Business

Skid in oil prices pulls the recycling industry down with it

Workers remove contaminants from a stream of recyclables at the Waste Management facility in Newark, N.J., Jan. 28, 2016. As oil prices sink, it becomes cheaper to make new plastic and other materials than it is to recycle them from garbage, hitting the recycling industry hard.
Workers remove contaminants from a stream of recyclables at the Waste Management facility in Newark, N.J., Jan. 28, 2016. As oil prices sink, it becomes cheaper to make new plastic and other materials than it is to recycle them from garbage, hitting the recycling industry hard. NYT

In a cavernous recycling facility crisscrossed with conveyor belts, enormous bales of crumpled plastic bottles are stacked one atop another, waiting to be sold to the highest bidder.

For Waste Management, the company that runs this operation, collecting, sorting and bundling recyclables was until recently a profitable endeavor. A year ago, Waste Management could have fetched $230 for each bale of thin translucent plastic.

But today, thanks to the glut of cheap oil flooding global markets, they are worth just $112 each.

“Recycling is in a crisis,” said David P. Steiner, chief executive of Waste Management. “It used to be that all players in the recycling ecosystem were able to make a profit. That’s not the case anymore.”

With concerns about climate change mounting, it’s an awkward time for the recycling industry to be under such pressure. The environmental merits of recycling are well accepted by the public, if still disputed by some. Curbside collection programs are commonplace.

Yet recycling is a commodities business. The paper, metal, plastic and glass that recyclers collect, sort and sell competes against so-called virgin materials. And right now, many commodities are cheap.

Abundant oil is the latest headache for recyclers. New plastics are made from the byproducts of oil and gas production. So as plentiful fossil fuels saturate global markets, it has become cheaper for the makers of water bottles, yogurt containers and takeout boxes to simply buy new plastics. This, in turn, is dragging down the price of recycled materials.

“The recycling industry is being hit dramatically by falling commodity and oil prices,” said Michael Taylor, vice president for international trade at the Society of the Plastics Industry. “A real fear now is that recycling rates might go down. That would be a horrible situation.”

Local governments and businesses have spent decades working to increase recycling rates with new infrastructure, education campaigns and higher demand for post-consumer materials. And though recycling rates vary by material – newspaper and cardboard are recycled more than aluminum, glass and plastic – the push was largely successful. About 34 percent of waste was recycled in 2013, according to the Environmental Protection Agency, more than double the 16 percent that was recycled in 1990.

Until recently, recycling programs were an unlikely cash cow for many cities and counties. Thanks to high commodity prices, recyclers like Waste Management would actually pay municipalities for used cardboard, aluminum cans and plastic bottles.

But as recyclers around the country face losses, they are passing their costs along to cities and counties. Increasingly, local governments are receiving nothing at all for their recyclables, or even having to pay companies to accept them.

Orange County, which includes Chapel Hill, was making about $500,000 a year by selling its recyclables to a company called Sonoco. But as commodity prices have fallen, so, too, have the prices that Sonoco can offer local governments. Starting this month, Sonoco will not pay Orange County anything for the mixed paper, plastics and metals it collects.

There are still bright spots in the industry. Big companies like Pepsi and Procter & Gamble are buying more recyclable material to meet sustainability goals. And efforts are underway to build out new recycling infrastructure that could make the industry more efficient.

“There are still some customers for recycled materials, for reasons other than pure economics,” said Taylor of the Society of the Plastics Industry. “The thinking is that that demand will grow because of the greening of the mainstream American consumer.”

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