On Wednesday March 25, 2009 the Municipal Waste Integration network (MWIN) held a seminar entitled “How Have You Weathered the Storm with Your Recyclables in 2009?” at the offices of Durham Region, Ontario. Moderator Angelos Bacopoulos welcomed a group of panelists and people participating via conference call. Following introductions, each panelist was asked to give a short overview about their situation in the current market, followed by discussion.
Durham Region’s Craig Bartlett led with the observation that the downturn in overall economy and depressed market prices for recycled commodities has significantly decreased high-value material scavenging in Durham Region. Has also noted that overall waste generation has dropped about three per cent. Six months ago, where white goods/appliances collection contractors were used to actually collecting only a tonne of material (compared to 30 tonnes set out for collection) due to scavenging, they’re now getting 30 tonnes of material again.
The Ontario Ministry of Environment’s Doris Dumais said that since the last MWIN recycling markets seminar in the fall, the ministry has put together Fact Sheets about temporary storage of recyclables and ramped up internal education on how to handle storage issues. (This was in response to concern in the waste industry that ministry inspectors would be intolerant of recyclables stored for longer periods of time due to lack of buyers.) The ministry, she noted, hasn’t recalled any certificates of approval (C ofAs) related to storage purposes and has in fact approved one recycling plant C of A amendment to increase storage capacity. Overall, she observed that it looks like the industry is managing material flow well.
“Municipalities have expressed concern about how the downturn in recycling revenues will impact blue box funding,” stated Durham Region’s Peter Veiga. “For clarification to participants from outside Ontario, in Ontario, industry — through Stewardship Ontario — pays 50 per cent of municipal net blue box costs.”
Data collected through the annual WDO datacall on revenues for each material, as well as gross costs, are entered into the Blue Box Funding Formula to calculate net program costs and the share that industry will pay in any given year. Veiga noted that the funding model has a built-in safety feature to protect against sharp up or down turns in material revenues, since it employs a 3-year average revenue in calculating net program costs. The current-year basket of goods price is determined and average with that of the previous two years. The three year average basket of goods price is then multiplied by the current year (reported tonnes marketed) to arrive at current-year gross revenue for funding purposes. (In the end, current year net cost equals current year gross minus three-year average gross revenue.)
The 2009 revenues are set at $60,179,095 which is about 16 per cent higher than 2008 funding, Veiga said, adding that municipalities will do well if they budgeted no change in 2009 from their 2008 WDO revenue actuals.
“The 2010 funding will be determined in mid-2009 and will be based on 2006, 2007, and 2008 revenues,” Veiga said. “It will capture the revenue drop that occurred in 2008 Q4.”
Stewardship Ontario has also been helping develop recycling material markets. The organization focused on the glass market in the first two years of its mandate. About $2.8 million was paid by the glass stewards to develop new glass processing capacity. Ontario now has well over 100,000 tonnes per year (tpy) of glass processing capacity. For 2008, $2.4 million was raised to work toward increased plastics recovery. An RFP was issued December 5, 2008 that closed on March 5, 2009. Preferred respondents will be identified in early April with negotiations commencing mid-April.
Donna Roberts of Atlantic Packaging (a major buyer of recycled fibre) stated that Feb- ruary and March saw significant downtime at its mills due to low orders.
“Hopefully the worst is over,” she said.
Near-future scheduling has downtime scaled back to one to two days at a time compared to week-long shutdowns recently experienced. Atlantic Packaging has secured new ONP clients that will make up for reduced demand from existing ONP customers (due to lower newspaper circulation). Reduced newspaper circulation (and thinner newspapers), some participants noted, is part of the global economic downturn but also part of a long-term trend as more and more people (especially the young) gather their news and information from other media such as the Internet.
ONP pricing has stabilized due to relatively good exports, Roberts said, although prices are low. Residential mixed paper has no domestic market, only export (and that is drying up). The overall paper mix has changed recently from 80 per cent ONP to just 50 per cent. There could be a shortage of ONP if the trend continues.
The Ontario Waste Management Association’s (OWMA) Rob Cook agreed that material is moving but at lower prices. Municipalities and contractors have been able to work through the issues to avoid significant storage and to avoid disposal options. In the IC&I sector, a shift has occurred wherein contractors, who formerly provided rebates for OCC, now charging collection fees. This has resulted in a drop in the supply of this material.
Al Metauro heads up Metro Waste Paper Recovery, which operates plants across North America. He was able to provide a useful contractor’s perspective on the difficult recycling market.
“Many domestic paper mills are still experiencing downtime,” Metauro said, “but exports have increased to take up surplus materials.
“However, increased demand has not resulted in increased pricing, which has stabilized at a low level.”
Metauro noted that material generation is low from both commercial and municipal sources, which is particularly important since March and April (along with the fall months) are busy times of the year.
“What’s going to happen come summer?” Metauro asked, adding that he doubts there will be any upward movement in material prices in the near future.
Volume and prices are down so much that in many cases it costs more to process material than can be recovered in sales to end-markets. At the same time, the demand for quality has gone up, Metauro said. This has put extreme pressure on the operators of single-stream recycling programs.
“Current revenues don’t justify the extra work required to improve sorting to meet increasing quality specs because revenues are less than operating costs,” he said. He agreed with one participant’s observation that potential future government “buy recycled” could be helpful, but only to a limited extent.
“We don’t have a problem with fine papers,” Metauro said. “The paper packaging market is where we have trouble right now.”
Metauro offered that manufacturers need to either increase their use of post-consumer recycled content in packaging materials or reduce the amount of packaging they produce. He added that a risk from green procurement programs is that if they increase the demand for fine paper, this would eat into the supply for tissue and hurt the tissue industry.
Metauro said he’s optimistic that an upturn is coming, but the big question remains “when?” His comments led Donna Roberts to add that ONP can only be stored for about three months before paper brightness and “run-ability” are affected.
Karl Allen of Northumberland County operates a single-stream recycling program that services 200,000 residents. Northumberland completed upgrades to its MRF in October 2008 and is trying hard to meet market specs, and is having difficulty moving material.
Allen said that the county is getting $62/ tonne for its “basket of goods.” He offered the following price breakdown: $57/t for fibre, $51/t for OCC, $30-$40/t for #6 mixed fibres, $0.08USD/lb for PET, $
0.125USD/lb for HDPE, and $0-$10/t for plastic film. He said that the local glass market has shut down and the county is shipping glass to US at a cost of $64/t. The county doesn’t collect polystyrene or polypropylene, but does make a mixed plastic bale which last December went for $15/t but is now going for zero.
(It’s worth remembering that if a bale of recycled material is worth nothing or even has a negative value, if that is less than landfill tip fees this can still make recycling economically advantageous over disposal. — ed.)
The experience is similar outside Ontario. Participants outside the province included Will Burrows (Coast Waste Management Association in BC) and Mark Fox (Lafleche Environmental in Quebec). Both stated that materials have started moving again but prices are down.
Fox explained that Quebec’s environment ministry has announced initiatives to help recycling markets and has agreed to provide loan guarantees to help facilities increase material quality. However, Fox stated, such agreements require facilities to get bank approvals, so the ministry’s program in fact ends up guaranteeing loans for large facilities that don’t need the loans, and not the small operators who do.
Quebec is introducing legislation to allow municipalities to amend and extend existing contracts and is offering $6 million to subsidize recycling plant renovations (which everyone agreed was too little since a single plant renovation can cost more than that amount). The government is setting up a committee to study the recycling markets issue and a possible subsidy for recycling workers’ salaries (although calls to the ministry about that have not been returned). Quebec is also talking about green procurement policies to boost recycling and the establishment of a recycling rate stabilization reserve fund.
Metro Waste Paper Recovery’s Gary Sextant was asked about the Chinese market and said that the Chinese economy is facing the same challenges as everyone else and has responded by protecting its domestic market.
“This policy impacts our exports since most are to China,” Sextant said. If Chinese domestic demand falls, China reduces its import of material. Growth in China is down to about 6 or 6.5 per cent, whereas 8 per cent is needed to sustain healthy exports to China. He doesn’t foresee significant price increases from China or India, and mentioned that China could pull out of the North American recycling market if prices increase significantly.
Other discussions included whether any increase in oil prices would help or hinder plastics recycling markets. Al Metauro thought that it could be a wash, since the value of plastic would increase, but so would the transportation and operating costs. He sees demand and pricing just “floating” over the next year, and noted that end markets are having a hard time paying their bills. (He said he wouldn’t be surprised to see one or two recycling companies go bankrupt this year. He told Craig Bartlett that single-stream MRFs are finding it harder to move material than the higher quality materials coming out of two-stream MRFs.)
Jaan Koel (TetraPak) asked Karl Allen about what’s happening with polycoat containers. Allen replied that Northumberland does not produce much polycoat, but the last load shipped in November 2009 through broker REMM for $40/t. He said that broker Paper Tigers is no longer accepting polycoat. Gary Sextant added that Paper Tigers markets to a mill in Michigan which is bankrupt, and that there’s no domestic market for polycoat, only Korea (which is very specific about quality and pays $10-$20/t.)
Another discussion related to whether or not increase landfill tip fees or disposal taxes could help boost recycling markets. Mark Fox noted that most Quebec landfills are privately owned and have abundant space. There’s a provincial landfill tax of $10/t that municipalities pay as well as IC&I users. The portion paid by IC&I users is given back to municipalities to help them pay for their recycling programs (but there’s no follow-up to ensure this is happening). Quebec is looking at increasing the tax to $20/t. Brian Carrow added that BC is looking at increasing its landfill tax to $15/t but has concerns this wouldn’t increase waste diversion, just waste exports. (Metro Vancouver is considering exporting waste to Washington State.)
Angelos Bacopoulos reminded everyone that Toronto’s raising of its Keele Valley tip fees in the 1990s from $30/t to $150/t drove waste out of the province. IC&I waste coming into the landfill dropped from 1.3 million tonnes per year to just 100,000 tonnes.
Craig Bartlett said that Ontario’s recycling infrastructure currently handles about one million tonnes per year of material. What impact, he asked, would mandating IC&I recycling have on Ontario recycling infrastructure and material pricing?
Rob Cooke replied that IC&I recycling is a high priority for the Ontario government and that fast implementation would stress existing infrastructure and flood the market with material, further eroding material prices.
“However,” he said, “good public policy will look at a long-term phased approach with targeted industry sectors to allow infrastructure and markets time to expand and adjust to change.” The OWMA has a proposal before the environment ministry for a $10/t fee at all Ontario transfer stations and landfills and agrees that to much of an increased tip fee could increase waste export. (See article, page 46.) His association members are seeing increased export to New York with the pending closure of the Michigan border to Ontario municipal waste.
Guy Crittenden is editor of this magazine. Thanks to Craig Bartlett for sharing notes from this seminar. Contact Guy firstname.lastname@example.orgFor more information, visitwww.mwin.org