A Global Appetite

Nancy Mann Jackson

While Most Sectors of the U.S. economy are faltering, the recycling industry — fueled, in part, by the rapidly growing industrial economies of India, China and Russia — continues to expand. As a result, recyclers are cashing in on record prices for their commodities.

“Industrial production in this country is doing OK,” says Bob Garino, director of commodities at the Washington-based Institute of Scrap Recycling Industries (ISRI). “It's still reasonable enough to continue the normal consumption [of recycled commodities]. But the added demand from countries like China, India and Russia has just made prices skyrocket.”

Bill Heenan, president of the Pittsburgh-based Steel Recycling Institute (SRI), concurs. “With India and China still booming and trying to get out of the Third World into the first world, these commodities are very important,” he says. “They have a lot further to go to catch up with the United States and Europe. There are a lot more appliances, airplanes and buildings to be built. So, I think we'll see a long-term upward trend.”

Paper

“The most important material for recycling is paper, and the markets have been very strong for the past five years,” says Chaz Miller, director of state programs for the Washington-based National Solid Wastes Management Association. “The price is basically driven by demand in China, where they have ultra-modern mills for making new paper, and the land is forest poor.”

While rising paper prices have been the norm for the past half-decade and prices remain higher than normal, paper recyclers have seen a decline in prices since first-quarter 2008, says David Clapp, senior economist for Bedford, Mass.-based RISI, a consulting firm for the paper and forest products industries.

One factor behind the decline is that Chinese buyers “are pretty well-stocked in terms of inventory,” Clapp says. “They are still buying but not as much as they were earlier this year.”

Miller suggests that the Beijing Olympics this summer could play a role in the stabilizing prices. “The Chinese have made it clear they want clean air [for the Olympics], so facilities may be taking an extended break from production,” he says. “But they'll come back.”

Like other businesses, paper recyclers also are battling increased expenses, as the costs of shipping and fuel have ballooned due to skyrocketing oil prices.

Although declining in some instances, paper prices still are strong. In June, old corrugated containers (OCC) drew an average of $120 per ton in the United States and $220 per ton in China, while old newspaper (ONP) drew an average of $135 per ton in the United States and $290 per ton in China, Clapp says.

A decline in newspaper readership, leading to fewer recycled newspapers, continues to drive up the prices for ONP. Bill Moore, president of Atlanta-based Moore & Associates, says 2008 marks the first time in his more than 20 years as a paper recycling consultant that a presidential election hasn't depressed ONP prices because of increased readership.

At least for the next few months, “most insiders expect pricing will continue declining through the summer, stabilize in the fall and could begin to turn around before the end of the year,” Clapp says. “Typically, the first or second quarter is when we see a rally.”

Metals

For metal recyclers, “these are the good days,” Garino says. “We're very encouraged.” In early July, the market saw record highs for copper and strong numbers for nickel, lead and zinc. Copper prices were above $3.70 per pound, nickel was just under $10 per pound, and lead and zinc were both earning about 90 cents per pound.

Bellwether scrap has increased four times since 2001, and was selling for $500 per ton in mid-July, Heenan says. “That's why people are out there stealing manhole covers,” he says. “Recyclers are no longer just guys in sandals and long hair — now they're commodity brokers.”

As for the future, Garino says the outlook is bullish for most metals. “There's a lot of interest in commodities both overseas and domestically,” he says. “While fundamentals will change prices one way or the other, we suggest that the market will be quite strong for longer.”

According to the New York-based Natural Resources Defense Council, airline travelers generate enough aluminum cans each year to build 58 Boeing 747 airplanes. As China and other developing economies continue to grow, recycled aluminum is being used to build airplanes along with numerous other goods.

“The burgeoning economies of India and China continue to strain supplies of a wide range of commodities, of which aluminum is one,” says Steve Thompson, director of recycling initiatives for the Washington-based Aluminum Can Council. In mid-July, truckload lots of baled used beverage cans were trading at $1.08 per pound, a price “near record levels,” Thompson says. While he expects both demand and prices to remain strong, supply is more of a question mark, he says.

“Supplies remain flat because of lack of convenience to consumers and a lack of a robust public education effort by curbside providers to remind consumers of the importance of recycling, both economically and environmentally,” Thompson says. “If stakeholders don't forge a working alliance to expand convenience and public awareness, supply will continue to lag demand.”

Although rising prices for aluminum are accompanied by increased freight charges and rising prices for finished goods made with recycled materials, many in the industry say it's worth it. “One recycler told me he only has to buy a roll-off once a year, and he gets money for cans every week,” Heenan says. “So, he doesn't mind the rising prices of finished goods so much.”

In the plastics market, demand for polyethylene terephthalate (PET) continues to outpace supply, continuing a trend of high prices. Current prices range from 20 cents to 30 cents per pound, says Dennis Sabourin, president of the Sonoma, Calif.-based National Association for PET Container Resources. The higher prices are found on the West Coast for products that are being shipped to China, where 50 percent of U.S. post-consumer bottles were sent in 2006, the last year for which figures are available.

The PET recycling rate should continue to grow as it has for the past three years for a couple of reasons, Sabourin says. “First, curbside recycling has become more consumer friendly because of single-stream recycling,” he says. “Also, the proliferation of automated sorting systems has made it easier for [cities] to get involved in the buoyant and active market for recycled materials.”

While the demand for PET plastics continues to surge, high-density polyethylene (HDPE) plastics experienced a great softening in demand during the first quarter of 2008. One reason for the decreased demand are products such as concentrated detergent that use smaller packaging. In addition, industries that have traditionally depended on recycled HDPE, such as the corrugated pipe and flowerpot industries, have slowed due to the homebuilding slump, says Tamsin Ettefagh, vice president of Reidsville, N.C.-based Envision Plastics, a reprocessor of HDPE.

The negative impact on demand by those industries has been mitigated due to increased interest in recycled materials from other industries. “Because of the Wal-Mart Scorecard, which gives products extra credit and better shelf placement for packaging made from recycled materials, more industries are interested in using HDPE for packaging,” Ettefagh says. “Detergent's not growing but personal hygiene is, and the automotive industry is trying to use more recycled materials. What we've lost, we're gaining back now.”

Currently, a bale of HDPE plastic is earning about 37 cents per pound, and mixed colored HDPE is earning 25 cents per pound. Although they are not quite where they were in 2007, Ettefagh projects that they will return to those levels and surpass them.

While the glass market has been strong for several years, the current oil crisis has increased demand significantly. “[Recycled glass] is in demand especially because of the energy situation and the cost of manufacturing new glass,” says Joe Cattaneo, president of the Alexandria, Va.-based Glass Packaging Institute. Using recycled glass can cut manufacturing costs by one-third, he adds.

Other sectors of the glass industry also are taking interest. “Due to the energy situation, now there's demand not just from the container industry but also from fiberglass and flat glass,” Cattaneo says. “They're looking at it more than before because of the reduced costs and reduced emissions [it offers].”

Although some recycling markets see commingled collections, or single-stream recycling, as a positive trend, it's a negative for the glass industry, Cattaneo says. Glass contaminates other materials and vice-versa.

“When you have a commingled system, you have extra costs for cleaning, and it reduces the amount of glass available because of residue and loss,” Cattaneo says.

However, as demand increases, processors are looking for better ways to clean glass that has been commingled with other commodities. Currently, glass recyclers are earning about $30 per ton of material, and Cattaneo expects that prices will continue to rise.

Nancy Mann Jackson is a Florence, Ala.-based contributing writer.