The Recycling Corner

As a co-owner in American Recycling Company, LLC, I am asked from time to time by potential customers how to choose a recycling company and whether I believe the recycling market prices will get better or worse. It is always the most frequent questions asked, but due to a myriad of variables is always the most difficult to answer. I remind our existing and potential customers recyclable materials are a commodity bought and sold on the international market and as such, it is inevitable we see fluctuations in price. The supply and demand of recyclable materials will always be integral to its price point. What has changed over the years, however, is the consolidation of buyers from specific geopolitical international regions with the potential to affect demand based upon policy.

Historically, the recycling industry over the last 20 years has seen dramatic shifts in the United States. In the early 90’s, the Europeans were the envy of the world when it came to effective, robust recycling programs with recovery rates in the mid 60% to 70% range. Their success was driven more by practicality rather than ideology. The Europeans had limited space and available land for municipal landfills, thus it became easier to recycle and institute mandatory recycled content in manufacturing than invest in legacy landfill processes with no hope of surviving. The United States, however, has never suffered the loss of abundant available land with which to dispose our refuse. With the relatively low cost of disposing waste in the ground in a majority of the U.S., the economics of recycling would not be realized until China became interested in our national scrap waste in the mid to late 90’s. Whereby a California business in 2000 could save money from removing cardboard or metal from their waste stream, the new Asian markets for recycled material meant that same business could now be paid. Today, the new international demand for U.S. recycled content meant domestic mills that had historically purchased material now had to compete for tons to purchase from businesses and recycling operations.

The following 15 years has seen a maturity to the recycling sector with dramatic increases in municipal mandated recycling, automated recyclable material recovery and international recyclable material definitions. Today California alone represents 42% of the Nation’s export of recyclable material (metal, paper and plastics). There is more supply today than at any time in our history, yet the price of commodities continues to be stable as there is a consistent demand for raw recycled goods due to increases in population alone.

The single greatest challenge today in the recycling sector pertains to recent changes in import guidelines and crackdowns in material destined for ports in China. The recent Green Fence and National Sword initiatives were instituted to prevent substandard and waste laden recyclables from reaching Chinese shores. These initiatives will most affect solid waste Material Recovery Facilities (MRF’s) utilizing single-stream sorting technologies. Single stream sorting is mostly mechanical and automated allowing for much higher volumes to be processed, thereby providing greater efficiency and cost savings. The drawback to this process is many contaminated and soiled materials are intermixed with clean recyclables making the recovered recyclables prone to odors and residues making them less valuable or prohibited altogether. The prohibition of many recycled materials into China has opened up new markets in many emerging economies, as well as developed new capacity domestically.

To come full circle and answer more simply a very complex question, I believe the real monetary value of recyclable material is predicated on the value of choosing your strategic sustainability partner. Choosing the right recycling company that intimately understands and anticipates market flows, regulatory conditions and geopolitical consequence is infinitely as valuable or more so than the actual value of the recyclable materials. Secondarily, choosing a recycling company that is diversified in its offerings of recyclable materials hedges against individual commodity drops in price. While it may seem tempting to have a dedicated scrap metal, plastic and paper recycle stream provider, there is also considerable risk they stop collecting, stop paying or go out of business altogether during any market cycle fluctuation. Ours is a company that has foregone some of the temptations to specialize in one commodity to take advantage of market highs. Consequently, our management team has focused on recovery and processing of all recycled papers, plastics, metals in addition to other services such as document shredding or food by-product destruction services. When so many other specialized recycling operations go out of business as they cannot weather down cycles in recycled commodity prices, our company maintains exceptional service and continues to grow due to diversification and vertical integration. In conclusion, the question should not be whether we can forecast a market price for any given recyclable as getting better or worse. Rather, the question should be who can provide the most cost effective and reliable service with a consistent supported fair market price. That service provider will always seek to provide a long term, strategic alliance in your benefit.

— Brian Terrell