Cleaning up contamination in its residential recycling program has been a goal for the community of Wausau, Wisconsin, ever since it performed a waste audit about two years ago.
According to a news release from the city of Wausau, its October 2019 waste audit showed that 84 percent of residential recycling carts contained contamination.
“When residents don’t put the correct materials in their recycling carts, we undermine the entire purpose of our local recycling program,” says MaryAnne Groat, Wausau’s finance director and recycling coordinator. “Those unacceptable materials simply take an expensive trip from the home to the recycling facility and then onto a landfill.”
As a result, the city’s Sustainability, Energy and Environment Committee voted in favor of bringing its residents more education about proper recycling. One way it’s doing that is through a web-based app called Betterbin, which the city officially launched Feb. 15.
Michelle Goetsch, who is the CEO of Wisconsin-based Betterbin, launched her business in 2018 with the idea that data and technology could change the way consumers learn how to properly dispose of packaging material. She says her goal was to provide consumers locally accurate recycling instructions for brand-specific products.
Goetsch says she had no experience in the recycling industry when she started her business but adds that she was passionate about improving sustainable waste management in communities and knew recycling education could be better. She says she had many conversations with solid waste management experts and material recovery facility (MRF) operators to learn about the complexities of the material recovery ecosystem in the United States when building Betterbin.
Since its launch in 2018, Goetsch says pilot implementations of the app have taken place in multiple communities, college campuses and at an Airbnb location.
“We are a startup, but we’ve done multiple pilot implementations to iterate on our machine learning technology as well as how to increase user engagement. [Betterbin is still] a pilot in the sense that our technology will only continue to get better, and we’ve only just embarked on partnerships with brands who want to use our platform as a way to reach environmentally responsible consumers,” she says. “At this point, it’s functioning at a high level, and it’s been fun to see user analytics to understand where consumers have the most questions and their willingness to want to learn more.”
Over the past year, Wausau and the MRF that receives its materials worked with Betterbin to develop the guidelines and content that were loaded into Betterbin’s web-based app, ensuring it would provide the right instructions for residents on what and how to recycle. “The app looks specifically at what’s accepted for Wausau residents when materials to go our MRF,” Groat says.
Goetsch adds that Betterbin is a “web-based app,” meaning it’s a website that can be accessed on computer or smartphone browsers without users having to commit to downloading an actual app.
“We intentionally have initially offered only a web-based app,” she says. “The biggest reasons we’re set up that way is because it’s a hard ask to get someone to download something on their phone, especially if they’re not overly passionate about recycling.
She continues, “A web-based app is more accessible—you can use it on a desktop, or on the go if you’re staying overnight at a travel destination, but it looks and functions just like an app on your mobile device.”
By scanning a barcode or typing the product into the web-based app, a resident can see if the item is recyclable.
Wisconsin-based Rocket Industrial, a packaging solutions provider, also helped to provide funding for Wausau to create the educational app with Betterbin. “As a provider of packaging solutions to brands internationally, we see it as our responsibility to divert as much recyclable packaging from landfills as possible,” says Ryan Gallagher, president of Rocket Industrial. “Seeing firsthand the contamination issues locally helps us better serve our customers across the country. The opportunity to support a local entrepreneur [to] solve a problem in our own community is the icing on the cake.”
Near-term goals
Groat says the city plans to monitor contamination in its residential recycling program.
Betterbin’s Goetsch says her team also will provide Wausau with additional promotional materials for residents, such as mailers that can be sent with water bills and messaging the city can share on social media. She adds that the Betterbin web-based app features a “tips and tricks” section with monthly themed content, such as details on how to recycle pet food packaging and giveaways of gift cards from local businesses.
”We have a vision of working directly with [stakeholders] to properly educate people on recycling.” – Michelle Goetsch, CEO, Betterbin
Groat adds that she is hopeful that the new web-based app will give residents the educational components they need to recycle right. She says she also hopes it will encourage more residents to make better purchases initially.
“I think this can help people make better decisions to ‘prerecycle,’” she says. “For instance, I try to purchase things that have less packaging.”
Goetsch says Betterbin’s goal is to serve any individual, building or community with contracted recycling services. “There is a lot of room for improvement in helping consumers recycle properly,” she says. “We have a vision of working directly with brands, MRF operators and local stakeholders to properly educate people on recycling, composting and food waste prevention but also the critical concepts of reducing, reusing and being a responsible consumer.”
She continues, “It’s hard for a consumer to go to a grocery store and know what packaging is sustainable or recyclable. We have this goal of being a platform and a data pool to help consumers make purchasing and disposal decisions with environmental and human health at the forefront of their mind.”
The author is managing editor of Recycling Today and can be reached at msmalley@gie.net.
An upbeat start
Features - Steel Industry Update
The steel industry benefits from rising demand amid a supply shortage and prospects of infrastructure stimulus.
The steel industry has kicked off 2021 on a high note, building on the strong recovery that started in the final quarter of 2020. Shares of major steel companies were heading higher in January. The momentum has been driven by surging steel prices on the back of rising steel demand amid a supply shortage and prospects of infrastructure stimulus packages this year from the Biden administration.
Material stocks got a thrust after the United States Congress formally certified Joe Biden as the 46th president Jan. 20. Biden has proposed spending $2 trillion over four years to boost clean energy and rebuild infrastructure. The planned investment includes building and repairing roads, bridges, water systems, electricity grids and broadband aimed at fixing America’s “crumbling” infrastructure.
Stocks make gains
American steel stocks were making gains in January on hopes that the sizable infrastructure spending would have a beneficial effect on the U.S. steel industry given the expected increase in consumption of steel, which is used to make almost everything from rail tracks to roads to bridges.
Notably, shares of major U.S. steelmakers, such as United States Steel Corp., Nucor Corp., Steel Dynamics Inc. and Cleveland-Cliffs Inc., the last of which completed the acquisitions of AK Steel and ArcelorMittal USA last year, were up roughly 37 percent, 7 percent, 9 percent and 24 percent, respectively, in January.
The optimism can be gauged from the fact that the Zacks Steel Producers industry stocks gained 10.6 percent in January, outperforming the S&P 500 Index’s 1.9 percent appreciation.
The steel industry has been urging for an infrastructure package since the early days of the pandemic. Leading U.S. steel industry groups in March 2020 called on Congress to include significant infrastructure investment in the next stimulus package to help the nation recover from the fallout of the deadly virus outbreak.
The pandemic-induced demand destruction put a crimp on the steel industry for much of the first half of 2020. However, an upturn in demand from key industries such as automotive and construction and an upswing in steel prices have pulled the industry out of its funk. Automotive and construction together account for a big chunk of steel consumption.
Momentum grows
Recovery started to gain steam toward the end of the third quarter of 2020 on resumption of operations across major steel-consuming sectors following the easing of lockdowns and restrictions across the world.
Steel prices also are shooting higher on an upturn in demand. Steel stocks started to rebound in the second half of 2020 after getting hammered during the first half along with most other commodities amid the pandemic-led demand slowdown.
Steelmakers are seeing strong order booking in automotive. Recovery in the automotive industry has accelerated in light of strong customer demand following pandemic-led shutdowns. The automotive rebound is driving demand for flat steel products globally.
A key reason behind the spurt in steel prices is the demand-supply imbalance.
Moreover, the revival in the global construction sector is driving demand for long and flat steel products in this major market. The construction sector also has bounced back on the heels of a resumption of projects that were stalled earlier in light of supply chain disruptions and manpower shortages. In particular, the nonresidential construction market remains resilient.
Meanwhile, a strong recovery in construction and manufacturing activities is driving demand for steel in China, the world’s top consumer of the commodity. Steel demand is being driven by China’s government spending in infrastructure projects. A rebound in China’s demand has instilled optimism in the steel space.
Steel prices are on an upswing on the back of rising demand, supply shortages and higher raw material costs. Notably, U.S. steel prices have staged a strong recovery and hit record levels after cratering to pandemic-induced multiyear lows in August 2020. Benchmark hot-rolled coil (“HRC”) prices started to recover in September and have been screaming higher since then. Prices zoomed past $900 per short ton in December 2020 on U.S. steel mills’ price-hike actions, tight supply and rising demand, and were hovering near the $1,000 per short ton level last attained in January 2008. In fact, HRC prices have catapulted to levels not seen in more than 10 years and doubled the lows witnessed in August. (Editor’s note: Fastmarkets AMM’s daily steel hot-rolled coil index, FOB U.S. mill, was calculated $1,285 per short ton March 12.)
Demand-supply imbalance
A key reason behind the spurt in steel prices is the demand-supply imbalance. Lead times for steel delivery at U.S. steel mills remain extended, indicating healthier demand. Moreover, supply remains restricted because of the idling of blast furnaces and production disruptions associated with mill outages. These coupled with lower steel imports arising from the pandemic and tariffs have resulted in the tightening of steel supplies, a situation which is likely to sustain over the short haul.
Steel scrap prices are also on the rise amid tight supply. As such, there is room for further upside in HRC prices as the fundamentals driving factors remain in place.
Higher demand, elevated input costs and supply constraints are likely to continue lending support to HRC prices over the near term. Higher prices would drive profitability and cash flows of steel companies.
This article is reprinted with permission from Zacks Investment Research, Chicago. For more information, visit www.zacks.com.
Striving for consistent, reliable and predictable rail service
Features - Transportation Focus
There’s some good news regarding railroad performance, but there’s still room for much improvement.
“A major win for the scrap industry.” That is how the Institute of Scrap Recycling Industries (ISRI), Washington, characterized a Surface Transportation Board (STB) ruling in April 2020. This ruling was in response to presentations to the board by rail shippers concerned with rail service and charges.
In the midst of and in spite of COVID-19, did the scrap industry see a major win with the railroads in 2020? What are some of the issues shippers of all products faced that drew a hearing by the STB? While demurrage in general was a major driver for the April 2020 ruling, several issues have been of growing concern to customers:
demurrage charges increasing;
changes in demurrage rules reducing the time to load or unload before charges begin;
a decline in operations service;
increasing freight rates;
growing inaccuracy of demurrage and freight bills;
poor response from carrier customer service and sales; and
excessive charges for canceling unit trains within a 48-hour window.
With the STB’s April 2020 ruling, it might seem odd that issues and changes have surged suddenly. Recyclers might be wondering what remedies have been proposed and enacted since this “major win,” as ISRI calls it.
Basics of rail shipping
The rail freight network in North America is one of the most capital-intensive industries in the world. It is self-sufficient in that the arteries through which its commerce run are owned and maintained by the railroads themselves.
Although it has oversight from agencies such as the STB and the Federal Railroad Administration, much of how the rail freight network operates is governed by its own organization that is managed and run by Class I rail executives, the Washington-based Association of American Railroads.
Government oversight, if done for the common public good, can require changes of a significant financial magnitude that the carriers must pay for themselves. Most recently, positive train control (PTC) was required on specified freight and passenger railroad route miles. Carriers had to implement this technology at costs originally estimated at $10 billion.
As a result, the rail carriers seek to drive efficiency into the network to remove costs and improve service. In the last few years, the late railway executive Hunter Harrison initiated a new way to operate and manage railroads: precision scheduled railroading (PSR). The stated goal of PSR is to benefit customers by providing consistent, reliable and predictable service. When successful, fewer rail cars are needed, planning is enhanced along the supply chain, costs are reduced, freight rates can be adjusted and everyone is happy.
If we look at a full cycle of how a rail car ships, it involves three players: the shipper, the rail carrier and the customer or consignee. Each player has a role in creating the desired efficiency, and how they each manage their segment impacts the whole. While not exhaustive, here are some of the actions each party controls:
Shippers properly manage car orders (or private fleets); ensure clear and safe track capacity for cars when placement is needed; order cars for placement; load promptly upon placement; release shipments and issue bills of lading upon loading; and ensure switch crew access to pull cars safely.
Carriers keep shippers and consignees informed of rail car status, including any demurrage accrual; supply all required rail cars as ordered and on schedule; process, release and create waybills promptly and accurately; pull and place rail cars on schedule and consistently; move cars through the rail network from origin to destination safely, reliably, consistently and on schedule; issue accurate and timely freight bills; issue accurate and timely demurrage or other accessorial bills; communicate any issues clearly and promptly; and resolve any delays or schedule deviations quickly.
Consignees ensure clear and safe track capacity for cars when placement is needed; order cars in upon arrival (if closed-gate); unload promptly upon placement; release empty upon unloading; and ensure switch crew access to pull cars safely.
For the rail customer, whether shipper or consignee, the key question is how well the carrier is managing all the time it is in its care. Another way to put it is how good is the service that the carrier has claimed is improving specifically because of PSR.
A C+ at best
In an article written by Jim Blaze and published in Railway Age in February 2021, the author looks beyond the rhetoric of the parties involved and offers some data. The very title of his article provides a clue to his conclusion: “Railroad Service Improvement Perhaps a C+.” Blaze writes, “The benefits that PSR was to eventually give as cost savings to customer supply chains are floundering. The improvement isn’t always continuous.”
The goal of PSR is to deliver consistent, reliable and predictable service. And if that service includes at least all the items listed under carrier responsibility, how well have they delivered that service?
Union Pacific reports its carload performance for 2020 by quarter as 64 percent, 76 percent, 72 percent and 74 percent. Intermodal was reported as 85 percent, 82 percent, 77 percent and 83 percent. CSX reports its carload performance as 81 percent, 80 percent, 73 percent and 75 percent and its intermodal performance as 96 percent, 94 percent, 87 percent and 84 percent. Is there a major win in these numbers? Hardly. These give some indication of the overall improvement or lack thereof.
In the spring 2020 STB ruling, the primary issue addressed was demurrage. In response, most Class I carriers made some adjustments to tariff rules and rates to ease the burden. Providing visibility with online tools for shippers is of great value. They potentially can monitor status throughout the month, contact the carrier via means provided to address discrepancies as they occur and take action as needed to keep cars moving to avoid charges. If the carrier makes billing updates, responds to questions and disputes and corrects erroneous bills promptly when identified, we have progress and improvement.
COVID-19 must be considered when evaluating how well the carriers respond to requests. When an issue or problem is identified, every delay in response creates a potential delay in the consistent, reliable and predictable service. With many if not most carriers’ customer service forces reduced from PSR and most contacts still working from home, the problem is exacerbated. This critical area has a significant impact on the goal of streamlining the process. As digital as the world has become, business still relies heavily on the most valuable resource: people. A great deal of room is left for improvement here.
A few years ago, the buzzword within the rail community was “first mile-last mile,” the recognition that the carriers do a fair job of getting cars moved hundreds of miles from origin to destination. But getting those cars placed for loading and unloading, pulled and handled locally for shipment (i.e., local switching) were the areas in need of the greatest improvement. Most of the focus on PSR has been on major and broad changes—removing hump yards, declassifying intermodal as a separate business to be operated differently, etc.—with less emphasis on the first and final mile involved. This is where demurrage surfaces, service schedules are missed and frustration builds. Without due consideration and emphasis on this, can shippers see a major win?
Finally, shippers and consignees, the railroad customers, do have control over key areas that can influence whether the rail industry is consistent, reliable and dependable. Anything less than rigorous attention to their areas only will lead to more frustration, poorer service and higher costs.
The author is president and CEO of Iron Horse Logistics, Aurora, Ohio, and president of the North East Association of Rail Shippers. To discuss this article further, contact him at dennis@ihlogistics.com.
Building on close relationships
Features - Industry Leaders Q&A
Close relationships helped to build Maite Quinn-Richards’ career in the recycling industry, and they are what she thinks can help to advance the circular economy.
A variety of close relationships have helped to shape Closed Loop Partners’ Maite Quinn-Richards’ career in the recycling industry. Quinn-Richards says she majored in journalism while pursuing her undergraduate degree at New Jersey-based Rutgers University in the early 1990s. After starting a career in journalism and television, she had a few conversations about the recycling industry with her friend’s father, Joseph Donnolo, who owned New York-based Sprint Recycling. He invited her to join the business in 2001.
“He asked me if I would join the company, which would pay for my MBA,” she says. “So, I took that leap of faith and never looked back after that because there was so much opportunity in [the recycling] space for me. I felt like finally I could have a really big positive impact.”
Quinn-Richards helped Sprint Recycling manage marketing and sales before she transitioned to the role of president as the business grew into the largest privately held recycling company in the U.S.
In 2009, after the market crashed, she says Donnolo decided to close Sprint Recycling. Having forged a great relationship with New York-based Sims Municipal Recycling while at Sprint, Quinn-Richards then took a position with Sims as director of marketing and business development.
Around that time in her career, Quinn-Richards says more private equity companies started calling her about investing in the recycling industry.
“The calls just kept coming in, and I thought to myself, ‘Wow, look at all this money now coming into our space with a lot of people that don’t know the recycling business,’” she says. “I thought this could be an opportunity for me to make a change—to make another impact in the sense that I could go work for a private equity firm that needs my operational expertise. I started speaking to private equity companies just trying to understand and explore the space.”
Quinn-Richards says she knew Ron Gonen, CEO of Closed Loop Partners, from the time she started working at Sprint Recycling. They occasionally met for lunch to talk about business. In 2018, Gonen, who also co-founded and served as CEO of RecycleBank from 2003 to 2010, asked Quinn-Richards whether she would be interested in joining him at Closed Loop Partners to help him as he started the company’s private equity arm, the Closed Loop Leadership Fund, that year. “That was like a no-brainer decision in the sense that I knew Ron and his organization,” she says. “It was a really good match.”
Quinn-Richards has been a managing director with Closed Loop Partners for almost three years. “I came in knowing that I was going to be the operational expertise. I’m co-leading the fund with my colleague Martin Aares, and he has many years of experience on the fund and financial side. So, we’re an amazing team. I also have Michael Gajewski, who’s our [Chief Financial Officer], helping us on the Leadership Fund side.
“As far as my role goes, I help on the pipeline side because I have long-term relationships in the industry. I know the good players from the bad players, and I know who is best in class [and] who we want to work with.”
Quinn-Richards explains the pivotal role relationships can play in the circular economy in the following interview:
Recycling Today (RT):You helped Closed Loop Partners acquire a stake in Austin, Texas-based Balcones Resources. How did Closed Loop Partners build a relationship with that company, and what has it been like working through that transaction?
Maite Quinn-Richards (MQR): My colleague Michael Gajewski, formerly CFO of Canusa Hershman, had known and worked with Kerry Getter, CEO of Balcones, for more than 15 years. Kerry and Michael began speaking about this partnership and the transaction for over a year. Kerry was keen on the idea of collaborating with Closed Loop Partners, and together we worked through the diligence process and made it happen.
After we closed in October of 2019, I began spending quite a bit of time out in Austin to really get to know the broader team and help think through their strategies for the coming years. It was also a way for all of us to get to know each other better and bring both of our companies closer together. As we at Closed Loop Partners continued to speak with [material recovery facilities, or MRFs] across the country conducting studies, my colleague at Closed Loop Partners Jon Powell introduced me to Single Stream Recyclers (SSR). After a few visits with the team at SSR, we thought maybe there was an opportunity for Balcones. Balcones was excited about the opportunity to acquire SSR—they were a match made in heaven.
RT: How did COVID-19 affect Closed Loop Partners and its projects in the past year?
MQR: We’ve actually seen the pandemic accelerate sustainable action and investment, with the pandemic shedding light on the risks of opaque global supply chains and the inadequacies of the status quo. The pandemic has demonstrated a need for more circular and resilient supply chains, and large corporations are doubling down on their sustainability commitments and efforts as a result.
For example, last year we launched the $15 million Beyond the Bag Initiative with CVS Health, Target and Walmart. Both Microsoft and Nestlé invested $30 million in Closed Loop Partners’ funds as well, signaling rising commitments from leading corporations to achieve supply chain efficiency and climate goals through circular solutions.
Closed Loop Partners also played an active role in responding to the effects of COVID-19 by supporting local communities and organizations as well as the firm’s portfolio of companies through a number of initiatives. … Across Closed Loop Partners’ Infrastructure Fund portfolio, none of the recycling facilities shut down or closed during the pandemic, demonstrating the resilience and essential nature of these businesses. Recovered materials played a critical role in maintaining and supporting key supply chains that in part helped address many challenges brought on by COVID, such as recycled paper supply needed for the increase in e- commerce packaging and toilet paper.
“I help on the pipeline side because I have long-term relationships in the industry. I know the good players from the bad players, and I know who is best in class [and] who we want to work with.” – Maite Quinn-Richards, managing director, Closed Loop Partners
For Closed Loop Infrastructure Fund portfolio companies, Closed Loop Partners convened multiple virtual meetings to better understand their challenges and connect with each other to share best practices while also helping support procuring critical supplies for the facilities to keep operating. Closed Loop Infrastructure Fund also restructured six loans, building in flexibility during a challenging period for businesses during the pandemic.
RT: Did it surprise you that there was that level of interest in sustainability and recycling during a pandemic?
MQR: You know, it did surprise me. I was ready for people backtracking on the postconsumer content. I was fearful; but. no, I’ve just seen it keep moving forward. And that makes me believe that brands are in it for the long haul. This was their test, and they are still plowing ahead.
RT: Down the road, how do you think the pandemic will affect municipal recycling?
MQR: I don’t think any of us know yet how that’s really impacted the municipalities as of today until we see the impact of people not paying taxes and what that’s going to do to recycling infrastructure. … I’ve been in touch with all of the cities we work with through Balcones and SSR, and I’ve asked them that question, and they all said, “No, there’s no talk of taking away these recycling programs.” But I think we’ve chosen to work with—and SSR and Balcones have chosen to work with—really forward-thinking cities that are not backing down, and they have communities that are really focused on this. In the next year or two, we’re going to see if people really don’t have the dedication to stick with sustainability. If the funding’s not there, we’ll see what happens. But I think Sarasota, [Florida], and Austin, and those areas, I think they’re really strong and committed.
RT: What would you say are the biggest challenges with the recycling supply chain today and why?
MQR: Increasingly evolving and growing waste streams with new packaging formats and types is one. Another is the current misalignment between the materials introduced to the market and the recovery infrastructure available to process these materials after use. Also, the need for greater investment in modernizing and updating recovery infrastructure across the U.S. in order to increase efficiency and capture the value of materials after use.
Closed Loop Partners works across the recycling value chain, financing recycling and circular economy infrastructure to improve the capture of existing materials after use while also advancing material innovations and reuse and refill models to stem production of unnecessary packaging where possible. The firm is a unique hybrid business model with an innovation center for research, analysis and collaboration alongside multiple investment funds, spanning venture capital, growth equity, private equity and project-based finance.
Closed Loop Partners provides an arc of capital that accelerates the growth of early-stage companies through to established companies. Each vertical of the firm builds upon one another, bridging gaps and fostering synergies to scale the circular economy.
Because collective work is needed to build circular supply chains, Closed Loop Partners connects critical stakeholders through its network—entrepreneurs, industry experts, global consumer goods companies, retailers, financial institutions and municipalities—to ensure that no challenge is solved in isolation.
RT:What legislation do you think might help the recycling industry and why?
MQR: Extended producer responsibility sees producers manage the end of life of their products and can play an important role in encouraging the development of a more circular economy among other important levers to accelerate the shift toward circularity. EPR can increase transparency, create better accounting for the external costs of recovering materials after use and encourage producers to harness design innovation. EPR is one tool that can be deployed among others to galvanize the momentum behind the [circular economy]. Even with EPR, we still need to build a market for recycling and drive innovation.
RT:What brand owners are heavily investing in recycling?
MQR: Our first fund—Closed Loop Infrastructure Fund, which was founded in 2014—brings together many of the world’s largest retailers and consumer goods companies, including Amazon, Starbucks, Unilever and Colgate-Palmolive, among others, to pool capital and invest via our fund into recycling and circular economy infrastructure in the United States. Just last year, even amid COVID, the original nine investors in the fund—3M, Coca-Cola, Colgate-Palmolive, Johnson & Johnson Consumer Health, Keurig Dr Pepper, PepsiCo, Procter & Gamble, Unilever and The Walmart Foundation—decided to extend their capital commitments, strengthening their investment in the infrastructure needed to build a more circular economy.
All of these companies share the same problem—losing sight of their products and packaging beyond the point of sale with too much ending up in the landfill or our oceans. One company alone cannot tackle the systemic issue.
Many of these companies have large public commitments to use recycled content in their packaging, but they cannot meet them unless the supply side catches up with demand for [recycled polyethylene terephthalate].
RT: Are brand owners doing enough to support recycling?
MQR: Not all brands are created equal—some are leaders, and some are laggards. We’d argue that those who have invested through our funds or our center are taking a leadership position. Overall, brands continue to make ambitious commitments to use recycled materials in their products and packaging, which creates the critical pull through the system.
That said, we now need to see more of these commitments translate into off-take agreements and long-term purchase orders or multiyear contracts to buy recyclables in a way that creates partnerships across the supply chain with shared risk and reward, not just transactions. This will help to build enduring markets, enabling investment in the system to deliver higher quality outputs.
RT: How can you tell if a company is a leader or a laggard as you put it?
MQR: I’ve been working really closely with the brands from the Closed Loop Partners perspective, and seeing how many high-level people are getting involved in these conversations shows to me it’s serious. Like when you have 20 people from Nestlé on a call about how to help increase recycling that are at the executive level, to me that’s serious. They’re putting their money where their mouth is; they’re putting their time behind that. So, I believe that they’re really pushing to get this done. I said earlier [that] COVID came [and] it could have been an easy way for them to say, “Oh, it’s a pandemic. We can’t do all of the things we said we were going to do.” It would have been a perfect out for them. And the fact that they just continued to pursue and that we got Nestlé funding during the pandemic says a lot.
RT: What other trends in the recycling industry are interesting to you right now?
MQR: There is a clear pathway to scale for reusable packaging models, and it’s no longer a question of if but when they are implemented. They are an important part of the suite of solutions deployed by individuals, brands and cities to address urgent global waste challenges. We are also seeing brands move from plastic to paper and aluminum. This is exciting, but brands need to make sure they work with MRFs and processors to confirm that the formats are recyclable for value and use recycled content in those materials as well.
Maite Quinn-Richards is a managing director at New York-based Closed Loop Partners. More information is available at www.closedlooppartners.com.
Substitution problem
Features - Recovered Fiber Commodity Focus
Demand for tissue grades is improving, but supply is a concern, and more mills are turning to virgin pulp as an alternative.
The COVID-19 pandemic and the lockdowns connected to it have had a big impact on the supply of and demand for recovered paper grades such as sorted office paper (SOP), sorted white ledger (SWL) and coated book stock (CBS). Offices are the primary generators of most of these grades, and many of them were closed or only partially open throughout most of 2020 and into 2021. Yet, demand for these grades also declined in the past year because they primarily are used in the away-from-home tissue market. That sector was adversely affected by the pandemic as restaurants, stadiums and other venues closed.
Although more businesses will opening in 2021 as vaccines roll out, sources say things haven’t normalized just yet. Things also vary by region, as some states are more locked down than others during the first quarter of 2021.
“In California, specifically the Bay Area, there are still lockdowns,” says Kari Talvola, president of Oakland, California-based Shred Works, a document destruction company. “A lot of companies are still working from home, which is throwing off generation. Some even announced permanent work-from-home [plans], especially in the tech industry.”
Cory Tomczyk, owner of Mosinee, Wisconsin-based IROW Shredding, a secure destruction firm, says he also has noticed that generation of tissue grades has declined in the past year mostly because many people are working from home.
“I’d say generation [in 2020] was down 15 percent or so from 2019,” he says. “More people are working electronically, away from home. If they are generating things, I don’t think it’s making it back to collection bins in the offices. [In the past year], there has been a downward trend on generation, and the pandemic has affected it to some degree.”
A mill operator based in the North says SOP generation typically is slower in the winter as well.
“January is always a tough month for SOP generation,” she says. “Then you add on top of that all the shutdowns of offices, schools and governments, so, January has been difficult for generation. But I’m optimistic that more will pick up probably in the next four to six weeks,” she says in late January.
For years, printing and writing paper demand also has been declining. Recent reports from the Washington-based American Forest & Paper Association (AF&PA) indicate that printing and writing paper shipments declined in the past year. In AF&PA’s January 2021 “Printing-Writing Monthly” report, the association says shipments declined 25 percent in January 2021 compared with January 2020. U.S. purchases of printing and writing papers also decreased in January 2021 by 22 percent compared with January 2020.
Pricing for tissue grades wasn’t great in the second half of 2020 following the spike at the onset of the pandemic, but prices have inched upward a bit since their decline last summer.
“In the last half of the year, [demand] was soft, and that was reflected in the pricing. But I can ship better at this point, and we’ve seen pricing come back,” Tomczyk says. “But there’s a looming fiber shortage” once away-from-home markets open, he adds.
Mill operators, as well, have expressed their concerns about potential supply shortages.
“Our mills right now have very high inventory of office paper, surprisingly,” one national mill operator says in mid- January. “We have excess material, which I’m surprised [by] with printing and writing papers declining significantly. Now, and throughout the year in 2020, I would say we have had very good inventories.
He continues, “But I think a lot of mills like us are concerned about the [future] supply of office paper.”
Away-from-home needs
Conditions are expected to improve for the away-from-home market this year as more people get vaccinated and more businesses, schools and government offices reopen. As a result, recyclers and mill operators alike think reopenings will prompt price increases for tissue grades such as SOP, CBS and SWL.
“There is limited generation currently, so, as consumer demands increase due to reopenings, pricing for recovered paper should go up,” Talvola says.
Yet tissue mill producers have stated that they aren’t sure the away-from-home market will return to prepandemic levels this year. Many anticipate minimal growth this year and suspect a supply shortage will become a bigger concern once away-from-home needs rise.
The national mill operator says he estimates that the away-from-home market “will probably come back from 2020 levels, but not to the 100 percent it was at before COVID. We feel that away-from-home will still be down significantly in 2021. Right now, the away-from-home market is still struggling because businesses, stadiums and restaurants are not opening or are on a reduced schedule.”
He adds, “There are so many questions, so it’s difficult to answer if away-from-home markets will surge. When vaccines come into play and confinement rules are lifted, will people go to malls and restaurants? Probably. And will that help away-from-home business? I would think so.”
The mill operator based in the North says she is hopeful the away-from-home market will come back in 2021 and will be meet by increased generation of SOP. However, she says, it’s hard to forecast anything with certainty. “If last year taught me anything, it’s to go month by month and deal with things as we go along.”
Export opportunities and headaches
Recyclers say steady demand exists in export markets for tissue grades, but the bigger challenge is securing shipping in the first quarter of 2021.
“With overall demand, I haven’t seen any curtails of requirements, especially for good-quality office pack and other grades,” Talvola says. “But the port situation is a nightmare. There has been a shift in how shipping lines are carrying cargo. Rather than load full, they are taking empty [containers] into China.”
“We’re scrambling for container space,” a recycler based in the Southeast adds. “You have to be nimble and you have to have a very fluid planning ability and also have a balance between domestic partnerships and export partnerships right now.”
Joe Passalacqua, a U.S.-based commodity manager for India-based Khanna Paper, says India has very healthy demand for tissue grades, but the biggest challenge is with shipping. “Vessels aren’t coming in,” he says of U.S. ports. “Piers are packed—truckers are waiting too long at the piers, which are overrun.”
Transportation concerns aside, Passalacqua says India’s appetite for tissue grades is “voracious” as of late January. “SOP and high grades, all the mills are asking for it,” he says, adding that it seems like India’s economy is opening up more since the pandemic started. “We’ll be making more copy paper as [Indian] schools might be going back.”
Pulp sub possibilities
The national mill operator says he has noticed the virgin pulp market is “starting to heat up” as more tissue mills choose to use hardwood or softwood pulp. He says, “Big shredding operations’ volumes are down ... and mills are using alternative grades in their recipes, using more virgin pulp. A lot of customers—big retailers, grocery chains—they want a certain amount of better quality, more brightness or whatever it might be. ... Large retailers have made grade changes and are planning for the future; they’re not ignorant of the secondary fiber business.”
The mill operator based in the North adds that she has seen pricing for hardwood pulp rise because that virgin material is in short supply. “Demand is still there and is going up. There is a general fiber shortage out there on both the softwood and hardwood pulp [sides]. I wouldn’t say there’s a shortage of deink, but when there is a shortage on softwood and hardwood, demand picks up for deinking materials.”
With demand rising among tissue mills for virgin pulp, recyclers say mills could consume more deinking grades and pulp substitutes.
“There have been some in the away-from-home market that have gotten smart and are producing at-home products with small recycled-content levels using pulp subs—things that are brighter and yield more,” the recycler based in the Southeast says. “There is so much virgin tissue starting to be made for the at-home market, so nimble tissue manufacturers are starting to buy more pulp for that purpose.”
The author is the managing editor of Recycling Today and can be reached at msmalley@gie.net.