Falling scrap prices hurt recycling industry

It’s the best of times and the worst of times for Indianapolis recycling firms. On the one hand, public interest and participation
in recycling programs have never been stronger. On the other, the industry’s capacity to turn all that trash into treasure
rarely has been weaker.

Blame the recession, which caused prices for products such as scrap paper, metal, glass and plastic—all riding historic highs
as recently as late summer—to plummet 50 percent to 80 percent.

Not surprisingly, companies are finding it harder and harder to get paying customers for their recyclable goods—goods that
may, as a last resort, wind up dumped at the land
fill. The bottom line: While recycling is considered a "green" industry, it’s really ruled by the same sort of green that
moves the rest of the world—cash.

Or at this particular moment, the lack thereof.

"Recycling is built on the price of commodities," said Bruce Savage, vice president of communications for the Washington,
D.C.-based Institute of Scrap Recycling Industries. "It’s one of those situations where the market is the determining factor,
not the desire to do good."

There are two aspects to the business: The touchy-feely side, in which citizens are encouraged to recycle so they can help
the planet. It’s hard to argue with its usefulness in this regard. According to the institute,
making aluminum from recycled metal takes 95 percent less energy than processing it from ore; and recycling one ton of paper
saves 17 trees, 79 gallons of oil, and 7,000 gallons of water.

And then there’s the business side, which is decidedly less touchy-feely. Recycling is a large, gritty industry that employs
50,000 people domestically and recycles 150 million metric tons of scrap materials a year. That generates $71 billion in economic
activity, including nearly $22 billion in exports.

At the beginning of 2008, the industry was enjoying an explosion in prices for commodities of all kinds. A ton of waste cardboard
sold for a sky-high $120 to $130, while a ton of scrap metal might fetch as much as $500. Similar numbers could be had for
everything from discarded plastic to glass.

And then, this fall, the commodities market collapsed quicker than an aluminum can in an industrial compactor.

The wake-up call came earliest—and most jarringly—to the paper industry. Jeff Snyder, general manager for Indianapolis Recycled
Fiber, said that in late fall he got word that bales of paper recently exported to China were piling up on the docks. No one
was picking it up. Demand for Chinese goods had fallen, as had the need to make cardboard boxes to ship them in.

"It started the first of November," Snyder said. "Exports were shut off. So we’re now coming into our third month of really,
really bad paper pricing. The worst it’s been in 30 years. Nobody saw it coming."

Slack demand

Chinese industry normally soaks up about one-third of the United States’ scrap paper output. With that market effectively
gone, the extra supply created a buyer’s market for domestic mills.

Snyder’s operation (owned by the Norcross, Ga.-based Rock-Tenn Co.) still moves 3,000 tons of material each month through
its facility, just as it did during the good times. It just doesn’t bring in as much cash. Not nearly as much.

"Basically, we’re still recycling paper, as much as we ever did," Snyder said. "The bottom line is, I’m not paying for it
like I used to."

He’s also not collecting as much. In the old days, he used to pay people to haul off their paper. Now, they often pay him.
He also used to maintain drop-off bins around town where the public could leave scrap paper. No longer.

"It cost more to go get the bins than
what the paper was worth," he said.

Hoosiers unfamiliar with the vagaries of commodities pricing can be a little taken aback when their favorite drop-off spot
vanishes. This has brought a lot of angry calls to Carey Hamilton, executive director of the Indiana Recycling Coalition.

"If those collection sites go away, they take it personally," Hamilton said. "They’re doing the right thing, and now they
no longer have a place to take those materials. And they don’t understand why."

Hamilton tells them to persevere with their recycling efforts and, if they can’t find anything else to do with unwanted plastic
and glass, to stockpile them for a brighter day. A day she’s sure will come.

"It’s very much a numbers game," she said. "I think what’s going to happen is that, in the near term, it won’t be quite as
easy to recycle in Indianapolis. But I don’t think the hit on recyclable commodity prices says anything negative about the value of recycling. It says that it is very much a part of our economy, and
that there are tough times all around."

Times are so tough that the Indiana Department of Environmental Management recently stopped funding, at least through the
summer of 2010, about $3 million worth of grant and loan programs for various recycling and pollution-prevention programs.
Hamilton sees that as a bigger long-term problem than a blip in commodity prices.

"The Indiana Recycling Coalition thinks that those grant dollars do a lot of good for Indiana’s environment and our economy,"
she said. "They’re very intertwined. These are programs for investment in Indiana’s green infrastructure, and it leads to
green jobs.

"So we’re very concerned, both from an environmental perspective but also really from the green economy perspective. We think
that green jobs, particularly in the recycling area, have a lot of potential to be a bright light in our economy during these
rough times."

Van Dick, quality manager for the scrap metal handler OmniSource Corp., has seen the nature of his "green" business change
overnight. The company’s Indianapolis operations (three processing facilities and two retail purchasing centers) are running
at about half the capacity they did a year ago, when they moved more than 50,000 tons annually.

And at the same time prices for recyclable materials have dropped (from $300 to $400 a ton during the good old days to perhaps
$100 a ton now), they’ve also become harder to get.

The company takes in scrap from the
public (washers, old cars and such) and also scours the state for steel ripped out during bridge reconstruction work or building
demolitions, and for industrial scrap from factories. But when the economy went south, those last two sources became more

OmniSource (which has nearly 50 locations nationwide) is helped by the fact that it’s a subsidiary of the Fort Wayne-based
steel maker Steel Dynamics, which sucks up much of what it procures.

"We haven’t slowed down our buying at all, though the prices that we pay for the material are lower," Dick said. "If the commodity
market for a certain item has fallen, we follow right along with that. Then the person selling the material has the option
of holding onto it and waiting to see if the market comes back."

Waiting for rebound

Right now, there are plenty of firms—both producers of waste and those recycling it—that are holding onto their stocks in
order to sell in better times.

But this isn’t as easy as it sounds. Even commodities that can safely be dumped outside (glass, scrap metal) take up a lot
of valuable space. And fragile paper must be stored inside, adding even more cost to the equation. Eventually, it has to go
somewhere. If an interested buyer can’t be found, for some companies and municipalities that "somewhere" is the nearest dump.

"A lot of these scrap-recycling facilities are not that large, so they don’t have a lot of acreage to store these materials
on," said Savage of the Institute of Scrap Recycling Industries.

"Unfortunately, some of the materials are probably going to landfills now, because it’s cheaper to put them there than to
stockpile them. Our best word is that some of the cities are diverting these materials into landfills."

Locally, Indianapolis contracts most of its recycling efforts to Republic Waste Services of Indiana. The company handles the
curbside program in 10 of the city’s 11 solid waste districts (Waste Management, via a subcontractor, Ray’s
Trash Service, does the other) and also is responsible for processing materials from the city’s 33 drop-off bins.

While Republic is contractually required to find good homes for the stuff from the bins, it’s free to handle the curbside
materials as it sees fit—including dumping them at the landfill if it can’t find buyers.

Republic officials did not respond to repeated telephone queries as to whether they’ve had to take this step locally.

But even if market conditions do force them to turn some of their recyclable treasures back into trash, Karen Haley, director
of the Indianapolis Department of Public Works’ Office of Sustainability, isn’t too worried. She’s seen enough wild swings
in commodity prices to know that what goes down comes up again—and often pretty quickly.

For instance, the first three quarters of 2007 also were dismal, with the city (which gets a cut of profits from recyclables
when prices are good, but shoulders a share of its contractors’ pickup costs when they aren’t) netting only $2,905.

However, the fourth quarter saw prices skyrocket, leaving the city with approximately $76,000 in its pocket for the year.
Similarly, though final numbers are sure to show the fourth quarter of 2008 was awful, the first three quarters—when prices
were still high—brought in a stellar $200,097. Factor that in, and Haley thinks the city will still make around $125,000 for
the year.

Haley isn’t spooked by the market fluctuations, no matter how drastic. For now, some of the material may wind up in a landfill.
But when prices firm up, those ever-growing mountains of recycled products will be put to greener uses. Which is why the city’s
curbside and drop-off programs aren’t going anywhere.

"Participation [in recycling programs] keeps increasing," Haley said. "I don’t think people are not recycling because the
market’s gone down. Everyone wants to recycle and we’re not going to take that away. It’s the right thing to do."

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