The automotive industry continues to see increased growth and demand for parts and accessories (P&A), especially online.
With the price of commodities, such as plastics, metal and paper, all in the proverbial “dumps,” the recycling industry is trending toward employing recycling programs that can result in potential commodity revenue.
According to Javier Flaim, chief executive officer of Recyclebank, as many in the industry have felt, they certainly have witnessed “recycling headwinds” in the waste and recycling market – including depressed commodity prices for fiber, glass, aluminum and even petroleum, as a raw material source for plastic. Recyclebank is a company that partners with municipalities to increase recycling rates by offering rewards and insight to consumers. The company is currently working with 300 communities big and small.
“This in turn has impacted cities and municipality infrastructure and recycling programs as potential sources of commodity revenue and costs or fees associated with deployment of programs have become more challenged,” Flaim said. “While we have seen some recent short-term recovery in some commodity prices, this has forced the industry to find greater and greater opportunities to find value and returns on their waste and sustainability programs. And regardless of where commodity values are heading in the future, this has forced many cities and municipalities to continue to innovate and become more focused with their specific recycling initiatives.”
The Bloomberg Commodity Index (BCOM) Report for November 2016 indicates that the November jump in bond yields and the spread between industrial metals versus precious metals may be just a bounce from historically depressed levels or a new beginning.
“Over the past years, metals prices have weakened due to sluggish global growth and low raw material prices,” said Meg Morris, vice president of materials management and community affairs at Covanta. “Now with the push for infrastructure spending, metals prices have been tracking up, but still remain fairly low. Plastic and paper have also begun to track up recently.”
As Flaim explained, even with the recycling commodity headwinds, the need, desire and focus for recycling and sustainability programs is clearly still strong and vibrant for municipalities. Residents have adopted and expected their cities to offer and provide sustainable waste and recycling services.
“With respect to waste, municipalities still have the opportunity to avoid landfill disposal tipping fees if they can effectively manage their waste solutions and drive higher levels of recycling diversion,” Flaim said. “And with respect to recycling commodities themselves – even with depressed market prices – cities still have the opportunity to capture revenue, particularly for higher value commodities such as fiber.”
The critical element now becomes improvement in resident participation to further improve volumes, reduction with the overall contamination of recyclables to improve the value of the recyclables, and identification of additional opportunities to improve overall diversion, such as through additional programs including composting or eWaste.
“We believe that at the heart of many of these initiatives is a need for resident education, and even incentives, so that residents can directly impact and participate in this vital economic equation,” Flaim said.
The commodity markets are an important part of the recycling value chain for cities, haulers and even residents as they can directly impact the value and reinvestment opportunities available for any given municipality.
“The current state of commodity pricing is driving an argument that the costs of recycling outweigh the benefits,” Morris said. “The reasoning is that in down commodity markets, the cost of recycling and recovering materials is higher than the cost to produce and use virgin materials.”
But while recycling opponents talk about how difficult it is to recycle, the industry has continued to find innovative ways to make it easier. By making recycling part of our everyday experience, our time and effort shapes a new mindset focused on strengthening the community.
“In just the last few decades, a new recycling mindset has transformed human habits around waste disposal,” Morris said. “Technology and a more comprehensive recycling strategy have sparked new green industries, bringing jobs, improved energy security, protecting communities and generating impressive value for citizens.”
And while commodity pricing is important to municipalities, of equal importance is the concept of avoided cost, i.e. paying less to recycle than to dispose.
In addition, as Flaim explained, monitoring specific commodities is vital in having an understanding of the potential end markets opportunities for the specific commodity streams.
“Many cities now understand this marketplace is dynamic – many are moving from the previous model or contract of only revenue share of the sale of recyclables to now also taking into account cost of collection, processing and end-market value as the new norm,” Flaim said. “Once again, we believe that this does not detract or diminish from the overall need of recycling programs in general, but instead, forces us in the industry to focus on innovative ways to continue to drive value through waste reduction, waste diversion, improved recycling economics such as through reduced contamination and better resident education and incentives – while doing so in an economically viable and equitable way for all players throughout the chain.”
Morris stressed that companies should understand the many reasons that municipalities will continue to recycle in a down commodity environment. First, the materials have intrinsic value, which will increase as the market slowly recovers.
“Because the success or failure of recycling programs hinge on human awareness, behavior and habit, it’s counterproductive to start and stop recycling programs too frequently, leading to wasted resources,” Morris said.
Second, experience shows that when we stop innovating during difficult times, we fall behind, impeding progress when the good times return.
“Like commodities, waste generation cycles often mirror that of the global economy; the upside is that down cycles force us to find ways to increase productivity, brainstorm new business models and drive down costs to stay competitive,” Morris said.
In an effort to offset the impact the varying commodity prices can have on municipalities’ recycling efforts, companies and municipal government are joining forces to establish innovative strategies for recycling.
For example, The Dow Chemical Company, Reynolds Consumer Products, Recyclebank, First Star Recycling, Conagra Brands, and Systech Environmental Corporation launched the Hefty Energy Bag program in September 2016 with support from Omaha Mayor Jean Stothert. According to the Environmental Protection Agency, Americans landfill 25 million tons of plastic waste each year. To help change that, Dow teamed with municipal and industry partners to implement an alternative for plastic waste with the Hefty Energy Bag Program.
According to Han Zhang, Ph.D., sustainability and advocacy manager at Dow Packaging & Specialty Plastics, the Hefty Energy Bag program is a waste management program designed to convert non-recycled plastics into energy used to produce cement in the Omaha area. Dow helped launch the first phase of the program for Recyclebank’s 6,000 existing members in the Omaha area. The mayor of Omaha supports the program and recently announced the city will be issuing 2,500 roller bins so more citizens can participate.
“Programs such as Hefty Energy Bag could achieve positive long term environmental and economic advantages, including fewer tons of landfill trash, more energy resources, and less dependence on fossil fuel energy,” Zhang said. “By collaborating with brand owners, packaging converters, and industry associations with broad knowledge regarding plastics, sustainability topics, and consumer marketing to help solve issues encountered in the initial pilot, the Hefty Energy Bag aims to continue validating such findings while discovering even more ways to recover materials for future programs.”
The Hefty Energy Bag program in the Omaha area could divert up to 36 tons of landfill waste in the initial launch phase. This would displace the use of 50 tons of coal, or the equivalent amount of petroleum coke per year in local cement kilns.
As the program expands, they are also testing different energy recovery outlets. “While we send most of the Omaha Hefty Energy Bags as alternative fuels to a local cement kiln to replace coal and petroleum coke, we are also sending a portion to pyrolysis companies, such as Nexus Fuels and Vadxx, so they can test and validate the bags’ contents. Both companies confirmed that the Hefty Energy Bag contents could be processed in their commercial units,” Zhang said. “We will continue to innovate and collaborate to find the best possible solutions to keep trash out of landfills and keep resources at their highest value throughout their life cycle.”
A Solid Outlook
While recycling programs should stand regardless of the markets, recycling may not always pencil out by itself. However, Morris said if we consider the enormous impact of externalities such as carbon emissions, damage to public health and loss of resources, the math would be entirely different.
“Even at today’s recycling rates, the avoided greenhouse gas emissions alone represent $8 to $12 billion a year in avoided future costs associated with climate change,” Morris said.
There are a few trends that Recyclebank believes have emerged because of the recent downturn and volatility in recycling commodity values. These include:
•A continued focus on higher-value commodities as well as finding end-markets/economically viable opportunities for lower value recycling commodities
•Greater focus on leveraging data and technology to help better understand areas of opportunity within waste and recycling
•Leverage impact of resident education and incentives improve participation and efforts to “recycle right” to improve recycling value
•Continue to innovate on the “business model” and economics of recycling, not only understanding the value of specific commodities, but a holistic value chain understanding of package recyclability, collection/processing, end-markets and the overall “carbon footprint” and impact of these efforts.
“The environmental and social benefits of recycling will continue to reshape American communities into richer, healthier and fundamentally improved places,” Morris said. “This is despite the vagaries of the recycling commodity market.”
Published in the January 2017 Edition of American Recycler News