Commodity prices have collapsed and recycling centers are following right behind.
“Times are tough,” said Brad Smith, an employee at Action Metal Inc. “We’ve been through tough times before, but these are the toughest.”
Because of the current economic situation, the demand for recyclable materials has gone down and the prices for raw material across the board have plummeted. Prices for scrap metal like copper and sheet iron are selling for less than half of what they were selling for earlier this year. Some have even called 2008 the worst year in recycling history.
“I’ve been doing this since I was a kid, and I’ve never seen it this bad,” Smith said.
Recycling has continuously gained popularity and exposure over the last few decades. Many municipalities, like New York City, have embraced environmental awareness and made recycling programs a mandatory part of keeping cities clean. This has increased the amount of recyclable material being sent to recycling centers.
“Recycling at NYU has gone up to 35 percent of the waste stream from 27 percent when I started a year ago,” said Sarah Boll, coordinator of the NYU recycling program.
Because of local recycling laws and public awareness and despite the economic situation, the amount of recyclable material being sent to recycling processors has not decreased with the market.
“People still recycle, they separate their trash, they do their diligent duty,” said Taylor Pyne, an employee at Rapid Processing, which handles paper recycling. “But people are not buying fiber products. There is no need for packaging material.”
While the main focus of recycling programs is to take care of the environment, there is also a business behind it. The business behind recycling is the processing of recyclable materials into something manufacturers can use in producing new products.
No matter how you recycle, whether you put your bottles on the curb to be picked up by the Department of Sanitation or your company hires a hauler to remove your recyclables, the materials all go back to a recycling processor.
“We can control the price we buy steel and other metal material, but municipal curbside recycling does not slow down,” said Tom Outerbridge of Sims Metal Management in New Jersey. “In the long run we won’t be able to sustain it.”
Outerbridge said his company should survive if the economic crisis ends relatively soon, but many smaller recycling companies will go out of business.
The recycling processor, like Action Metal Inc. or Sims Metal Management, readies the material to be bought by a manufacturer. The manufacturer buys the material at the market price, whatever that may be, and uses the material to make new products.
There are many factors that affect the market prices: the global demand for material, the economic conditions in major countries buying recyclable material, and the availability of cargo shipping containers. Residential recycled material also has to compete with commercial recycled material, which is usually much cleaner, and virgin material.
“When the demand is down, manufacturers get pickier about the material they buy,” Outerbridge said. “They pay more attention to quality.”
With no one buying raw material and the supply of recyclables not changing, paper, plastic, glass and metal are piling up at recycling processors all over. Many recyclers are worried they will have to pay to get rid of the material being stored. Many are not making enough money to keep from going under.
“We take in the municipal recycling at a loss because it is still cheaper than putting the material in a landfill,” Outerbridge said.
One company, Sprint Recycling in Manhattan, went out of business a few months ago. New York University had a contract with Sprint Recycling.
“It was absolutely due to the current economy,” said Boll, the coordinator of the NYU recycling program. “They were not able to get loans and their product prices went down.”
The current state of recycling centers has not started affecting large recyclers like NYU yet, though. “It’s not an ideal situation for our hauler but it doesn’t affect our recycling directly,” Boll said.
It could affect them in the long run. According to a report released by the Department of Sanitation in May 2004, without businesses interested in buying recyclable material, residential recycling programs would grind to a halt, no matter how well organized or popular the programs are.
New York City’s Department of Sanitation has padded itself from the economic issues facing the recycling industry by entering into long-term contracts with recycling contractors. “The City sacrifices some revenue during periods of market highs for greater stability when markets are very low and the contractor must bear greater financial risk,” said Matthew Lipani, assistant director of the Public Information Office at the Department of Sanitation.
The city receives lower revenues during good markets in order to ensure that the recycling centers continue to take in recyclables during bad market times like the current situation.
Roy Radner, a professor of economics, information systems, and environmental studies at NYU’s Stern Business School, said the current crunch on recycling markets is not something to worry about. “The things that make recycling profitable are going to continue. Getting rid of trash will get more expensive, and in the long run, things will turn around,” Radner said.
He said materials like plastic, which are not biodegradable and use expensive oil to produce, would need to be recycled. The question, Radner said, is how fast the market will come back up.
Right now, recycling processors are doing everything they can to stay in business. “We’ve changed our incoming prices. It doesn’t compensate fully, but it helps,” said Pyne of Rapid Processing.
“I’m getting a license to drive the truck, said Smith of Action Metal. “I have to fire the truck driver and start driving myself.”
