MARKETS TRENDS IN RECYCLING Southern California Waste Management Forum Thursday, May 14 th, 2009 Presented by Michael Timpane, Senior Program Manager Waste Management, Inc. Recycling Services
31 Single Stream Facilities SINCE 2002 4.6 Million tons of Capacity Capacity will grow to 8 Million tons by 2010 and 10 Million by 2012
New in 2008 Germantown, Wisc. & Avon, Ma.
MARKET TRENDS- INCOMING MATERIAL ISSUE 1 GROWING CONTAMINATION IN CURBSIDE RECYCLABLES= YIELD LOSS Population turnover Burden shifted to MRF or hauler to deliver continuing education on recycling due to budget & competition More materials mean more confusion on what is recyclable, i.e. film, composite materials, etc. No relationship between contamination & residue in contract. Blame game between collection company and MRF
MARKET TRENDS ISSUE 2: INCREASING RATE OF CHANGE IN THE RECYCLABLE MATERIAL STREAM Less ONP. Troubled Newspaper: 260,000 articles in the last year on the death of the newsprint media Phone books 1/3 size vs. 2004 Single Serve: More Mixed Fibers and Flex Containers = > sorting cost Personal, lighter packaging consumption increased until late last year (PET and HDPE continue to capture share from rigid containers (glass bottles and metal cans, Costco) Tons from same source contracts down 9% in 2008 as mix changed before economic slide. Glass % in BV increases as news volume goes down. Problem acute in unregulated markets.
Changing Blended Value of Single Stream in North America
MARKET TRENDS INCOMING MATERIAL: ISSUE 3 RECYCLING INFRASTRUCTURE IS MORE COMPLEX Capital burden makes high tech processing facilities volume sensitive. Dependency on hub and spoke to fill facilities cut margins Cost of T&D of Residue and Mixed Glass marketing have a > $10/T impact to bottom line of processing 3 Years of greater than average markets- i.e. BV of Single Stream above $90 on the west coast before CRV.
MARKET TRENDS INCOMING MATERIAL: ISSUE 3 RECYCLING INFRASTRUCTURE IS MORE COMPLEX Capital burden makes high tech processing facilities volume sensitive. Dependency on hub and spoke to fill facilities cut margins Cost of T&D of Residue and Mixed Glass marketing have a > $10/T impact to bottom line of processing 3 Years of greater than average markets- i.e. BV of Single Stream above $90 on the west coast before CRV.
100% 90% 80% 70% 60% 50% Incoming Material Stream Market Trends: Issue # 4 Diversion Options Proliferate through Regs & Mkt Optimism SEGMENTATION CURVE FOR PROCESSING ecycling $.12/# $160 $140 $120 $100 $80 40% 30% 20% 10% Composting Dual Stream Source Separated C&D Single Stream $60 $40 $20 0% 1980 2003 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 $-
MOORE STUDY- COST AVERAGE RECYCLING FACILITY GOE COST PUBLIC PRIVATE $ Per Ton 83.56 $49.76
SCOPE OF STUDY Gross Operating Expenses was the variable used for cost Includes Sorting labor, maintenance, variable rolling stock, utilities,sorting line, depreciation and baler expense. No SG&A ($2-5) No Disposal (Add $1 Min. for each % Residue T&D)
SCOPE OF STUDY PARTICIPATING COMPANIES Abitibi-Bow ater Allan Company Allied/BFI Services Athens BLT Burrtec Colgate CR&R EDCO FCR Groot Hudson Baylor IESI Waste Services Metro-W aste Mid-America Recycling M iller W aste NORCAL Republic Services Resource Management Rumpke Smurfit Stone Recycling Sonoco SP Recycling Tidewater Fiber Veolia Services W M R e c y c le A m e ric a
SCOPE OF STUDY Albuquerque PARTICIPATING MUNICIPALITIES Santa Cruz Glendale, AZ Oneida, NY State of Rhode Island Somerset, NJ Austin, Texas Lycoming, PA Centre County, PA Horry County, So. Carolina Oakland, MI Note 1: Had to be operating, meet comparative criteria and with data available. Note 2: Had to be willing to share numbers.
PART 2- TRENDS AND COMMENTS: MARKETS FOR MATERIALS
FIBER: WESTERN U.S. - GENERAL MARKET TRENDS Export is saving the day but containers are getting scarce. China is consuming but is also building inventory- bargain or bubble? Domestic Paper industry is down 25% year over year Domestic Demand slow to improve with end-use fiber mills taking extended downtime due to lack of finished-goods orders. Export is supplementing movement from locales where domestic shipments are typical Credit situation is very tough- collection is tougher Mills are now able to demand much better quality ONP
FIBER: SOUTHERN CALIFORNIA- CURRENT EXPORT OUTLOOK
SCRAP VALUES AND THE CURRENT MARKET $90 AVG OVER 5 YEARS Deployment of Single Stream: GOE + Residue
Export ONP
Domestic ONP
ONP and the Future Quite apart from newsprint's traditional role as the seafood wrapper of choice (TIME magazine).if traditional print media isn't sleeping with the fishes yet, it is well on its way. Bruce Watson, Daily Finance
Export OCC
Domestic OCC
Growth in U.S. Recovered Paper Exports to China, 1991-2006 2008 11.3 Million 11,000,000 10,000,000 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Short Tons Source: U.S. Department of Commerce; Paper Stock Report Year 23
What WM is doing Adverse to storage. We did not store during 08 credit crunch unless very short term. Customer does not want to pay for storage. Cost of rent and transload too much of a risk Waste Recycling Dilemma: Material keeps coming Continue to ship both to domestic sources and export from all market types Dependency in a volatile market to one destination or consumer is not good health Position Recycling as a processing service rather than a revenue generator long-term
OTHER MATERIALS MARKET TRENDS AND OUTLOOK Beverage container industry is flat, construction is down, car industry is on life support. Export is key to balanced movement. 3-7 Plastic barrier to market seems to be below $50 per ton. This is where inventory builds up. Some areas have discontinued material in the short term. Quality demands increasing with new players like Nestle and Coca Cola Non-ferrous metals (aluminum and copper) dropped roughly 50% and have come back 30% since December Ferrous Metals (steel and tin) dropped roughly 75% and have stabilized at a lower level, 1/3 of the 2008 high
WMRA AND THE CURRENT MARKET: OPEC BASKET PRICE AND THE REVERSE J CURVE: Energy and Oil
COLORED HDPE Sept 08 May 09
UBC 1979 San Diego