Kristin Smith & Brian Taylor

The authors can be contacted via e-mail at btaylor@gie.net and at ksmith@gie.net.

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Market conditions affecting the trade of secondary commodities were addressed at several conferences held around the globe this spring.

July 8, 2013

BIR World Recycling Convention

Those involved in the recycling, brokering and shipping of secondary materials have had their share of issues to contend with in 2013, including price volatility and stricter material inspections at Chinese ports. Declining material generation also is having an impact near and far. Events in the United States and Asia brought many of these concerns to the surface this spring.

The major waste and recycling companies in North America take different approaches to managing their businesses. Where they see opportunities and what areas they are investing in vary from company to company. During the inaugural Waste Industry Investor Summit held May 20 during WasteExpo in New Orleans, several waste and recycling companies including Waste Management and Casella Waste Systems were on the roster discussing their financials.

Jim Fish, CFO of Waste Management (WM), Houston, talked about the decline in tonnage going to the landfill over the last few years. He said the company had to change its approach to business because of that. WM has taken a tough stance on capital spending and has cut back on landfill and landfill-gas-to-energy investments, said Fish. The company also has made efforts to improve its hauling efficiency by looking at routing, he added.

Fish also addressed China’s Operation Green Fence, which has brought increased scrutiny to the quality of secondary commodities entering that country’s ports. While the inspections have had a major impact on plastics, Fish contends the initiative has had a bigger effect on WM’s fiber exports.

“It absolutely has impacted us much more on the fiber side than the plastics side,” said Fish. “It is causing our cost structure to go up because there is a quality improvement.”

Fish predicted what he called “a short-term blip,” where the increased costs will cause WM to take a hit, but that, over the long-term, the company will be able to get higher prices for material of better quality.

Another company rethinking its landfill model is Casella Waste Systems, Rutland, Va. Company Chairman and CEO John Casella talked about the progress Casella Waste Systems has made in gaining market share in the eastern region, where it has assets in Vermont, Massachusetts, Maine and New Hampshire.

“We’ve done some interesting things strategically to move our assets from a 15 percent margin to a 22 percent margin,” Casella said.

“Our challenge has been the western region, where we have a tremendous amount of landfill capacity,” he added.

Casella said the company’s stragety is to “create the value that we think is inherent in the disposal assets we have in the western region.”

Casella CFO Ned Coletta also talked about opportunities that existed in the Northeast to keep waste local instead of hauling it an estimated 3 million to 4 million tons per year to Ohio by rail. “That’s where we want to compete,” he said.
 


Paper Recycling Conference

On The Fence
WasteExpo wasn’t the only conference where China’s Operation Green Fence received attention. It was uppermost on the list of topics for recyclers who spoke at the Plastics Committee meeting at the Bureau of International Recycling (BIR) 2013 World Recycling Convention in Shanghai. Participants from 57 countries made up the 1,200 attendees at the convention.

“A butterfly in China has created a tornado in Europe,” commented Plastics Committee Chairman Surendra Borad of Gemini Corp., Antwerp, Belgium.

Fellow committee member Gregory Cardot of Veolia Proprete of France told attendees that customs officers in China are “only applying a Chinese regulation of 2010.” Cardot added that his company and other “main actors” in plastics recycling do not regard Operation Green Fence as a temporary phase. “This rule must continue and must be identical to all the players [because recyclers] will have to structure themselves to develop their quality and develop the plastics recycling processes of tomorrow.”

Guest speaker Steve Wong of Hong Kong-based Fukutomi Co. Ltd. said Operation Green Fence was designed to “stop some of the [companies] in China that don’t have the ability to recycle” hazardous or mixed materials from accepting contaminated loads.

Wong said the prohibited materials customs inspectors are looking for include:

  • Bulk bags and sacks, usually woven or made of polypropylene;
  • Mixed rigid postconsumer plastics;
  • LDPE films, such as ag foils;
  • Mixed PET and HDPE bottles and jugs;
  • Metalized DVD and CD scrap, unless it is going directly to approved facilities near Guangzhou; and
  • Usorted electronic scrap with plastic and metals mixed together.

In some cases, Wong said the prohibition of some of these materials “is a shame, because it is valuable material.”

Another end result is likely to be increased sorting and processing investment and effort in Europe and North America. “In order to survive, overseas suppliers have started recycling and processing their postconsumer [plastics] into recycled raw materials locally.”

Guest speaker Cai Renwu of Guangzhou GISE-MBA Polymers said Chinese media portrayals of mixed plastic as “foreign garbage” have been hard for Chinese consumers of plastic material to overcome. “Some single negative events have been exaggerated, causing overall embarrassment to the industry’s reputation.”

Among the burdens for plastics scrap importers, said Cai, is that two different inspection processes are requiring two different sets of standards. While the customs office is enforcing Ministry of Environmental Protection standards and carefully matching descriptions to container content, the AQSIQ (Administration of Quality Supervision, Inspection and Quarantine) is scrutinizing for “tidiness.” Cai said, “We do not have uniform standards.”

Wong predicted the difficulty of obtaining approval from all Chinese agencies will continue to drive U.S. and European recyclers to invest in sorting and reprocessing equipment, perhaps to the point of making recycled pellets. “It is very difficult for factories [in China] who rely on this kind of material,” said Wong. “In the end, they will have to pay more for upgraded material.”

Market reports and guest presentations offered at the BIR World Recycling Convention revealed a mixture of resignation, concern and a few hints of optimism.

Steel industry analyst Peter Marcus of World Steel Dynamics, Englewood Cliffs, N.J., speaking at the BIR Ferrous Division meeting, predicted the steel industry would continue to travel the “rutted road” it started out on in 2008 through the rest of this year and into 2014.

Marcus was bearish about ferrous scrap and iron ore pricing during that stretch, declaring, “Steel’s iron age is over.” He predicted, though, that raw material costs are shifting in favor of scrap, with the pendulum moving in scrap’s favor by 2015.

China’s ferrous scrap reservoir has been building, said Marcus. He forecasted that by 2025 China will have a 145-million-ton-per-year ferrous scrap surplus, “given the same EAF (electric arc furnace) steelmaking and BOF (basic oxygen furnace) scrap usage figures.” Even if China adds EAF capacity and charges more scrap into its BOF mills, Marcus foresaw “75 million tons of surplus” scrap in China annually by 2025.

Division Chair Christian Rubach of Germany’s TSR Recycling remarked that “economists are starting the discussion [of] whether we are at the end of the commodity super cycle [that] fueled our steel recycling industry for the last [several] years.”

A report submitted by U.K.-based Tom Bird of Van Dalen Recycling noted that “prices have continued to weaken during the month [of May] and we could see further reductions for June across the board.”

Bird added, “Like 2012, 2013 is proving to be a difficult year. After a fairly positive start to the year, the market has gradually tightened though April and May.

Summarizing the U.S. market, Blake Kelley of Sims Metal Management, New York, described declining prices in May and referred to “trade opinion” predicting declines of $10 per ton or more in June.

Prices for finished hot-rolled coil steel in the U.S., at from $606 to $639 per metric ton, are “the lowest since 2010, as steelmakers struggle to maintain order books where lead times are reportedly three-to-four weeks,” he said.

Kelley noted that the world’s steel industry in 2013 continues to produce more steel than ever before and is on pace to produce 1.56 billion metric tons of steel—54 million more metric tons than in 2012.

However, with much of the growth occurring in China, where iron ore-fed basic oxygen furnaces predominate, the world in 2013 will “apparently consume 11 million metric tons less purchased scrap,” according to Kelley.

The 2013 BIR World Recycling Convention & Exposition was at the Pudong Shangri-La Hotel in Shanghai May 27-29.
 


WasteExpo

Turbulent Times
The debut Paper Recycling Conference Asia served as an ideal gathering place for recovered fiber buyers and sellers in the midst of a turbulent market.

Delegates from nearly 30 countries convened at the Hongta Hotel in Shanghai May 30-31 to gain insight into the rapidly changing recovered paper market.

The nearly 200 attendees at 2013 Paper Recycling Conference Asia, organized by the Recycling Today Media Group, SmithersPira and the China Technical Association of the Paper Industry (CTAPI), witnessed and took part in several lively discussions.

The assembled delegates heard from speakers from throughout Asia, Europe and North America at six conference sessions spread out over the two days.

Representatives from major mill companies such as Lee & Man, Smurfit Kappa and SAICA; brokerages such as Cellmark, Ekman Recycling and Ralison International; and organizations including CTAPI and the Publishers National Environment Bureau of Australia were on the program.

Keynote speaker Professor Wang Yangzu, formerly of China’s Ministry of Environmental Protection, noted secondary raw materials had played a crucial role in China’s economic growth in the past 15 years. “We have a lot of mineral resources, but we are only 53rd in the world in terms of mineral resources per capita,” Wang stated. “We have enjoyed the benefits of importing recycled resources,” said Wang, adding that it had saved considerable timber and ore resources in China and around the world. “It also has provided more than 1 million job opportunities [in China],” he remarked.

Audit partner Sally Sun of Deloitte’s Shanghai office provided an overview of Asia’s paper industry and also pointed to the critical role of recycling. China’s forest resources provide only “17 percent of the [feedstock] needs” for its paper mills, she pointed out. “Scrap paper fills a large proportion [of what is needed], and some 30 million tons is now imported annually.”

Although China’s paper mills need that fiber, speakers on subsequent Paper Recycling Conference Asia panels commented that the government’s Operation Green Fence was making the process difficult.

Sarah Feng, a recovered paper senior analyst with UM Paper, a RISI subsidiary in China, noted some mills had suspended importing the mixed paper grade to try to meet a 1.5 percent contamination threshold being enforced by customs inspectors. Both mills and suppliers are affected by having to pay demurrage and additional shipping costs, said Feng.

Vivian Ou of Ralison International, Diamond Bar, Calif., said the situation can be frustrating but manageable. “I saw clean bales at the plant of one of our large suppliers, but they were probably not clean enough to pass the new customs standards. I can buy them, but China won’t let them in.”

Ou said that while it might be hard for suppliers to change by adding extra personnel or additional processing steps, “They have to face this, and most of our suppliers are making changes.” The suppliers have to change for the sake of their own profitability, she commented. “They told me how much money they’ve lost in the last two months,” Ou said of one supplier.


More Opportunities
WasteExpo, BIR and Paper Recycling Conference Asia all provided a forum for those involved in the trading of secondary materials to learn about their businesses. As fall approaches, more opportunities exist for recyclers to convene on the issues.

Among those are conferences organized by the Recycling Today Media Group, including the Paper Recycling Conference & Trade Show, Oct. 16-18, in Chicago; Paper Recycling Conference Europe, Oct. 30-31, in Warsaw, Poland; and the Renewable Energy From Waste Conference, Nov. 18-20, in West Palm Beach, Fla. More information on these upcoming conferences is available online at www.PaperRecyclingConference.com and at www.REWConference.com. For a complete list of recycling industry conferences being held in the coming months, see Datebook.

The authors are editors with the Recycling Today Media Group and can be reached at ksmith@gie.net and btaylor@gie.net.

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