1. Downturn of the Recycling Markets: Impact on Municipal Programs
State of Texas Alliance for Recycling
Downturn of the Recycling Markets: Impact on Municipal Programs
August 2009
Introduction
Work with Dave Yanke and Scott Pasternak in our Solid Waste Practice, 3 years, focusing on recycling and diversion
Pleased to be here today to present on Dave’s behalf on recyclable materials markets and the impact on municipal recycling programs
Mention that this presentation was originally developed in January by Bob Craggs, National Director, provided an update of what commodity indices have done since then
Robert Craggs Vice President and National Director
Copyright © 2008 by R. W. Beck, Inc. All Rights Reserved.

2. Presentation Overview
Status of Recyclable Materials Markets
Implications for Local Government Programs
Recommended Strategies and Principles to Ensure Sustainable Programs
Texas-Focused Resources

3. Status of Recyclable Materials Markets

4. Status of Recyclable Materials Markets
What has been the extent of the downturn in the recycling market?
How does the recent decline in pricing compare to historical pricing for the various commodities?
Cyclical pricing (15 years)
2008 pricing volatility
2009 pricing trends
The first question we want to examine is what is the extent of the downturn in the commodities markets
Not only that, but how can we compare the downturn to historical pricing
Next slides, we are going to look graphs that describe at 1) pricing for recyclable commodities over the last 15 years 2) Compare that against what occurred in ) Take a look at how markets have rebounded, or not, in 2009

5. OCC (#11) Paper Stock Prices 1993-2007
The first material that we are going to take a look at is OCC. The blue line represents a 6 month average of the OBM yellowsheet price for OCC for the Chicago Region. The red line is the trend line.
OCC, even more than some of the other commodities, is an example of the extreme volatility of the commodities markets. However, over the roughly 15 year period, the price has trended upward.
Source: Official Board Markets (Chicago Region)

6. OCC (#11) Paper Stock Prices 2008
This graph shows the month by month pricing for the material in At the beginning of 2008, the indices were consistently above 100 per ton, up to 120 per ton. However, you can see that in the last 3 months of 2008 there was a severe decrease to around $20 per ton.
This is just index pricing. You may have heard, and we heard, of situations in which recyclers and local governments were unable to move material at all. But, for the purposes of this, we are looking at index pricing.
Source: Official Board Markets (Chicago Region)

7. OCC (#11) Paper Stock Prices
2008
What this graph has done is overlaid the historical pricing with the 2008 month by month pricing in order to illustrate that in the same year, OCC experienced both near historical highs and historical lows. That was part of what made this particular downturn so severe is the magnitude of the price change in such a short period of time, a 3 month period of time.
Source: Official Board Markets (Chicago Region)

8. OCC # Trend
This slide shows what pricing for OCC has done in the first 7 months of As with some of the other fibers we are going to look at, pricing has steadily rebounded to right around $55 to $60 per ton range.

9. ONP #8 Paper Stock Prices 1995-2007
The next few slides show a similar analysis for other recyclable commodities. This is ONP, old newspaper, and the overall upward trend that has occurred over the last 13 years.
Source: Official Board Markets (Chicago Region)

10. ONP #8 Paper Stock Prices 2008
This graph shows 2008 pricing and the particularly drastic price decrease in the last three months.
Source: Official Board Markets (Chicago Region)

11. ONP #8 Paper Stock Prices
2008
Again, we see historic highs and near historic lows of the commodity within the same year, really within 3 months.
Source: Official Board Markets (Chicago Region)

12. ONP (#8) Paper Stock Prices 2009 Trend
As with OCC, ONP has slowly and steadily begun to rebound in the first half of 2009

13. Mixed Paper (#1) Paper Stock Prices 1993-2007
Mixed paper tells the same story as OCC and ONP – 15 year upward trend in pricing, with much volatility
Source: Official Board Markets (Chicago Region)

14. Mixed Paper (#1) Paper Stock Prices 2008
Severe price decrease in the last three months of 2008
Source: Official Board Markets (Chicago Region)

15. Mixed Paper (#1) Paper Stock Prices
2008
Comparison showing 15 year highs and lows in the same year.
Source: Official Board Markets (Chicago Region)

16. Mixed Paper (#1) Paper Stock Prices 2009 Trend
Also for mixed paper a slow and steady rebound for 2009, but still definitely not pricing at the level that was seen in 2008.

17. Aluminum Cans
Source: Waste News (Midwest)

18. Aluminum Cans 2008
Source: Waste News (Midwest)

19. Aluminum Cans
2008
Source: Waste News (Midwest)

20. Aluminum Cans 2009 Trend

21. Steel Cans
Source: Waste News (Midwest)

22. Steel Cans 2008
Source: Waste News (Midwest)

23. Steel Cans
2008
Source: Waste News (Midwest)

24. Steel Cans 2009 Trend

25. PET #
Source: Waste News (Midwest)

26. PET #1 2008
Source: Waste News (Midwest)

27. PET #1
2008
Source: Waste News (Midwest)

28. PET # Trend

29. Glass (Flint)
Source: Waste News (Midwest)

30. Glass (Flint) 2008
Source: Waste News (Midwest)

31. Glass (Flint)
2008
Source: Waste News (Midwest)

32. Glass (Flint) 2009 Trend

33. Market Pricing Summary Conclusions
2008 market pricing reflects a severe decline for all the traditional commodities (OCC, ONP, metals, plastics, and glass containers).
Recyclable materials pricing in 2008 for several commodities (OCC, ONP, mixed paper, and PET) reflects a dramatic change from historical highs to historical lows.
Cyclical nature of pricing in the past reflects a likely upturn in pricing in the future.

34. Where Are Prices Trending in 2009?
Paper
OCC – slowly rebounding
ONP – slowly rebounding
Mixed paper – slowly rebounding
Containers
Glass – no change
Metal cans – little change
Aluminum cans – little change
Plastics – visibly rebounding

35. Implications for Recycling Industry and Local Government Programs

36. Implications for Industry and Programs
Methodology: Gather general feedback from local governments in various U.S. regions.

37. Local Government Feedback
“Reduced revenues with revenue sharing arrangement”
Applies to multiple types of contract arrangements (i.e. processing costs, floor pricing, sliding scale)
“Request from private service provider to renegotiate the agreement”
Service agreement has no processing fees and a 50/50 revenue share up to a defined threshold of revenue
Temporary agreement reached

38. Local Government Feedback
“Termination of service agreement to process and market recyclables”
Highly visible processor of wastepaper terminated an agreement to accept processed fiber from a regional waste authority because of the present lack of markets
“Temporary suspension of accepting specific material types”
Rural county with drop-off program has temporarily excluded plastics and glass from their program because of depressed markets

39. Local Government Feedback
“Receiving more recyclable materials from local haulers”
Public MRF becoming market of last resort because some commercial processors in region no longer accepting plastics from haulers on spot market
“Recycling program abruptly transitioned from a net revenue generator to a net expense”
Revenues received from private MRF operator under revenue sharing agreement no longer exceed materials processing costs

40. Local Government Feedback
“Our processor has chosen to warehouse materials indefinitely and we are concerned about health and safety issues”
Most recovered materials in California are exported to end users, but lack of buyers has resulted in materials being stored in warehouses and in ports in U.S. and China.
“The lack of recovery value results in recyclable materials being disposed at a landfill and/or WTE”
None reported.

41. Recommended Strategies and Principles to Ensure Sustainable Programs

42. Recommended Strategies to Ensure Sustainable Programs
Emphasize the importance of maintaining recycling through the economic downturn to various stakeholders
Foster development of local end-use markets for recycled materials to move away from dependence on export markets
Promote increase in recycled content requirements
Diversify recycling programs by establish or expand organic diversion

43. Recommended Principles in Today’s Marketplace
Structure contracts to share market risk
Maintain the course because the markets will improve
Focus on the environmental benefits of recycling and materials diversion

44. Texas-Focused Resources

45. NCTCOG Recycling Contract Negotiation Guidebook
Comprehensive guide for local governments and private companies in the region
Topics include:
Procurement process description
Processing and collection contract provisions
Commodity price discussion
Detailed financial explanations
Sample contract language
Case studies from cities within region and outside of region

46. Contracting Guidebook Schedule
Draft Guidebook submitted to NCTCOG
Final Guidebook by Summer 2009
Workshop on August 14, 2009

47. Other Regional Studies Can be Leveraged Across Texas
H-GAC
Recycling 101 and 102 workshops
Transfer Station Best Management Practices Workshop
Organic Waste Best Management Practices Workshop
Waste Audit Workshop and Workbook
NCTCOG
C&D Waste Minimization Strategies Study
C&D MRF Feasibility Study
Regional Recycling Rate Benchmarking Study
Recycling Contract Negotiation Guidebook (current)
Recycling Ordinances and Building Design Guidelines (current)
CAPCOG
Market Analysis of Recovered Materials

48. Questions? Robert Craggs, Vice President Scott Pasternak
(651)
Scott Pasternak
(512)