Recycling's Rebound

Michael Fickes

While the economy battles to avoid a double dip, recycling markets, despite some volatility, have improved. Looking ahead, industry observers foresee a period of relative price stability.

UP FROM THE DEPTHS: While they haven't returned to their soaring pre-crash highs, recycling commodity prices have improved since the recession's deepest point.

The price of steel has been rising since the crash at a rate of about $100 per gross ton per year, reaching a high of around $400 per gross ton. The price has since fallen back to $300 per gross ton. Old corrugated container (OCC), paper's benchmark commodity, rose $100 per ton from first-quarter 2009 through the first quarter of this year. It too has since fallen back somewhat.

Polyethylene terephthalate (PET) rebounded after the crash but has moved around since then. And after a lot of bouncing, high-density polyethylene (HDPE) prices ended up about the same in mid-July 2010 as they were one year earlier.

The commodity prices that have rebounded still have not returned to their pre-crash highs — but that's probably good, since most agree those prices were inflated by an overheated economy. Thus, current prices are reasonably close to historical averages.

Showing Their Mettle

The markets for recycled metals — aluminum, iron and steel — have been recovering from the crash since hitting bottom in February 2009, says Greg Wittbecker, director of corporate metal recycling strategy with New York-based Alcoa. Aluminum rose from a low of $0.59 per pound in February 2009 to $1.12 per pound in April 2010. "By late July of this year, the price had fallen back to $0.93 cents per pound," Wittbecker says.

The iron and steel markets have rebounded as well, according to Gregory Crawford, vice president, operations, with the Pittsburgh-based Steel Recycling Institute. After rising to the unusually high price of $600 per ton before the recession, ferrous scrap plummeted to $100 per ton in the crash. Since then, the price has recovered, reaching $400 per ton two months ago. At the end of July, however, it had fallen back to $300 per ton, the approximate cost of making new steel. "Since scrap is a substitute for the virgin materials, the market will temper scrap prices when they rise above the cost of virgin materials," says Crawford.

Elastic Plastic Market

SEA OF STABILITY: Looking ahead, recycling industry observers say prices should be more stable after a couple years of volatility.

Like the metal markets, the market prices for PET and HDPE recovered shortly after the crash but fell back this past spring. PET started to recover within six weeks of the early 2009 crash, with prices rising from single digits to more or less historical levels of $0.12 per pound by the end of the year. "Going into the end of 2009, we had another downturn and once again fell into the single digits," says Mike Schedler, director of technology with the Sonoma, Calif.-based National Association for PET Container Resources (NAPCOR).

Then came a complete turnabout, with a number of new PET plants purchasing materials ahead of start-up, Schedler continues. That, combined with typically lower supplies during the winter, drove prices up to $0.25 per pound. "Since then, there has been a downward spiral as Asian buyers dropped out of the market," he says. Even so, today's PET prices remain relatively high at $0.15 to $0.17 per pound.

After plunging close to $0.10 per pound during the crash, HDPE prices have recovered strongly, reaching a peak in May 2010, says Tamsin Ettefagh, a vice president with Envision Plastics, an HDPE re-processor with facilities in Reidsville, N.C., and Chino, Calif. "In May, natural peaked at $0.33 per pound, and mixed color got up to $0.29 per pound on the East Coast," Ettefagh says. "West Coast prices were lower, at $0.29 per pound for natural and $0.24 per pound for mixed color.

By the end of July 2010, however, prices had slid back, with natural falling about 10 cents per pound on the East Coast and 4.5 cents per pound on the West Coast. Mixed color fell 9 cents per pound in the east and 7 cents on the West Coast.

Ditto Paper

Considered a bellwether for the recycled paper markets, OCC prices peaked prior to the recession at $130 per ton. When prices crashed in the first quarter of 2009, OCC hit $41 per ton, says Bill Moore, president of Atlanta-based Moore & Associates, a paper-recycling consultancy.

Then came a powerful recovery with the paper grade rising to $138 per ton by the end of the first quarter of 2010. Since then, OCC prices have fallen back. At the end of July, OCC was going for $120 per ton.

"Mixed paper followed a similar route," Moore says. "It crashed to $13 per ton, moved up strongly to $88 in the second quarter of this year, and fell back during the third quarter. Our estimate is that it will be around $76 by the time the quarter ends."

Old newspaper pulp (ONP) has reacted differently. It peaked in the fourth quarter of 2008 at $134 per ton, bottomed out at $50 per ton in the first quarter of 2009, and then more than doubled to $102 per ton in the first quarter of 2010. It has not fallen back.

Is There a Pattern?

Except for glass and ONP, recycling commodity prices seem to be following a pattern. All hit shocking lows late in 2008 or early in 2009. All bounced back through the first quarter of 2010. And all have declined somewhat since then.

Alcoa's Wittbecker points out that the decline that began in April and May probably came as a result of sovereign debt issues in Europe. That's the period of time when Italy was struggling with debt issues and Greece sought a bailout. "Since that issue has receded, people have started talking about a double dip recession," Wittbecker says. He surmises that such fears will perhaps keep commodity prices from rising back to their pre-Greece highs, at least for a while.

Nevertheless, Wittbecker seems reasonably confident that the pullback in commodity prices does not reflect problematic economic weakness. "At a macro level, the aluminum markets are being driven by three of the BRIC countries — Brazil, India and China," he says. "All three exited the recession faster than the western world. The fourth BRIC country, Russia, was slow in beginning to recover but is improving now."

Wittbecker also observes that the aluminum markets in Europe, Japan and the United States also have started to recover and will probably be able to add some fuel to the economic rebound. Overall, the rebound of recycling commodity prices close to their pre-crash levels may, in the end, herald better economic times to come.

Glass Is Different

Demand is strong for glass — as strong as it was last year and the year before, says Curt Bucey, president and chief operating officer with Houston-based Strategic Materials Inc., the largest recycled glass processor in North America (and one of the largest plastic processors). What's more, Bucey continues, demand for glass may be about to grow stronger. According to the Glass Packaging Institute, the industry's trade association, glass container manufacturers are actively promoting glass recycling, hoping that a higher rate of recycling will make it possible to ratchet up recycled glass content in glass containers. The goal is to move from the current level of 25 percent to 50 percent by the end of 2013.

"The problem isn't demand," Bucey says. "Curbside collection doesn't provide enough supply."

Have strong demand and weak supply combined to raise prices? No, says Bucey. "Generally, glass prices have remained constant throughout the recession," agrees Amanda Pratt, a spokesperson for Cincinnati-base Rumpke, a waste hauler with a large glass reprocessing business.

Bucey explains the phenomenon by noting that recycled glass prices respond more to contamination and landfill tipping fees than supply and demand. While dual-stream recycling produces glass relatively free of contamination, early single-stream programs yielded glass contaminated with other recycling commodities that processors weren't equipped to separate. That has changed. According to Bucey, Strategic Materials as well as its competitors can now separate contaminants from glass arriving from single-stream recycling programs. But it is expensive.

"For example, basic flint, amber and green prices generally range around $30, $25 and $5 per ton, respectively," Bucey says. "We work prices down from there. A shipment from a single-stream MRF might contain a half-ton of contaminants for every half-ton of glass. We have to separate the materials and then landfill what isn't glass. We'll adjust the price we'll pay for the glass by the tipping cost to landfill the contaminants."

Michael Fickes is a Westminster, Md.-based contributing writer.

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