Garbage haulers feel squeeze: Margins, markets for recycled materials shrink
DULUTH — Dan Hartel, owner of Hartel’s Disposal, has seen plenty of market fluctuation in his time, but nothing quite like the recent slump in demand for reclaimed materials.
“Pricing is at an all-time historic low,” he said.
“We have a tremendous amount of supply in the country and not enough demand,” Hartel said.
For years, China imported vast quantities of recycled materials from the U.S., but recently the Chinese government has begun to place stricter controls on the flow.
In September alone, Chinese imports of scrap paper and metal dropped by a respective 23 and 44 percent, according to Recycling Today.
Local garbage haulers have felt the squeeze.
“They estimate that 20 to 30 percent of our recycling was being exported, and that’s kind of been shut off by the Chinese. So, now all that has to be absorbed domestically, and we don’t have enough demand for it,” Hartel said.
Even recycled materials that have traditionally commanded higher prices are now selling for depressed values.
China has placed a 50 percent tariff on imports of scrap aluminum, according to the Institute of Scrap Recycling Industries.
Meanwhile, U.S. demand for recycled aluminum cans has fallen off, too, with domestic mills drawn to produce greater quantities of higher-margin flat-rolled aluminum for automotive and industrial uses. For that type of product, mills typically opt not to use recycled aluminum.
As a result, the domestic price of used aluminum cans has tumbled by about 30 percent.
Many in the recycling industry see little indication prices will rebound any time soon, including Julie Ketchum, a spokeswoman for Waste Management Minnesota, who noted that material-recovery facilities are adjusting to what she called “the new normal.”
Wayne Gjerde, a recycling markets coordinator for the Minnesota Pollution Control Agency, agreed that the Chinese market for U.S. recyclable materials is unlikely to come back.
That’s why it’s incumbent on states to help develop new markets for the materials closer to home, said Mark Rust, sustainable-materials management unit supervisor for the MPCA.
“We need to invest and reinvest in end markets,” he said.
Toward that end, he noted Minnesota Gov. Tim Walz has included $800,000 in his proposed budget for market development.
However, there’s no quick fix, Ketchum said.
“We do need new end markets to be developed, but the horizon for something like that can be five years off. So, we’re sitting here with a need to get rid of these materials. We have end markets, but in some cases we’re paying to get rid of some of these commodities,” she said.
Some communities in other parts of the country have suspended recycling programs, citing cost concerns, instead diverting recyclable materials to landfills or incinerators.
But that has not been an option in Minnesota or Wisconsin, which both mandate recycling.
Instead, Hartel said he has had little choice but to pass increased costs along to customers in the form of higher rates.
Ketchum agreed, saying: “Over time, I think you’re going to see the cost of recycling going up for residents and businesses in order to make recycling work economically. It’s just going to have to happen.”
Lynn Morgan with Waste Management Wisconsin, said: “The game has changed. The markets that are available are fewer, and they’re far more stringent about what they’re willing to accept in the materials that are delivered to their door.”
She said much of Waste Management’s efforts have focused on educating customers to minimize the contamination of recycled materials. Morgan stressed the importance of making sure only appropriate materials are placed in recycling bins. She also warned against items that can get tangled in processing equipment, such as plastic bags which typically force Waste Management’s material recovery facility processing line to be shut down three times a shift, so that entangled plastic can be cut away from machinery.
Hartel said the recycling industry is at a crossroads.
“Like anything, it will evolve. ... Technology is out there and being worked on to make MRFs better at what they do,” he said.
However, he noted that new automated technology likely will be expensive.
“You need to keep investing, and that’s the smaller MRFs that will go by the wayside, because we can’t afford million-dollar optical sorters. You’ve got to have the volume to justify that,” Hartel said.
Recent market conditions have been trying, but Hartel said they’ve generated some useful discussion.
“We’re finally opening up a dialog in this country that’s needed to happen for a while about the economics of recycling. We’re still at the infancy of that. But when you look at what’s going on in recycling from an economic perspective, it’s the poorest investment anybody could make,” he said.
“But it is what the states require. It is a mandate, so we have to do it,” Hartel said.