BUOYED BY INCREASED demand for secondary materials from the Pacific Rim, recycling companies are enjoying unprecedented success — and price volatility. Prices for corrugated containers, mixed paper and metals have been reaching near-record highs this year. But demand has caused prices to rise and plunge from week to week. These are heady times for the recycling industry, which often struggled in the 1990s to find market activity.
To get a first-hand view of the roller coaster ride, Waste Age recently spoke with six materials recovery facility (MRF) managers in the public and private sectors from across North America. Besides price fluctuations, the managers say there are ongoing concerns about worker safety and the growing amount of electronic waste (e-waste) coming through their doors. Single-stream collection is growing, generating robust diversion rates. Some managers, however, are complaining about the greater risk of contamination from broken glass. Others say the next generation of automated optical sorting technology will easily manage contamination.
However the debate over single-stream and source-separation is decided, MRF managers are still in for a wild ride for the rest of the year. The participants in Waste Age's roundtable include:
D. Trevor Barton, waste management programs supervisor for the city of Guelph, Ontario, Canada;
Scott L. Brown, manager of solid waste services for Mecklenburg County, N.C.;
Bob Fernandez, division manager for Diversion Services for the city of Austin, Texas;
Shawn Guttersen, vice president of BLT Enterprises, Oxnard, Calif.;
Stuart Lee, general manager of MRF/transfer for CVT, a division of Republic Services Inc. in Anaheim, Calif.; and
Don Schmidt, site supervisor for the Lake County MRF of the Recycle America Alliance, a subsidiary of Waste Management Inc. in Grayslake, Ill.
Waste Age (WA): What issues are of greatest concern?
Lee: Workplace safety. All levels of management conduct routine workplace observations to look for areas where an injury or accident may occur. In addition, we investigate all incidents regarding safety to determine the root cause[s] and how they can be prevented.
Barton: Increasing efficiency of recovery and reducing costs. We recently spent $5 million [Canadian] to retrofit our facility [and switched] to a one-shift operation. We hope to reduce or eliminate downtime by adhering to scheduled preventative maintenance [and] increasing training and support for our employees.
Brown: Contamination continues to be the greatest concern. We have addressed this through continued education of the haulers and users.
Fernandez: The Austin area lacks suppliers that can provide necessary maintenance and repair parts for our sorting equipment. This increases downtime because a majority of the replacement parts must come from out-of-state.
Guttersen: We're concerned about the rising costs of workers' compensation. We've been enthusiastic about workers' comp reform and making sure it serves those who are really hurt.
WA: How is the demand for recyclables in China and other international markets affecting your operations?
Brown: The increased demand for recyclables in China has resulted in increased value of the commodities. Also, as the price of oil continues to rise, the value of the commodities increases.
Schmidt: For this MRF in particular, China is our largest customer for fiber. With fiber making up approximately 70 percent of our marketable commodities, it affects our operation greatly.
Guttersen: Our marketing manager has made trips to China in the past few years because of the huge demand there for electronic waste. China has really brought stabilization to the mixed paper market by driving up prices, but it also has hurt our domestic mills terribly. There's a good short-term gain from China, but I'm worried about the long-term effects.
Barton: Due to the SARS (severe acute respiratory syndrome) outbreak last year [in the Toronto area], the absence of the Asian markets severely impacted sales. Domestic mills and processors were in the driver's seat and prices tumbled due to oversupply. A healthy international market helps our industry.
Fernandez: There is not much impact on the Austin operation. Most of our material is sold to buyers and end-users within the United States. We do, however, enjoy the higher prices due to increased demands abroad.
WA: How have recycled commodity prices evolved?
Schmidt: Commodity prices have been very strong to date. A great deal of the market today appears to be export-driven. With a strong foreign demand for recycled commodities, domestic markets are forced to increase the amount they are willing to pay for goods. We are enjoying the robust markets but are always preparing for a downturn.
Fernandez: Over the past year, we have witnessed an increase in metals prices. The prices for plastics have remained constant; we are not experiencing the great fluctuations that we have in the past.
Barton: Like other commodity prices we see ebbs and flows — the trick is to keep the product moving in slow markets by developing long-term business relationships with end-markets and processors.
Guttersen: We were hit pretty hard on the West Coast by the port strike, which affected us for the first quarter of 2003. Other than that, the materials markets have been relatively strong. Corrugated, news- and mixed paper all have been solid, particularly in the past two or three months.
WA: How are regulations affecting your business?
Barton: Landfill bans are a two-edged sword — strict adherence to bans drives away tipping fees to our competitors. We have a global budget and landfill/transfer station tip fees play a big role in balancing the books. We try to strike a balance diplomatically. Recycling mandates are provincial jurisdiction, and the goal of Stewardship Ontario is 60 percent diversion. The only way to meet that target is by including organics. There is a call within the next few years for a province-wide ban on landfilling organics.
Lee: We continue to work under a mandate from the state of California to divert 50-plus percent of the waste stream from landfills. AB 939 has made the waste industry more environmentally aware. The net result is an extension in landfill space.
Guttersen: We're forecasting that there will eventually be a ban on using green waste for alternate daily cover in California. We'd like to see that recycled as compost.
Schmidt: Landfill bans and recycling mandates have had very little impact on our business to date. While these mandates can stimulate recyclable generation, we believe the underlying economic fundamentals have a greater impact.
WA: Do you see a trend in communities switching to single-stream collection?
Lee: No, curbside separation of waste continues to be predominant [in our communities].
Brown: There certainly is a great deal of discussion concerning single-stream recycling. Initial feedback indicates that substantial savings can be gained in collections, but processing costs increase. Recovery rates seem to increase, but so do residuals/contamination.
Fernandez: Currently, we collect as a dual-stream system. We are moving toward conducting a single-stream pilot in July 2004. If and when single-stream goes citywide, the MRF will act as a transfer station and will cease its processing operation and outsource this activity.
Schmidt: My plant converted to single-stream processing more than a year ago. Hauling companies have reduced some of their recycling costs by as much as 30 percent. From the MRF side, we have been able to increase our throughput, albeit at the expense of additional personnel.
Guttersen: If you took a survey of California recyclers, you'd see that single stream is definitely the way of the future. We've seen 75 to 100 percent increases in the amount of material collected compared to source-separation. There is much better screening technology these days to take care of the contamination issue. Also, in states that have container redemption bills like California, there isn't as much of a problem with glass.
WA: How is e-waste affecting your operations?
Schmidt: We are approached daily with regard to our ability to handle e-waste. One of our goals this year is to work with our eCycling division to develop a curbside collection program. Some states, i.e., California, are adopting e-waste legislation.
Guttersen: I'd say we saw about a 20 to 25 percent increase in e-waste coming out of the waste stream in the past year. We special-handle these items and ship them directly to places like HMR in Sacramento and a Waste Management Inc. facility in the East Bay.
Barton: The e-waste market has been very volatile. First-generation recyclers of e-scrap have closed-up shop and declared bankruptcy. The latest generation [is] expensive, and we need to cover shipping and recycling fees, which means we have to charge generators more.
Brown: E-waste does not go to the MRF. However, Mecklenburg County has an e-waste recycling program at our full-service recycling centers. It is expected that both the volume and cost of this program will continue to rise.
Lee: We work closely with Orange County regarding e-waste. E-wastes are pulled out of the waste stream and delivered to the county's facility located on our site.
WA: What advice would you give to other MRF managers looking for markets?
Fernandez: Make sure that your buyers are reliable and will pay you for the material they purchase, at the price they quoted. Buyers that acquire your material [and] then go bankrupt do not help you at all.
Lee: Look globally. The emerging markets appear to be where the new demand will continue to come from.
Guttersen: Talk to your brokers. Ask them to spend time with you in your facility and understand the kinds of materials you handle. Establish long-term contracts and make sure your brokers make annual trips to mills in your area.
Barton: Join marketing associations to exchange ideas and information. Learn to ask questions and read the trade journals. Don't cross the street for $5 — our industry has a long memory, and if you are jumping around from buyer to buyer in a hot market, you may just lose your only market during the downturns. Remember, you're all in it for the long haul.
WA: What are the goals for your facility?
Barton: For the dry MRF [paper, plastics, metals and glass], we have set a goal of 70 percent recovery of recyclables. As markets develop for new recyclables, we can change the dynamics of the plant to recover new materials.
Brown: Our goal at our facility is to obtain long-term contracts for incoming recyclables and then to leverage this guaranteed stream of recyclables to obtain long-term markets that have floors to limit risk at the low side of the markets.
Fernandez: Maintain a safe and efficient operation, increase revenue and decrease expenditures. The biggest impact on our productivity is down-time. We minimize downtime and maximize productivity by developing and implementing an aggressive preventative maintenance program, and stressing employee safety.
Lee: We have established long-term relationships with end-users who understand our high standards. Our goal is to continue to nurture these relationships so we can find outlets for our products during any market conditions.
WA: What technology is on the horizon?
Guttersen: Most of the developments will be in glass- and fiber-screening technology. Some of the big players in the field are all making big strides in this area. Automation will have the biggest impact, because a tremendous amount of what we used to do was done manually.
Barton: We're seeing improved plastic bottle crushers that can handle higher volumes and achieve more consistent crushing or perforation to make denser bales for shipping.
Lee: Optical sorting systems for plastics and paper with the ability to process material more quickly with less employee involvement.
Schmidt: New and improved single-stream processing equipment is hitting the marketplace everyday, as are options [such as] no-sort plastic processing and better utilization of optical sorting equipment.
WA: What incentives exist to help you grow?
Brown: Return on investment.
Barton: The upcoming incentive will be Stewardship Ontario, where 50 percent funding will be available for municipalities to operate recycling programs.
Guttersen: Last year, the California legislature passed an increase in the container redemption program from 2.5 cents per container to 4 cents per container. That will be a big help that will allow a lot more small recycling companies to survive.
Schmidt: Fixed costs remain the same if you process 10 tons or 1,000 tons. By growing our business, we are able to reduce our processing cost per ton, thus allowing us to increase the amount of rebates to our hauling companies. The bottom line is a much better bottom line.
WA: How closely do you work with manufacturers to make it easier for you to process their products?
Barton: Through our association memberships, we make comments on product packaging and try to influence resin choices.
Fernandez: We work closely with the buyers of our material to ensure that our product meets their specifications to sell to manufacturers.
Lee: We have helped numerous companies improve their recycling systems through education and the installation of equipment such as balers and compactors.
Schmidt: The Recycle America Alliance has a Sourcing Division that works very closely with manufacturers in this regard. We provide extensive consulting services to our customers so that they can make economically appropriate [recycling] decisions.
WA: How can you improve community and customer relations?
Brown: We continue to educate our citizens to not only increase set-out rates, but to increase recycling participation for those that do currently participate.
Guttersen: We always have an Earth Day celebration each year and we conduct monthly tours. Through TV spots, we promoted a telephone book recycling drive in the local schools and gave a check to the school that collected the most.
Schmidt: Our EduCycle Center has been part of our MRF since our beginning in 1997. Last year alone, our education director spoke with approximately 9,850 people.
Fernandez: Because the largest users of the MRF are our own collection crews, we continuously discuss with them means by which they can help us, and we them, with increasing productivity and efficiency.
WA: What will drive the recycling business five years from now?
Lee: The use of recycled feedstock will be more fully integrated into our production systems, hopefully ensuring long-term markets for our products.
Guttersen: Down the road, we expect that landfilling will finally become more expensive than recycling. Also, world demand in China for secondary materials will continue and will be even more intense in years to come.
Fernandez: Specifically for the MRF in Austin, Texas, increased access to markets in Mexico.
Schmidt: The main driving elements should remain exactly what they are today: The need to provide recycling services to reduce the amount of material going into landfills, and the need to provide cheaper recycled materials to manufacturers.
Randy Woods, a former managing editor of Waste Age, is based in Seattle.