Recycling is big business, but it's taking a hit from falling commodity prices

by Clare Goldsberry

Source: Plastics Today

It seems that people are taking the reduce-reuse-recycle mantra to heart, especially the recycling part. According to a new economic impact study from the Institute of Scrap Recycling Industries (ISRI; Washington, D.C.), the recycling industry accounts for nearly half a million jobs in the United States and generates more than $105 billion annually in economic activity. The study was performed by the independent consulting firm of John Dunham and Associates to explore the size and scope of the U.S. scrap industry and measure its contribution to the economy in terms of employment, tax generation and overall economic benefit.

"Despite the challenging landscape of today's global marketplace, scrap recycling has proven to be a resilient, job-creating and economy-driving industry," said Robin Wiener, president of ISRI. "As the first link in the manufacturing chain and as a major exporter, the scrap recycling industry is a leading indicator to the overall health of the U.S. economy. While the last several months have been difficult for commodities, this study suggests hope for a rebound."

The U.S. recycling industry is important because operations are so widespread throughout the country. Total economic activity generated by scrap recycling in the United States is $105.8 billion, making the industry similar in size to the nation's data processing and hosting industry, the dental industry and the automotive repair industry, noted the study. Scrap commodities are among the nation's largest exports by value, with overall exports accounting for 26.7% of the industry's economic activity.

The recycling industry is also responsible for 471,567 direct and indirect jobs in the United States, including 149,010 direct jobs that pay an average of $77,153 in wages and benefits. Direct jobs include those in facilities that process scrap materials into new, usable commodities. Indirect jobs come from machinery, equipment and services suppliers, and the wages and taxes paid by scrap recyclers to their workers and suppliers.

However, according to the National Center for Policy Analysis (NCPA), a drop in commodity prices is beginning to hurt the recycling industry. Waste Management, a company that was founded in Houston, TX, and now serves more than 20 million customers throughout North America, got its start when commodity prices were at an all-time high; it signed contracts with municipal governments based on a deal that required a commodity prices floor of $65 a ton.

When revenue falls below $65 a ton, the city of Houston does not make any money and Waste Management takes a loss. One major reason for this, said the NCPA, is that the sorting process at a recycling facility costs between $75 to $150 a ton on average, depending on how contaminated the recycling load, while Waste Management sells the recycled material for just $80/ton on average.

Additionally, contracts were made when the average recycled commodity prices rose 20% in 2011 and revenue reached up to $140 per ton. The city of Houston gets 70% of any revenue over $65 per ton.

The Waste Management contracts with municipal governments have been profitable for both entities over the past few years. However, notes the NCPA, with recycled commodity prices as low as they now are, Waste Management's contracts might have to expire. Cities like Houston could lose their popular recycling programs because of hasty decisions that were made a few years ago.

It may be time that municipalities and waste recycling companies renegotiate their contracts. Better yet, with the high cost of recycling and the amount of fossil fuel energy used in picking up, sorting, baling (plastics and paper) and hauling the materials to facilities for re-manufacturing into new products, they might consider waste-to-energy. This would be a particularly valuable use for plastics, and a much greener alternative, as well.

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