Cheap oil, oversupply of recyclables make for a losing operation

Cheap oil, oversupply of recyclables make for a losing operation

posted in: Recycling Articles | 0

By Tim Landis
Business Editor

http://www.sj-r.com/article/20151205/NEWS/151209742

Posted Dec. 5, 2015 at 10:00 PM
Updated Dec 5, 2015 at 11:31 PM

Cheaper gasoline at the local convenience store and fewer choices at the local recycling center have a commodity in common: crude oil.

As oil, a key component in plastics, gets cheaper on world markets, so does the cost of making new plastic compared with the cost of recycled materials, industry experts say. Prices and demand for recycled products fall as a result, making it harder for recycling companies to justify the expense of collecting, cleaning and processing plastic, paper and cans.

Lower energy costs carry over into demand for other recycled materials as prices of raw commodities used in products from aluminum to paper fall, said Chaz Miller, director of policy for the National Waste & Recycling Association in Washington.

“One of the unfortunate results right now is overproduction,” Miller said. “There is just too much supply.”

Early this year, according to industry trade publication Plastics News, futures contract prices for virgin plastic typically used in soft-drink and other bottles were at 72 cents per pound, compared with 64 cents per pound for recycled plastic. Recycling has been a victim of its own success, Miller said, including growing popularity with consumers.

State and local governments have added to the recycling stream through well-intended laws to divert waste from limited landfill space.

“Recycling markets are no longer supply and demand,” Miller said. “In the past, when demand lagged, it was easy to turn off the supply. It’s hard to turn off the spigot of municipal recycling programs. If you’re recycling, it’s a good thing, and it’s also bad if the end-market demand is not there.”

Industry challenge

Poor markets for recycled products were cited in a decision last month by Lake Area Disposal to close a popular drop-off center at 2742 S. Sixth St. in Springfield, effective Dec. 18. In response to requests from consumers and city officials, the company announced Thursday that the center would reopen from 8 a.m. to noon Dec. 26 to accept Christmas wrap and cardboard only. The drop-off will also open 8 a.m. to 4 p.m. for a few days the week of Dec. 28 to accept wrapping paper and cardboard.

The challenge faced by Lake Area is being played out across the industry, said Wynne Coplea, president of the Illinois Recycling Association. Coplea previously coordinated the city of Springfield’s recycling program.

“The global market is one word: China,” Coplea said.

China had been the top market for recycled plastic and paper from the United States for years, she said. As the Chinese economy slowed, so did demand for imported commodities, including recycled products. Stricter regulations of imported recyclables also contributed, according to Plastic News, which reported in May that 70 percent of recycling companies had left China in the last three years.

Coplea said some landfill operators in Illinois have begun seeking approval to separate and store recyclables on-site in anticipation of an eventual market recovery.

“It’s not ideal,” she said, “but it’s better than going into the landfill.”

Traditional curbside recycling has not be affected at this point, Coplea said, but she added that the low prices and demand could force decisions on local governments that support recycling programs.

“Local governments are hard-pressed,” she said. “But it’s up to them to support the service similar to any other service that affects the quality of life.”

Costly operation

Recycling programs are not cheap. Habitat for Humanity of Sangamon County dropped an electronics recycling program about two years ago because of cost, said Colleen Stone, executive director.

“We figured it was costing about $50,000 a year, and that was taking away from our core mission of building affordable homes,” Stone said. The program was started prior to her becoming executive director in 2013.

“It’s absolutely needed for the environment,” she said, “but we had to treat it as a business decision.”

Recycling was generally self-supporting when curbside programs began to gain popularity in the 1990s, said Miller, of the national recycling organization.

“We could pay for trucks, workers and processing just on the tonnage value of the end product,” he said.

The market for recycled materials peaked in 2011, Miller said, and has been subject since to the same kind of ups and downs as commodities from oil to soybeans.

“People sort of forget that these are commodities,” he said, “and sooner or later, the piper is going to be paid.”

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Recycling options

Here’s an overview of items accepted by curbside recycling program in Springfield:

* Paper: Clean, dry newspaper and glossy inserts, unwanted mail, paper food containers, shredded paper, magazines and paperback books, milk or juice cartons, and cardboard (check with hauler).

* Metal: Tin cans, aluminum beverage cans, metal to-go food trays and clean aluminum foil.

* Plastic: Plastics labeled No. 1 through No. 7, excluding No. 6.

* Glass: Clear glass bottles and jars that contained food or drinks; green, brown and other colors.

For more information

* City of Springfield: bit.ly/springfieldilrecycle

* Sangamon County Department of Public Health: scdph.org/recycling-information

Contact Tim Landis: tim.landis@sj-r.com, 788-1536, twitter.com/timlandisSJR.