Down in the dumps

A plastic log playhouse is among the ruins at Columbia Recycling PDX.

The current economic climate is taking a bite out of the recycling industry. Demand for recyclables has dropped globally. Scaled back construction and manufacturing have gutted the markets for steel and copper. Slowed consumer spending has dampened consumer goods manufacturing and distribution, slimming demand for plastics and paper. Even troubles in the media business have begun to take their toll on the recycling industry. Newspaper, traditionally a reliable commodity material, has faltered—as ad sales drop and news moves online, newspapers are printing fewer copies of smaller papers with fewer pages.

Because demand has fallen off across the board, prices have taken a nosedive as well. Prices for many commodities fell between 50 percent and 100 percent between July 2008 and December 2008, erasing any gains they made in the first half of the year—and then some. Plastics in particular fell steeply, and in some cases recyclers had to move material at a significant loss. Even the big players have been hit hard: Waste Management (NYSE: WMI) reported that its fourth-quarter 2008 recycling revenue fell 37 percent from the previous year, and 44 percent from the previous quarter.

In the industry, this has left many folks in the recycling value chain—be they curbside collection companies, material sorters or manufacturers—casting about for new ways of doing business, from high-technology solutions to old-fashioned partnerships.

Supply continues, despite demand
Regardless of the current economic situation, curbside collection hasn’t slowed. In many U.S. jurisdictions, haulers are required by local and state policies to pick up recycleables at the curb, and such policies are on the rise nationwide. While the list of materials they’re required to collect varies, mandatory recycling “tends to go on regardless of what market prices are,” says Betty Patton, resource director of the Association of Oregon Recyclers (AOR), an industry group founded in 1977. When market prices fall, even if they fall below the cost of collecting material, haulers continue to collect and sell materials.

Garbage and recycling rates paid by consumers and businesses are typically set by the local government are re-evaluated once every five years (as in Oregon) or some other set period of time. As such, the system isn’t set up to react to swings in commodity prices. For the most part, that works out alright. But the current market collapse is causing a serious pain point for many haulers, which can’t just stop collecting waste when prices drop. Local governments aren’t likely to curtail recycling programs, according to most of the industry experts interviewed for this story, and even if they were to begin re-evaluating garbage rates more often, many of the haulers have taken such a substantial hit already that new rates wouldn’t help them recoup the losses they’ve incurred up to this point.

“This price drop has been so radical, and happened so quickly, that garbage companies are going to have to absorb this cost,” says John Matthews, sustainability coordinator for Salem, Ore.–based recycler Garten Services and a founder of AOR. The garbage business is an old industry, however, so many recyclers are prepared to weather storms such as this, at least for a period of time. And, as Matthews points out, eventually the slow-down in production will result in less waste to be managed by recyclers and haulers.
But others point out that a focus on commodity prices is only half the story when it comes to the value of recyclables.