BY: Marc J Rogoff, David E Ross n (First Published February 3, 2016)
In recent months, both the solid waste industry press and mainstream media in the United States (including Fortune, the New York Times, Wall Street Journal, and the Washington Post) have called attention to the growing ‘ills’ of recycling (Davis, 2015; Groden, 2015; Whelan, 2015). In short, the common theme of these articles is that recycling in the USA has stalled and the situation is dire. How dire is it? Industry executives have opined that prices for recycling commodities have largely fallen to the point over the past several years that it is no longer economical for them to process many (or even most) recyclables for sale and shipment to their largely Asian markets, which set standards for toleration of contaminants (also known as the ‘Green Fence’). For example, some of the USA’s largest materials recovery facility (MRF) operators, such as Recycle America and Republic Services, and ReCommunity have ‘mothballed’ recently operating facilities or delayed capital investment owing to declining revenues that now preclude profitable operations. Those who provide solid waste management advisory services to public agencies and private firms traditionally have advocated for increased recycling as a foundation for achieving regional sustainability (also called a ‘circular economy’). But now many practitioners and city leaders in both the USA and elsewhere in the world are asking, ‘Is this situation a momentary blip in recycling revenues or a harbinger of a longer-term trend?
Markets are squeezed: RECYCLING CRISIS
Based on the often-fluctuating markets for recyclable materials over the past 35 years, we can safely predict that today’s troubles are but a blip on the screen. Or, as Yogi Berra, the former great Yankee baseball player (and master of coining colloquial expressions that appear to lack logic) once said, ‘It is déjà vu all over again’.
Price volatility in recycling markets is almost a universal truth across the globe (Yard, 2015). Being able to manage recycling operations in the face of ever-changing market prices can either produce success or break a community’s waste diversion program. Most recycling industry observers have noted that prices for most, if not all, virgin and recycled materials tend to follow expansions and contractions in the overall world or national economies, such as major economic recessions and market crashes (like the Great Recession), the Iraq war, Y2K fears, and oftentimes irrational market exuberance. There are, however, specific trends industries that move prices for different recycled materials in entirely opposite directions. One can argue that the long-term (30-year) average of the curbside recyclables market has moved up substantially from average levels through the 1991–1993 recession, the 2001–2003 economic downturn, and the latest downturn, the ‘Great Recession’ in 2007–2009.
Experience over the past three decades shows that communities that collect many different materials probably experience less revenue volatility over the course of an economic cycle. Nevertheless, even curbside recycling programs that collect a wide variety of materials, such as residential mixed paper, newspapers, cardboard, glass, metals, and plastic bottles, may experience significant and pronounced revenue swings, creating budget shortfalls and consequent calls for cutbacks if not the outright cessation of community recycling programs.
END OF PART 1