Why recycling economics are in the trash bin
The recent unexpected collapse in oil prices is putting the squeeze on the recycling industry.
As a result of crashing crude prices, it's cheaper for plastics companies to use new or virgin materials than recycled stuff. Prices are so low for recycled plastics and glass bottles that companies such as Waste Management (WM) or local governments have to pay to have it hauled away. It's a simple issue of supply and demand.
"The bottom line is that what is recycled and what is not is directly linked to oil," said Tom Szaky, CEO of TerraCycle, which works with companies on programs to make packaging recyclable. "If the cost of collection and processing is greater than the material value, then the material becomes nonrecyclable. If it's less, then it's recyclable. It's that easy. And the material value is 100 percent dependent on oil prices as it's derived from oil."
Prices for all plastics have fallen about 20 percent to 30 percent compared with last year, though they've firmed a bit in April, according to Brent Bell, Waste Management's vice president for recycling. The most common type of recycled plastic is polyethylene terephthalate, or PET, which is used in soda bottles. The Wall Street Journal reported that new PET now costs about 63 cents a pound, 7 cents less than the recycled variety. Other types of flexible or colored plastics aren't being recycled because recyclers can't find a market for them.
"We would obviously like to have more stable pricing," said Bell, adding that the market hadn't been in this situation for several years. Houston-based Waste Management, the largest U.S. solid waste disposal company, gets about 10 percent of its annual revenue -- $14 billion last year -- from recycling.
As the Journal noted, municipalities in the Northeast have so little space in their landfills that it's worth it for them to pay to haul their plastics away. The industry has also been hurt by the bankruptcies of two German plastics recyclers. And a British firm went into "administration," which the Journal described as a "form of bankruptcy."
Finding buyers for recycled glass also can be tough. Clear glass is recycled, while colored glass used in wine and beer bottles winds up in concrete aggregate.
"You have to find the bottlers who want to have some recycled content from us," Bell said.
Other recyclable markets are in the dumps as well, such as scrap metals like steel because of the West Coast port strike and the slowdown in the Chinese economy.
"To say that everything is not ideal in the ferrous scrap world is a bit of an understatement," according to Scrap Price Bulletin. "The first quarter of 2015 has presented scrap companies with their greatest challenges since the Great Recession helped to lower prices near the end of 2008."
Until oil prices rebound, recycling companies will need to play a waiting game.
Recyclers "store the material for a while in hopes that oil will go up again," TerraCycle's Szaky said. "Then, once their storage is full, they simply dispose of the material in landfills or incinerators vs. increasing the amount stored."