Nat Egosi, president of RRT Design and Construction, says consolidation has led to greater value for the recycling industry.
Nat Egosi, president of RRT Design and Construction, will be one of the panelists at the upcoming Paper Recycling Conference & Trade Show, set for Oct. 16-18 in Chicago. The session, "Making MRFs Work," also features speakers Sean Duffy, president/CEO of ReCommunity; and Tom Outerbridge, general manager of Sims Metal Management.
To learn more about the conference, visit http://americas.paperrecyclingconference.com/.
In advance of his presentation, Egosi shares some thoughts on the paper recycling industry.
Recycling Today (RT): Consolidation has been a big factor for the recycling industry. Can you explain the impact this trend has had on the recycling industry?
Nat Egosi (NE): Mergers and acquisitions have been accomplished primarily with publicly traded companies. What drives them? They want to or need to maintain or increase shareholder values. On the shareholder value side, consolidators are considering revenue and income and they also are considering how to manage their risk. They are looking to offset any variables that are occurring in their businesses. They want to leverage all the assets they already own, whether contracts, landfills, transfer stations and other recycling facilities, as well as their customer accounts.
We see the clear direction in the industry that consolidation leads to greater value and provides these companies with more purchasing power with everything they are doing; more marketing power in terms of how they approach the customers; and marketing power on how they sell their recyclables and where they put their recyclables into the market.
They provide job opportunities and perhaps one of the largest drivers is the possibility for lower operating costs as recycling values fluctuate. It helps communities and companies to achieve diversion costs.
What this means for the industry is we want them to succeed. It is their activities and business that are fueling our industry. They are behind a lot of what is happening. That big factor is the driver for the continued strengthening in the future of our industry.
RT: A trend for MRFs has been to maximize throughput. What does this do for quality?
NE: It isn’t a recent trend. It has always been and will always continue to be. We are in the business of the volume paradox. The more material we process the lower the cost per unit it is to process. So, this trend has and will continue to move forward. But the essence of the question is what it does to quality. There is an expression that ‘haste makes waste.’ In many of these cases facilities operate over throughput levels exceeding what the facility can actually do. Consequently, they are producing lower grade product.
Why are they doing it? Part of the reason is the expectation levels set by the equipment manufacturers, designers and promoters of what a facility can do. The benchmark for the facility has been that bigger is better. Therefore, one might perhaps overstate the capacity of the facility and project a higher level of performance as a goal, which ensures everyone is working hard as they can to reach the goal. If the goal is too high, the consequence is the output of the facility may result in product of lower grade or not acceptable quality.
There is an ongoing correction that is going on in the industry in parallel with that maximizing throughput. ‘Are we overrunning our facilities? Are we putting too much material through our facilities?’
RT: One grade originally predominant was ONP (old newspapers). It has been declining lately. Where do you see ONP heading in the future? And are there any materials that can supplement?
NE: What we see is ONP in the future is a significant reduction in the demand for the purchase of newsprint, which reduces the production of newsprint, thus a decline in ONP. There is a continuous reduction in availability of ONP as a paper grade. It will be that way. It has been projected that way for many, many years.
What recyclers can do to replace ONP has been largely discussed and people talking about adding more grades of plastics, maybe textiles, more metals, adding aseptic containers. All those ideas have merit, whether or not ONP was shrinking as a commodity. However, if you add all those items it won’t come close to offsetting the reduction in ONP. What we see happening for recyclers is they are diversifying their business to rebrand their MRF to handle a completely different stream, in some cases a commercial stream and other items that are becoming a big trend in our industry.
RT: Are there any overarching trends driving the recycling markets today?
NE: First, I will say we are seeing through the consolidation in the private sector that companies consolidating and centralizing smaller facilities to feed larger facilities. Larger facilities are closing down smaller facilities and trucking material to larger facilities.
That trend is made possible by the fact that the public sector has greatly reduced its interest and activity in owning and operating MRFs. In the late '80s and early '90s, the public sector was really interested in owning the MRFs. Now, it is all on the private side and that trend, in combination with the private companies' mission for shareholder value, is all about making these MRFs become super MRFs. It is multi-material, more than just containers and paper. They’re bringing in materials like C&D, mixed waste and organics. From a trending point of view they have broadened to include many other things and not just residential curbside recyclables.
It is exciting for us in regards to the trends but also very challenging. Back in the day there were a narrow group of people covering the entire industry with great success. Today, you need a variety of experts and expertise and different types of equipment suppliers and even different types of owners and operators running different kinds of facilities that all integrate the entire industry.
More information on the Paper Recycling Conference is available at http://americas.paperrecyclingconference.com.