The role of recycling in growing the economy Jerry Powell Resource Recycling Portland, Oregon www.resource-recycling.com
What we’ll look at today • Changes in recycling markets through the decades • An assessment of where markets might be headed • A display of the regional opportunities at hand for economic growth through recycling • Questions and (attempted) answers
Recycling markets A history of U.S. recycling markets over the past three decades would focus on: -- market growth, especially globally -- the removal of much of the market’s volatility (except for late 2008) -- domestic market contraction -- investment and consolidation
Recycling market growth In many ways, recycling has moved from being a green, niche market to a fundamental way to acquire raw materials. This growth has been aided by: -- technological innovation, such as deinking -- rising disposal fees -- growing scarcity of virgin raw materials
Recycling market growth Examples of technological innovation: -- from corrugating medium to linerboard -- bottles-to-bottles plastics recycling -- optical sorting of plastics and glass -- recycled plastic decking products
Total MSW generation (by material), 2009243 million tons (before recycling)
Recycling’s growth Yes, more than 10,000 communities, where 63 percent of Americans live, now collect recyclables curbside. Yes, 193 million Americans can set out recyclables weekly. But our progress has slowed. Recycling rates have flattened out.
Less market volatility The value of recyclables has risen over time: Material19902010 ONP and OCC $40-$60 $130-$160 Aluminum cans 30-40 cts 70-90 cts PET bottles 10 cents 30 cents
Less market volatility At the same time, recycling’s price moves are less severe. What explains most of the growth in recycling markets over the past two decades and the rising level of market stability? Hint: It’s a five-letter word.
Less market volatility We have seen a fundamental shift in critical recycling markets. The continuing rise in Chinese demand, even during a recession, has resulted in systemic changes in the American recycling market.
Less market volatility Even with rising exports, recovered material pricing has been very attractive, except for a recessionary dip in late 2008.
Less market volatility So what happened in the Great Recession of 2008-2009?
Domestic market contraction The crunch created by high export demand has had a profound impact on a number of domestic recycling industries. We’ll look at two examples: PET bottles and newsprint.
Domestic market contraction PET reclaimers have lost share to Chinese buyers. This is the share held by exports for bales of plastic bottles from the U.S. MRFs: 2000 22 percent 2002 35 percent 2004 37 percent 2006 51 percent 2008 57 percent 2010 50 percent
Domestic market contraction PET reclaimers are thus operating at less and less of their combined capacity: 2004 84 percent 2006 86 percent 2008 80 percent 2010 73 percent
Domestic market contraction The situation is far worse for recycled newsprint producers, including mills here in Tennessee.
2010 recovered paper market Million Tons 31.3 20.2 51.5 • Versus 2009 • +7.0% • -3.8% • +3.4% • 2010 Marketplace • 61% • 39% Domestic Exports Total
Newsprint: a serious problem North American shipments in million tons: 2007: 12.2 2008: 11.2 2009: 8.1 2010: 8.6 This is a loss of 30 percent in just three years.
Investment and consolidation We are going through a multi-year period of industry consolidation. New investments are being made, especially in collection and processing, and end users are buying competitors.
Investment and consolidation More and more recyclables will be collected and processed by fewer and fewer players. Mergers and acquisitions will continue.
6: Continued consolidation Top 50 recovered paper processors: o handle nearly half of all collected fiber o operate 612 plants o average plant does 3,200 tons per month Source: Moore & Associates, 2010.