Eye on the Economy, AnEye on the Economy, An
April 1, 2001
In an environment of economic uncertainty, forecasters of recycling market trends predict the future of various curbside commodities.
Like the rest of America, recyclers are hoping the new presidential administration and Federal Reserve Board Chairman Alan Greenspan can stave off a recession. Prices for most commodities — including recyclables — are affected by the health of the nation's economy.
In 2000, prices for aluminum, glass and most grades of paper and plastic generally were stable. There were only small, seasonal price fluctuations that recyclers have come to expect. Those that follow the markets for recyclables are hoping the new year will be as good as, if not better than, 2000. But before they can predict what kind of year 2001 will be, recyclers need the answers to several questions.
Recyclers need to know if fuel prices will come down, whether the Fed will lower interest rates again and if consumer spending will rebound. No one knows for sure how the new players in today's economy will affect prices at home, but recyclers are eagerly watching.
Recyclers characterize 2000 as a typical year, but there were a few highlights. Perhaps the biggest surprise came when prices for old corrugated cardboard (OCC) plummeted in the second half of the year, while old newspaper (ONP) prices climbed. “It's quite unusual to see ONP worth more than OCC and to have to scramble to sell OCC bales,” says Kathy Black, the cooperative marketing manager for the Southwest Public Recycling Association (SPRA), Tucson, Ariz. SPRA markets materials for about 50 communities in the southwest and Rocky Mountain states. “All in all, it's been a pretty boring year,” Black says, “with the exception of the OCC scare.”
The dramatic price drop for OCC caught many off-guard, agrees Bill Moore, president of Moore and Associates, Atlanta. He attributes the drop in OCC and office grades to problems within the paper industry. “Mill operating rates started to plummet, and they were having problems with earnings and pricing,” he says.
Moore expects fiber prices to regain some of the lost ground, but only if the economy is good. “I think it will be a so-so year at best domestically.” If the Asian mills, especially in China, return to the market with some vigor, it should help bring prices back up, he adds.
The surprising fiber star of 2000 — ONP — probably will see some price erosion, Moore predicts. Two new U.S. newsprint plants are starting up this year in Alabama and Washington, and Asian mills also are adding capacity, he says. “The newsprint business worldwide is going recycled.”
Consolidation also is playing a major role in the recycled paper industry. “In 2000 alone, Champion [International Corp., Stamford, Conn.] has been folded into International Paper, [Purchase, N.Y.] which had previously bought Union Camp [Wayne, N.J.]. Georgia Pacific [Atlanta] announced plans to acquire Fort James [Norwalk, Conn.], and Stora Enso [Helsinki, Finland] bought Consolidated Papers [Wisconsin Rapids, Wis.], which had previously bought Repap. [Cincinnati-based] Crown Vantage's future is uncertain,” says Susan Kinsella, executive director of Conservatree, San Francisco, a nonprofit advocate of environmentally sustainable paper markets. “It's not yet clear what will happen to all of their recycled papers,” she says.
According to the American Forest and Paper Association, Washington, D.C., recovered paper's share of the total fiber supply was just more than 36 percent in 2000. Mill consumption of recovered paper is expected to grow by an average of 2.2 percent per year for the next three years. But according to Kinsella, little of this recycled paper finds its way into printing and writing papers. She estimates that all printing and writing papers combined have less than 3 percent post-consumer content.
More paper mills than ever before have the capacity to run both recycled and virgin content, allowing them to decide how much recycled content to use from day-to-day, depending on the demand for recycled paper. “The big problem for the recycled paper market is not so much the manufacturers anymore,” Kinsella says. “It's a bottleneck in distribution with merchants and printers, because they are not stocking as much recycled paper as they used to.”
Kinsella believes a common misperception is that all papers have recycled content now. “We still need to ask for recycled content specifically, every time we buy paper,” she says.
Aluminum and glass markets held steady courses in 2000, and expect few changes in 2001. Joe Cattaneo, president of the Glass Packaging Institute, Arlington, Va., says container glass production, the largest market for cullet, was down about 4 percent in 2000. The only changes he foresees for the glass industry is its ongoing battle with plastic containers for market share.
The glass container industry is increasing production for beer, with a new Anheiser-Busch glass plant opening in Texas this year, Cattaneo says. But the real battle is taking place in food containers, with plastic manufacturers now going after products such as pickles.
Nevertheless, Cattaneo says larger economic factors such as fuel prices will have the largest affect on recycling markets. If transportation costs remain high, it could lead to less interest in shipping cullet to container plants and more interest in local recycling options, such as roadbed applications and glass tiles, he says.
The glass industry also will continue to struggle with the rise of single-stream collection programs. “Single-stream collection doesn't make it any easier for glass, and it often makes it worse,” Cattaneo says, noting that contamination associated with single-stream collection makes glass recycling more expensive than it would otherwise be.
Meanwhile, recyclers predict steel will remains on its same seesaw, with 2000 and 2001 duplicating 1998 and 1999. In 1998, markets for steel cans and white goods started high and ended low; in 1999, they started low and ended high.
“In 2000, we had a decent first half and a lousy second half,” says Bill Heenan, president of the Steel Recycling Institute, Pittsburgh. “We are hoping for the mirror affect again this year.”
Heenan says steel's recovery will be linked to the economy as a whole. If consumers feel good about the economy, they will buy the cars and appliances that drive the steel industry, he says. If a recession closes in, the seesaw could be down for quite some time.
This is because the U.S. steel industry continues to lose market share to foreign competitors. Most U.S. producers are cash-strapped and a handful have filed for bankruptcy protection in the last year, including LTV Steel, Cleveland; Wheeling-Pittsburg Steel Corp., Wheeling, W. Va.; and CSC Ltd., Warren, Ohio.
Despite the industry's woes, Heenan remains optimistic about the future of steel recycling. “We are blessed with a good infrastructure for recycling steel,” he says, “and steel is still moving, just not as quickly.”
Picking Up Plastics
The plastics industry in 2000 was business as usual, says Barb Halpin, associate director of technical assistance programs for the American Plastics Council (APC), Arlington, Va. “Markets are good for PET [polyethylene terephthalate] and HDPE [high-density polyethylene]. Demand is strong and prices are sustainable.”
Patty Moore, president of Moore Recycling Associates Inc., Sonoma, Calif., agrees that industry fundamentals are strong and well-developed. “Reclaimers are saying they need all the PET and HDPE they can get,” she says.
The big story in plastics recycling on the West Coast is the newly developed markets for HDPE and LDPE (low-density polyethylene) film. Two companies, Trex, South Hackensack, N.J., and Boise Cascade, Boise, Idaho, are purchasing film for the production of lumber substitutes, such as decking and molding, leading to more collection programs, including curbside pickup of film in San Jose, Calif., and Seattle.
“The infrastructure for film is now well-established, with competition between two players, plus the export market. It's a very positive development for the industry,” Patty Moore says.
Halpin says APC will continue its push to increase supply by advocating all-bottle collection programs and offering communities outreach materials such as clip art and public service announcements. Critics of the all-bottles approach fear the additional contamination of plastics without markets (labeled numbers 3 through 7) could damage the markets for PET and HDPE. But Patty Moore believes that if all-bottle programs are successful, they could boost markets for the other plastic resins by producing an adequate supply of them for the first time.
Peter Anderson of RecycleWorlds Consulting, Madison, Wis., advises recyclers to accept the fact that the packaging industry is moving toward PET in a variety of colors, sizes and shapes, and with a number of barrier materials for oxygen-sensitive products such as beer.
“What number of colored bottles in a bale affects clarity or performance? Will these bottles downgrade markets? Where's the danger zone?” Anderson asks. “As recyclers, we need to continue to work with packagers to preclude the dangers from happening.” Patty Moore says reclaimers are doing a lot of research on the best way to deal with the variations in PET containers. The question is not whether to collect and process them, but how and in what combinations, she says.
Growing Green Waste
Markets for compost and other organics are beginning to mature nationally. Steven Sherman, president of Applied Compost Consulting, Oakland, Calif., attributes much of the growth to the adoption of commonly accepted standards and guidelines for compost quality. “Concerns about oversupply of compost are unfounded, except in limited locations and instances of poor quality,” he says. “A high-quality, consistent supply always sells.”
As the compost industry has matured, the types of materials collected in both residential and commercial programs have expanded. “From the mid-1980s to the early 1990s, collection [was limited] to primarily leaves. Throughout the ’90s, the mix was broadened to all yard trimmings. Now we see the addition of food scraps to collection programs,” Sherman says.
Organics recyclers in California are watching carefully at the California energy crisis' affect on markets. “I would not be surprised to see a number of idled boiler fuel plants reemerging and increasing the demand for wood chips,” Sherman says. He believes these mothballed fuel plants may be able to come back online more quickly than other types of energy production facilities, which would stimulate new demand for wood chips derived from urban yard and landscape trimmings.
The Washington, D.C.-based U.S. Environmental Protection Agency's (EPA) work on bioreactor landfills also could affect compost markets, says William Ferretti, executive director of the National Recycling Coalition (NRC), Alexandria, Va. The NRC believes the EPA should consider all methods of managing organic materials in the waste stream and should give the same level of attention to composting as it is to bioreactors.
“We are very interested to learn what the new administration's approach will be,” Ferretti says. “How they treat bioreactor landfills will affect composting around the United States.”
Beside the Bin
Recyclers of materials not traditionally found in curbside bins are enjoying varied levels of success. For example, construction and demolition (C&D) recyclers are pleased with the progress in their industry.
“Concrete and asphalt recycling markets are very strong in most of the country,” says William Turley, executive director of the Construction Materials Recycling Association, Lisle, Ill. Turley says the number of concrete and asphalt operators has reached market saturation. “They are fighting for every piece of concrete and asphalt, which means we are diverting a lot of material from the landfill,” says Turley, who estimates that 100 million tons of concrete and asphalt are recycled each year.
According to Turley, the C&D market's biggest problem is regulatory uncertainty. He believes that the EPA will revise its lead-based paint regulations to allow C&D recycling centers to process wood with lead-based paint, but he is uncertain if the rules will allow reuse of the wood without processing. Flow control measures in several states that restrict C&D recyclers' access to materials also are troubling for the industry.
Turley expects most of the innovation in C&D markets to take place with asphalt shingles and gypsum. “We still are working through the barriers and questions,” he says, “but asphalt shingle recycling is definitely the up-and-coming material in C&D recycling.” Markets include hot mix asphalt, cold patch and dust cover for gravel roads. Turley also notes that a number of gypsum recycling operations are springing up across the country, producing material for land application, cement and new gypsum wallboard.
Textile recyclers, on the other hand, have had it tough for the past two or three years, says Bernie Brill, executive vice president of the Secondary Materials and Recycled Textiles Association, Bethesda, Md. A strong U.S. dollar, combined with foreign tariffs and bans, have made exporting textiles difficult. But the export demand for high-quality recycled clothing still is strong, and Brill expects that markets for some lower-quality materials will reopen in the coming year.
The market for commercial and industrial disposable wipers made from recycled textiles has remained strong, due to a strong manufacturing economy in the past year. If manufacturing slows, especially in the auto sector, so will the wiper market.
Brill also sees consolidation in the textile recycling industry, with a shakeout of the smaller and older companies. “Given the overall economic conditions, only those companies with the resources to survive tough times are making it,” he says. “The weaker companies just can't hang on.”
Many materials, including building supplies, furniture, some electronics and manufacturing remnants are more easily reused than recycled, and the reuse industry is continuing to grow. “I get calls every week from community and government organizations interested in starting new reuse centers,” says Julie Rhodes, executive director of the Reuse Development Organization (ReDO), Indianapolis. Rhodes sees more companies adding value to materials through repair and refurbishment, instead of simply redistributing goods from those who no longer need them to those who do.
For example, a nonprofit called Crayons to Computers, Cincinnati, is using a partnership with its local department of corrections to transform large pieces of poster board and huge rolls of fabric that are donated into more usable flashcards, cut-out letters, book bags and chair covers that teachers can use immediately.
Reuse centers also are becoming more financially self-sufficient, Rhodes says. Rather than relying solely on government grants, programs are charging handling and membership fees to help cover costs. Deconstruction, or soft demolition of buildings, probably is the biggest growth area in the reuse industry. ReDO will be hosting the first national conference on deconstruction with the Institute for Local Self-Reliance, Washington, D.C., this fall in Hartford, Conn.
Reading the Tea Leaves
Overall, NRC's Ferretti says his organization is closely watching several economic factors to determine their effect on the recycling industry, including the potential impact of California's electricity crisis on recycling. Because statistics show significant energy savings associated with manufacturing using recycled content, some recycling-based manufacturers might fare better than others when energy supplies are tight, he says.
NRC also is watching for signals from the George W. Bush administration. “How the administration feels about the federal buy-recycled requirements, their timber harvest policies and what direction EPA will take on recycling and solid waste — we are just reading the tea leaves and eagerly awaiting their signals,” Ferretti says.
With so much of the recycling industry's success riding on the overall economy's health, watching for these and other signs is the best recyclers can do.
Kivi Leroux is an environmental writer and Waste Age contributing editor based in Washington, D.C. For more information on recyclables, visit www.wasteage.com.