Circular File: One Year Later

China's Olympic fervor gave way to a new recycling reality.

Last August, many of us were watching coverage of the summer Olympics, enjoying the athletes' performances and marveling at Beijing's blue skies. Recyclers were particularly happy because prices were the best ever seen for recyclables. While some market experts saw dark clouds on the horizon, most of us were serenely unworried. After all, the economy was strong. Sure, prices could always go down, but when they fell in the past, they usually fell slowly.

In September, scrap steel prices collapsed. In October, recycled paper prices also collapsed. This time, a worldwide recession was driving prices straight down. Paper recyclers were faced with little or no revenue for their products. With the rise of mandatory recycling, they had no way to turn off the supply spigot.

By the end of the year, prices for most recyclables stabilized. Since then, they have been slowly moving back up. While they are nowhere near the bubble prices inexperienced recyclers thought were the norm, they are better than the bottom. In fact, the most recent Official Board Market (OBM) paperstock prices show a return to traditional values for these recyclables. For instance, the OBM's Chicago price for Number 8 news went from $120 a ton in October 2008, to $70 per ton in November, bottomed out at $30 per ton in January and was back to $50 per ton in July. Similar trends can be found for other paper grades and most other recyclables.

For many municipal and commercial recycling programs, this market instability was a reminder that they are collecting and selling commodities whose value can swing up and down. As I've noted before, a North Carolina State University study showed that recyclables have the biggest price swings of all commodities. Unfortunately, too many recyclers were lulled into passivity by the sustained high values they experienced before the market crash.

Another big change in recycling markets is our increasing reliance on overseas markets. Although a majority of the paper collected for recycling stays in this country, more than a quarter is consumed by Chinese mills. Part of the reason that prices have gone up is that the economic stimulus package put into place by the Chinese government is working. Although exports of Chinese-produced products continue to lag, that country's internal growth has rebounded. Whether or not this trend will continue without a stronger worldwide economy is a major unknown facing recyclers.

Most American recycling programs survived the price collapse. Materials are moving, warehouses full of unsellable recyclables are now empty. Only a few rural drop-off programs and small-town curbside programs were discontinued. The largest program scheduled to stop, in Muskegon, Mich., may yet get a reprieve.

However, we are not out of the woods yet. Tax revenues are down dramatically at the state and local level. One state, Vermont, cut costs by eliminating its waste reduction and recycling program. If local governments continue to face the severe financial stress they have faced this year, and if markets don't continue at their present levels, we could see more programs go out of business in 2010. While my crystal ball predicts that market prices will remain stable for the rest of the year, it also predicts that cost cutting will be more intense next year. Recyclers should batten down the hatches and be prepared.

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Chaz Miller is state programs director for the Environmental Industry Associations, Washington, D.C.

Opinions in this column do not necessarily reflect those of the National Solid Wastes Management Association or the Environmental Industry Associations. E-mail the author at [email protected].