Economic Crunch Hits Market for Recyclable Materials
RALEIGH, N.C. - Sonoco Recycling, which processes bottles, cans, jars and papers collected from Raleigh homes, sent a truckload of metal cans two weeks ago to a smelting plant in Pennsylvania.
As recently as August, the load would have been worth about $7,500. Not now, though. Instead of receiving payment, Sonoco had to pay the shipping to get the plant to accept the cans.
"It cost us $240 in freight, and I was giving it away," said Jim Foster, plant manager of Sonoco's materials recovery facility in Southeast Raleigh. "There is no way to win right now."
People are still putting their bins of recyclables out on curbs. But the recyclable materials market, which was booming only a few months ago, has dropped sharply, along with the worldwide economy, creating a backlog of materials at processing plants.
Reduced demand for used paper, plastic bottles, glass, and metal cans has caused prices to plummet, surprising even those who have followed the ups and downs of the recycling market.
"We have seen drastic changes in market values, faster than I've seen since I've been in industry back to the 1980s," said Foster, who said the value of recyclables was about 70 percent less on average than two months ago. "A lot of it, you can't move right now."
Foster said the recycling plant is still sorting and bundling about 400 tons of paper per day, but it's more difficult to sell.
When the economy slows, consumers cut back on purchases, and in turn manufacturers ship fewer products. The demand for used corrugated cardboard, for example, drops. Corrugated cardboard, which is used to make packaging, brings about $25 per ton, one-fifth of the $125 a ton it brought in April.
Sonoco, one of the largest recyclers in North America, uses about half of the 3 million tons of corrugated and other paper it recovers at its own paper mills. It sells the rest to other paper producers. The prices are so low now, Sonoco has simply started warehousing some material to sell when prices go back up, Foster said.
The city of Raleigh has a five-year contract with Sonoco that requires the processor to pay the city $26 per ton for curbside recyclables, plus bonuses if the materials sell above certain prices.
The payment doesn't cover the city's full cost of picking up recyclables from curbsides and delivering them to Sonoco, but it helps offset the program's cost and avoids the disposal cost of taking the materials to the Wake County landfill. Even during a downturn, the contract guarantees the city of Raleigh a minimum price.
Two years ago, the city collected about $260,000 in bonuses from Sonoco, but the bonuses have shriveled. The last one, received in July, was $3,100.
"We'll be kissing that bonus goodbye," said Linda Leighton, waste reduction specialist with the city of Raleigh.
PRICES LIKE 'YO-YO'
At TFC Recycling in Durham, which contracts with the city and county of Durham to take recyclables, bales of cardboard and mixed paper are stacked 20 feet high outside the processing plant and covered by a blue tarp.
Waylon Lynch, general manager of TFC Recycling, said the company had been exporting loads of mixed paper and cardboard to China and started seeing significant declines about the time of the Summer Olympics.
"When it really hit us hard was the first of November," said Lynch, who was unhappy to have the backlog of material stacked outside. "We moved very little material in November."
"We're not in the warehouse business, so we don't want to warehouse the material," Lynch said.
Lynch said the company, which has its headquarters in Chesapeake, Va., anticipated the market would remain flat through early 2009, then prices would start to recover.
"When the markets are good and the margins are excellent, you have a lot of people who think they want to be in the recycling business," Lynch said. "I've been here for six years, and the prices are like a yo-yo. You've got to be in it for the long term."
SOUTHEAST HURTING LESS
Scott Mouw, the state's recycling coordinator, said recycling plants in the Southeast, while affected by the worldwide slowdown, are doing better than those elsewhere in the country because there are more manufacturers in the region that use their recycled material.
"We have a lot of paper mills in the Southeast that recycle paper," Mouw said. "Some of the largest aluminum plants that use recycled aluminum are here. We're not quite as dependent on foreign markets."
But the number of curbside programs across North Carolina has declined from 260 to 220 in the past decade, even though the overall tonnage has increased because of expansion of programs in Raleigh, Charlotte and other cities. The decline in programs could accelerate in the coming year if small towns come under pressure to trim their budgets.
"Recycling tends to be one of those things that tends to be looked at as a luxury," Mouw said. "I'm sure this year will see some small towns drop curbside because they have to drop something. It tends to happen in rural areas of the state."