Is recycling headed for a sweet spot?

Columns - Editor’s Letter

Beyond the turmoil and shifts in supply chains could lie opportunities for recyclers.

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May 29, 2020

Conditions for recycling company owners and managers have been as difficult as for those in any other sector during the turmoil caused by COVID-19 and subsequent restrictions on activity. Revenue and jobs have been lost, and material flows have dwindled.

Metals prices were hit with a vengeance, and most secondary commodities had no choice but to go along for the ride. On the municipal side, already tight state and local budgets are now in complete disarray, painting a potentially bleak scenario for government-supported collection and sorting of recyclables.

Does the recycling sector have a case for optimism? Some signs point to “yes.” As dismal as April was for the U.S. and global economy, upcoming months will be incrementally better, barring a second COVID-19 outbreak.

Even if a roaring V-shaped recovery is not in the offing, by the first week of May, negotiations between ferrous scrap sellers and buyers were pointing to a rebound in that market. Recovered fiber pricing, meanwhile, tracked upward during COVID-19-related partial shutdowns. Packaging remained in demand, as did tissue.

“The demand for raw materials is poised to increase sharply, and secondary commodities will be part of that rebound.”

As the away-from-home economy begins to show itself again, demand for raw materials is poised to increase sharply, and secondary commodities will be part of that rebound.

As a rebound ensues—even a medium-speed one—recyclers will struggle to secure adequate supply. Their challenges may be minor compared with those faced by miners of virgin raw materials used by metal and polymer producers.

Recyclers may have to bring back laid-off workers, reconfigure routes for industrial scrap generators that are back in business and convince peddlers that their scales offer pricing that is worth the collectors’ efforts.

That “to do” list likely can be achieved faster than restarting the global supply chains of consumers of iron ore, bauxite, copper concentrates and virgin polymers. These producers will need to sort out issues pertaining to labor, transoceanic bulk shipping, longer term price settlements and negotiations with governments in many nations.

One more intangible is in play for recyclers: whether the global pause button that was hit in March and April has slowed down sustainability momentum or boosted it.

I see reason to believe the latter. The internet has been abuzz with “before and after” photos of air pollution and discussions about reinvigorating domestic manufacturing and shifting to shorter global supply chains. These trends can be tied in to developed nations using their scrap resources effectively.

The first four months of 2020 provided sparse good cheer to people in most economic sectors. It is possible, though, that collectors, processors and sellers of scrap metal, paper, plastic and other materials have promising reasons to keep planning for the future of their businesses.