The recent global economic upheaval has had a direct, detrimental effect on the value of recycled commodities. Through October and November the price of post consumer fibres, plastics and metals has plummeted, creating challenges for program operators everywhere.
The average “basket of goods” price for Ontario blue box materials was over $175/tonne in October and less than $40 in December. The initial price drops were felt from the fibre markets. With the economic malaise fewer goods are being produced requiring fewer boxes to package them. Mills have fewer orders to fill. Newspaper companies built large inventories over the summer fearing a price increase from ONP mills. The price of OCC and ONP dropped $80/tonne in just two months. Abitibi-Bowater in Thorold Ontario shut down production for the first two weeks of November. At the same time, demand from China practically ceased. Nine Dragons — a large consumer of North American scrap fibres — closed its east coast offices.
The lack of overseas demand has not been restricted to fibres. Plastics and metals have few outlets overseas where approximately 20 per cent of blue box items are sold. A glut of domestic tonnage has led municipal and commercial recycling plants to begin stockpiling baled materials onsite or in warehouses.
Unfortunately this does not seem to be a minor hiccup. Speculation is rampant as to when a rebound may occur, with guesses ranging from mid-February (after the Chinese New Year) to as far off as the beginning of 2010. Regardless, a few things are worth knowing.
Longstanding relationships with the end markets are more important than ever. The spot market is essentially gone. Unless tonnes were contracted to a mill you’ll find yourself at the bottom of the list to get in. The old practice of jumping from one buyer to another for a quarter cent a pound is probably costing you any gains you made in the past.
Quality is paramount. With the oversupply mills will first choose the material that returns the greatest yield. Some municipalities have already experienced this at aluminum and newsprint mills. Abitibi-Bowater and Atlantic Packaging state they won’t accept ONP from single-stream MRFs unless quality improves drastically. Dual-stream quality is not necessarily better; however, the majority of tonnages are generated by single-stream operations. The Novelis aluminum plant in Oswego, New York previously indicated a preference for deposit-refund over curbside-collected material; they now refuse to take materials from several Ontario MRFs.
Materials by type
OCC: Continues to move slowly. Mills indicate two-week shutdowns over Christmas. MRF stockpiles will increase.
ONP: Some relief with Abitibi-Bowater back on line and a few orders trickling in from China; however, this is only for #8 grade. Lower grade #6 paper is no longer being sought by mills. MRFs producing this grade relied on overseas markets; now they’re stuck with material that’s homeless. Talk of landfilling runs into the fact that permitted space is limited. Boxboard is experiencing the same issues as ONP#6
Plastics: #1 PET buyers are offering to pick up loads at no charge, in stark contrast with the $400+ everyone received a few months ago. HDPE #2 has swung $700/tonne in six weeks. At least these materials are still moving and Coca Cola’s new bottle-to-bottle recycling facility for PET in the US may increase demand. The bad news is that the price of prime or virgin material is more affordable than ever (the reduced price of oil being the main factor). Tubs and lids or #3 thru #7 mixed plastic is a different story. Demand for these marginal materials is almost gone. They still have a few homes but soon buyers charge to take them. Mixed plastic only had an outlet overseas. This is gone. The only option for this grade may be landfill or incineration unless new processing technologies come online. This, however, will cost substantial money.
Plastic film is stagnant as well. The quality that traditionally comes from MRFs is poor at best. Most film processors are interested in plastic bags but it has to be clean. Return-to-vendor film seems to have a better chance of being recycled than MRF film.
Metal: Steel cans continue to move but at a fraction of the summer high. Local mills may go into prolonged shutdowns during the holidays, with no price increases for months. Aluminum cans remain difficult to move. Orders for January are few and far between. One of the problems here may be the credit crunch. The price has fallen and there’s still an appetite for the material — unfortunately financing is hampering this market. Looming on the horizon is the fact that Chinese mills are producing aluminum at record rates. The Chinese government had imposed a 15 per cent tariff on the export of aluminum to protect essentially the selling of its electricity. With an oversupply in the country, the Chinese government is being pressured to remove the tariff which will result in the world market being flooded with aluminum.
Glass: Clear and coloured glass continues to move with relative ease. Mixed broken glass (prevalent in most MRFs) is a different story. Fibreglass insulation is the main use for mixed broken glass and demand has dropped along with housing starts in the United States.
Difficulty moving recyclables has happened in the past but never to this degree. It’s obvious that some creative solutions will be required to get through this turmoil. See next page for analysis of problem materials at the MRF.
Phil Zigby is Marketing and Procurement Coordinator — Solid Waste Resources, for the City of Guelph, Ontario. Contact Phil firstname.lastname@example.org
“The average ‘basket of goods’ price for Ontario blue box materials was over $175/tonne in October and less than $40 in December.”