struggling economy is less waste,
which will make hitting diversion laws easier, she said. Nationwide, garbage is
down 10 percent to 40 percent in different regions, mostly due to declines in
housing and retail waste, Wallace said.
Still, East Coast and Canadian recycling centers have
started sending recycled materials to landfills, Moore said.
Reach Matthias Gafni at 925-952-5053 or firstname.lastname@example.org.
The crumbling global economy has taken down the recycled paper market in the
past few weeks. Here's how much buyers were paying per ton as of Nov. 1 in the
Bay Area market, with decline since Oct. 1.
Nov. 1, 2008
Oct. 1, 2008
$40 to $45
Sources: The Brown Sheet and
The Yellow Sheet
NOTE: The numbers in the table above are from the print version
of the Contra Costa Times, 11/3/08 – the table in the online article had
different numbers that don’t look right:
Nov. 1 Oct. 1
Cardboard $40 to $45
Mixed paper $25 to $30 $75
Newspaper $65 to $70
Office paper $130 to $140 $70
Sources: The Brown Sheet and The Yellow Sheet
[mailto:GreenYes@no.address] On Behalf Of Bob Wallace
Sent: Friday, October 31, 2008 9:04 AM
To: 'David Biddle'; 'GreenYes'
Subject: [GreenYes] Re: Markets Tanking
Ironically, we conducted a small-scale study on the subject
recently for a client and what our industry sources told us, specifically
commodity brokers (who are closest to the action – and whose well being
depend on making money of the commodities), is that they have not seen markets
this bad since 1972.
Further, they expect this to last at least 9 months and as long
as 3 years. They based this on the fact that China, one of the main
consumers of recycled paper, have warehouses full of raw material; have ships
floating at sea loaded with containers of raw materials; and finished roll
stock stacked in warehouses as well so they are backlogged on sales of finished
goods – backing up the entire supply chain. Our sources told us
that at best, if markets were corrected today, it would be at least six months
to eliminate the backlog of finished goods once orders were placed, shipping
commenced and the plants were back to 100% utilization of raw materials.
Sources also stated that mixed waste is nearing $ 0.00 value and
with the cost of curbside collection and processing the commingled materials,
it may start seeing the landfill for disposal instead of being stock piled for
later sale – something that will not bode well with many.
Principal & V.P. Business Solutions
WIH Resource Group
& Logistical SolutionsTM
Phone: 480.241.9994 ~ Fax: 623.505.2634
[mailto:GreenYes@no.address] On Behalf Of David Biddle
Sent: Friday, October 31, 2008 5:54 AM
Subject: [GreenYes] Markets Tanking
I’d like to get a discussion started here about the state of the markets
and what others are seeing in their regions.
I don’t know about any of you, but we are now dealing with a set of
commodities markets that have fallen through the floor. Cardboard has dropped
by more than 50%, office paper and commingled containers are way down, scrap
steel we are hearing has dropped by 80-90%. I’m planning on doing a
systematic call to all of our main markets to get a pulse and solid numbers
beginning next week.
This is an acute problem here in the Mid-Atlantic and obviously no one knows
how long we’re going to be struggling with this situation. What it means
for my member companies is that they won’t be seeing rebate checks for a
while and they may well start having to pay more for recycling services.
My biggest concern is for businesses just now trying to put programs in place.
They’re going to take a look at the economic equation of shifting over to
recycling and have a hard time understanding why they should be recycling. In
the case of our big haulers its very likely that they’re now going to be
uninterested in working with small and medium accounts to put recycling in
place — no doubt they are losing money on dumpster service systems where
they just charge a flat monthly fee for recycling.
I’m not panicking here. I understand that this is a long-term game.
We’ve seen this before in the early 90s. I’m going to be working on
getting the word out to the business community on the need to do proper
long-term economic analysis and to work things through on a group level
(we’ve formed a partnership with IRN and are offering cooperative
marketing services now to our members).
This is potentially very serious, though. The zest for “green
programs” is meeting the realities of the market economy and I dare say
folks are going to lose interest at least in recycling if we don’t figure
out how to help them properly. We’ve come too far to let things slip like
they did in the 90s.
David Biddle, Executive Director
Greater Philadelphia Commercial Recycling Council
P.O. Box 4037
Philadelphia, PA 19118