Remember the old line about the salesman who was so slick he could sell your dirty socks back to you? These days, that salesman won't bother with the likes of you; he can get between $100 and $200 per ton for old socks and other textile wastes in the recycling marketplace.
Towns like Oyster Bay, N.Y., know: It garnered about $125 a ton for discarded textiles collected in drop-off bins last year under a contract with American Recycling Technologies, East Northport, N.Y., which picks up the recyclables at drop-off stations.
As prices for recyclable materials such as textiles, paper, plastic and metal rise and fall precipitously from year to year, it's easy to lose sight of the fact that the markets for these materials do indeed grow annually.
To be sure, this market growth is volatile, faltering, too fast, too slow, nearly impossible to predict, and very, very hard on businesses. Nevertheless, the growth is there, created by a combin-ation of natural market forces, government prodding and social reform.
Come on, you say. Look at Houston-based Browning-Ferris (BFI). After spending $300 million to build 150 material recovery facilities (MRFs), the bottom fell out of the market last year and caused the company to close 32 of those facilities.
And take Weyerhaeuser, Tacoma, Wash.: The paper giant appears to be souring on MRFs as well, having closed eight of its 40 facilities in the past couple of years.
Industry figures suggest that the MRF business has become downright untenable: Old newsprint (ONP) prices have dropped from $190 a ton in 1995 to somewhere around $20 a ton this year. And plastic soda bottle prices have collapsed completely, falling from $600 a ton in 1995 to $60 a ton today.
Yet processing costs average $30 a ton for ONP and $100 a ton for plastic bottles.
Anyone who didn't come down with yesterday's rain can see a problem here.
So, what's a MRF operator to do? Market, that's what. Other businesses have to market effectively. Why should a MRF be exempt?
Exercising Marketing Muscle The markets are out there and growing. And the MRFs with marketing savvy are tapping into them with an array of short-term and long-term marketing techniques.
For example, Maryland Environ-mental Services (MES), a state agency and non-profit corporation based in Annapolis, operates two MRFs: one in Montgomery County and the other in Baltimore County.
"I do the marketing for containers at MES," says Chief of Recycling Richard Keller who has devoted his 20-year career to increasing the purchase of recycled products. "There is fairly strong competition for materials currently."
Keller's marketing approach includes day-to-day sales strategies and long-term marketing strat-egies.
On the sales side, Keller combines the material outputs of both MES' MRFs and uses quantity and quality as levers to solidify customers and the prices they will pay.
"Manufacturers will pay higher prices to insure secure supplies," Keller says.
"We market the fact that we have significant quantities of high-quality materials that we can send in trailer-load quantities versus roll-off quantities.
"On the container side, whether it's plas-tic, aluminum, steel or glass, we don't have trouble moving the material."
Bill Moore, president of Moore & Associates, an Atlanta-based paper recycling consulting firm, adds that tying a MRF's collection supply source to prices on the buying side is an important strategy considering today's volatile prices. "If I'm selling old corrugated (OCC) to a mill, I know that prices will be up and down in that market," Moore says. "So, when I arrange to collect loose corrugated from a supplier, I'll use a contract that links prices to baled OCC.
"If my sale price goes up, I'll give the generator more. When my price goes down, I'll reduce what I pay down to a guaranteed floor."
Some analysts note that BFI's recycling losses probably stemmed from a lack of such arrangements with generators.
Teaching is Half the Battle Keller calls long-range marketing the "second piece of the puzzle" when it comes to marketing MRF output. MES' efforts in this area include administering a program that trains personnel in federal, state and local government agencies and also in private companies to buy products with recycled content.
Keller serves as director of training for the program, which was developed originally by the Maryland Waste Disposal Authority in Baltimore. And, in November of this year, he conducted the one-hundredth training seminar offered under the program, which is given in cooperation with the U.S. Conference of Mayors.
"The idea is to close the loop and make sure people are buying recycled products and that there is an end market for the materials we process. These training programs give purchasing and recycling officials and using agencies the tools they need to expand their buy recycled programs by answering questions such as: How do you change your specifications? How do you do cooperative purchasing? How do you find recycled products? How do you do good record keeping and evaluation? How do you do waste prevention?"
The National Recycling Coalition Inc. (NRC), Alexandria, Va., also has undertaken a number of buy recycled training programs which address three audiences:
* government purchasing and procurement agents,
* business purchasing managers and
* general consumers.
In the government purchasing arena, NRC has organized a series of three meetings for purchasing agents. These seminars aim to help achieve the buy-recycling goals set forth in President Clinton's 1993 Executive Order.
"Our meetings focus on one product at a time," says Dr. William M. Ferretti, NRC's executive director, who notes that the 1997 focus was recycled copy paper. By the end of 1996, 20 percent of all federal agencies had complied with the Executive Order, Ferretti reports. He expects that figure to grow to 90 percent by the end of 1997.
NRC's Buy Recycled Business Alliance, which currently includes more than 3,200 companies committed to increasing the purchase of recycled products, addresses buy-recycled issues in the private sector. Among its many activities, the organization develops informational materials for purchasing managers and purchasing influences in the private sector.
"For example, we've documented recycled products available for building construction," Ferretti says. "Our audience includes architects, interior designers and others who specify products for commercial structures."
NRC also has created a program aimed at developing the biggest market for recycled products: American consumers.
"Consumers accept intellectually that buying recycled is a good thing to do," Ferretti says. "They understand that they have two roles to play in the loop: separating and dropping off material that can be recycled and buying it back in the form of new products. The problem is they don't have enough information to make informed purchasing decisions."
Thus, NRC kicked off a national effort to educate consumers about recycling purchasing with "America Recycles Day" which was held on November 15, 1997. The nationwide event drew support from federal government agencies, the National Conference of Mayors, the U.S. Postal Service, the Environmental Defense Fund and a host of private companies.
For the event, companies such as Atlanta-based Home Depot produced point-of-purchase literature and developed featured displays for products containing recycled materials.
"The consumer market is important," Ferretti says. "If you build public awareness and spur consumer demand, you also send signals to businesses about making products with recycled materials. That's our overall goal: to generate a stable demand in the public and private sectors and also among consumers."
Business Assistance Buy-recycled programs are just one of several strategies designed to create demand for recycled products. Betsy Dorn, a principal with Dorn and Associates, a plastics marketing consultant in Apex, N.C., notes that the U.S. Environmental Protection Agency recently funded recycling business assistance centers in states around the country.
"The purpose of these centers is to aid entrepreneurs and any business that wants to increase the use of recycled products in the manufacturing of other products," Dorn says. "These programs provide loans, grants and education on matters such as permitting procedures."
Marplast, a Moorpark, Calif., company that manufactures products from recycled plastics, recently received a low-interest loan of $334,000 through the Ventura County Recycling Market Development Zone plus an $875,000 loan backed by the federal government to fund a major plant expansion. Marplast will use the money to purchase a new building and new molding machines, while bringing 10 new employees on board.
The American Plastics Council, (APC) Washington, D.C., also works with entrepreneurs developing methods for using recycled plastics in the manufacture of new products.
In June 1997, Epic Plastics, a Richmond, Calif., company, unveiled a new production line for the company's lines of plastic lumber. "After three years of research and development with assistance from the APC and the Alameda County Recycling Board, Epic Plastics now has moved to full production of highly-durable recycled plastic lumber and garden edging," says Craig Boblitt, president. Currently, Epic distributes its products through 100 locations in California.
New product possibilities are virtually endless, given adequate research and development funding. For example, The Marine Habitat Foundation in Sanibel, Fla., has begun installing artificial coral reefs made of recycled vinyl sheets in coastal waters off Florida's coast. These recycled plastic "bioreefs" are honey-combed and serve to attract bacteria that forms the basis of food chains for fish.
And, the Oneida tribe in Upstate New York hopes to begin supplying shredded plastic shopping bags to Alloyed Blend Polymers, a French manufacturer of Starflex, an asphalt road-paving product made more flexible and durable by the addition of plastic.
Whether it's plastics, paper, glass or metal: At the end of the day, MRFs will either flourish or not according to the dictates of public and private markets.
It's taken 20 years, but recycled paper fiber has become a mature commodity product capable of rivaling virgin fiber in the mainstream market.
According to the American Forest & Paper Association, Washington, D.C., recovered fiber has seized 30 percent of the raw materials market across all segments of the industry. However, this doesn't mean that you can stop looking ahead and thinking about how supply and demand will affect prices and profits.
Bill Moore, president of Moore and Associates, an Atlanta-based paper recycling consulting firm, stays in close touch with the paper markets. Following is his take on the market outlook for four grades of recovered paper: old newspaper (ONP), old corrugated (OCC) residential mix and office mix.
ONP: Moore estimates that as much as 65 percent of recoverable ONP is being collected in programs which, once again, have been driven by government desires to divert material from landfills. So, supplies are large.
On the demand side, in the early 1990s, state government mandates and recommendations (in addition to low ONP prices) caused a lot of capital investment in the newsprint industry to build capacity for recycled content newsprint.
"This was a first step," Moore says. "We've moved beyond that now. The big problems today are that people are reading fewer newspapers and advertising lineage is down. Therefore, manufacturers are sitting on excess virgin pulp capacity.
"Markets in Asia/Pacific Rim could be a potential savior. The Far East is fiber-short and has the potential to use a lot of material. While they are increasing their own recovery rates, they will continue to come to the United States, as they did in 1995 when prices here were so high."
OCC: Of all the paper grades, OCC appears to be the first to have gained an institutionalized status in the paper markets.
OCC moves in a free market on the supply side, generated and collected privately without government prodding.
"It's the same on the demand side," Moore says. "OCC recovery is higher every year because demand is higher every year, both in North America and in the Far East. In fact, I think we're going to reach the limits of recovery capacity sometime within the next five years or so, and that will run prices for OCC up."
Residential Mix: Residential mixed paper is the grade with the most potential oversupply in the market, according to Moore.
"The primary market force here is the desire of local governments to collect residential mix and reach higher levels of diversion," he says.
"This can create an over-supply in the market," he continues. "On the demand side, there is no government intervention. I think we'll see more of this grade being exported.
"In addition, the smarter mills already are experimenting with usage and finding ways to use more of it. As OCC gets more expensive, the mills will do more experimenting."
Office De-inking Mix: While several large cities have instituted commercial recycling regulations, enforcement has been lax.
As a result, supplies of this grade come mainly from the efforts of private sector recyclers who see markets for this paper.
On the demand side, the federal mandate to buy recycled content paper and "buy recycled" programs in the business community have stimulated some demand. "Market growth in this area is reasonable, both in the United States and internationally," Moore says.
As the market for recycled paper fiber has moved into the mainstream of the paper market, paper mill technology has begun to lock it in place.
"Approximately 200 mills today use strictly recovered paper," Moore explains. "A lot of mills can go either way, using more recycled fiber when prices there are better and switching back to more virgin when those prices are better.
"This isn't the norm yet," he adds, "but the market is moving in that direction."
Remember the recyclers' lament? "A few years ago, the problem was finding end markets," says Gerry Claes, general manager of Graham Recycling Co., York, Pa. Today, however, this waste processor reports "plenty of demand for recycled plastic but not enough is being collected."
Overall, plastic bottle recovery has increased from 1,272 million pounds in 1995 to 1,307 million pounds in 1996, with PET and HDPE resins accounting for most of this amount, according to a mid-1997 report from the American Plastics Council (APC), Washington, D.C.
Despite the increase in recovered plastic, the APC notes that plastic recyclers can process significantly more PET and HDPE.
The Association of Postconsumer Plastic Recyclers, Washington, D.C. believes that demand for recycled plastic is growing even faster than the supply stream and has undertaken a campaign to urge more communities to collect plastic bottles.
Two years ago, recyclers took it on the chin when they responded to high demand and high prices. "About a year ago, a big quantity of virgin capacity came on line and made off-spec and regrind available and put PET in the tank," says Ron Perkins, APC's director of recycling operations.
Now, demand has returned and prices are moving up. Will things be different this time around? No one can say for sure, but there have been developments that may raise the overall demand for recycled plastic to the next level.
New products that use recycled plastic continue to come to market. "Despite a shakeout in the plastic lumber market, there are some quality companies in this industry who are gaining the confidence of buyers," Perkins says. "The APC puts out a sourcebook listing products with recycled plastic content. It lists more than 1,400 products today."
In addition, advanced plastic recycling technologies have continued to mature. "Advanced recycling technology now can take recovered plastic components of virtually any kind and break them back down into monomers that can be turned into new polymer resins," reports Frank Aronhalt of Aronhalt Consultants, Hockessin, Del.
"Presently, not many recycled materials go through this process, but it has great potential because it can handle products with less purity such as coated video and audio tape," he adds.
A higher level of advanced recycling technology also has begun to evolve. According to Aronhalt, this technology can break down recovered monomers into feedstock materials.
"These are exciting technologies," Aronhalt says. "The problem that needs solving is the scale of supplies available to these advanced technology plants. A mature operation requires millions of pounds. When you go back into the recovery chain, you're dealing with thousands of pounds. And when you get back to the consumer, you're dealing with hundreds of pounds.
"Factor this into a plastics industry that requires billions of pounds of supply per year, and you can see the problem of creating a supply stream capable of competing with virgin resin production."
The bad news is that severe swings in supply and demand will probably continue to whipsaw prices for recycled plastics.
The good news is that the support industries that will purchase these materials are growing.
At least six key forces drive the supply, demand and pricing of recycled materials, says Richard Keller, chief of recycling at Maryland Environmental Services, a state agency and non-profit corporation headquartered in Annapolis, Md.:
1. Export markets. The Far East, where fiber is in short supply, represents a particularly strong export market for recycled materials.
2. Virgin capacities and recycled capacities. When price and availability of virgin commodities change, the price and availability of recycled commodities follow.
3. Geography. A West Coast generator with access to markets in the Pacific Rim has different opportunities than a generator in the Midwest.
4. Transportation costs. The distance to market plays a role in the pricing of all commodities, whether recycled or virgin.
5. End product demand. Recycled materials serve three key sectors of the economy: automobiles, housing and retail. When the auto industry booms, so does the steel and plastic industries. When housing booms, business increases for suppliers of steel, paper, plastic and other virgin and recycled materials. Likewise, when retail sales climb, so do paper and plastic packaging material sales.
6. Natural disasters around the world. When a community begins to rebuild after a natural disaster, demand for recycled materials in all areas spike up.