Recycling and Surviving in a Down Economy

One of the benefits of recycling is that you can begin to see the interconnectedness of everything, how your decisions as a consumer and a waste-producer can reverberate through communities and regions of the world, for better and for worse. And now, the recycling industry in Boulder County finds itself connected to things it might not have imagined a few decades ago, when it was in its infancy—like the global financial market. When the economy tanked in 2008, recyclers took a hit as well.

“It’s really the first time a recession hit us,” said Marti Matsch, the communications director for Eco-Cylce, the nonprofit that runs the county’s recycling center in Boulder and one of the largest recycling companies in the United States. “It was good and bad; at least it showed that we’re no longer on the fringe. It was a sign that we’re providing significant feedstock to the manufacturing industry.”

Nationally, the recycling industry is still young, barely 30 years old. Recycled materials are far cheaper to manufacturing companies than virgin material and were therefore quickly embraced.

“Industry has been onboard not because they’re green,” said Eric Lombardi, Eco-Cycle’s executive director, “but because it’s cheaper feedstock.”

But in a recession, when consumers stop buying, manufacturers stop manufacturing. For those that use virgin material, like fresh timber for paper, the supplier simply stops cutting down trees. It’s not so easy to stop the flow of raw ingredients in the recycling business. With orders drying up and available product still flooding the market from everyone separating their newspapers and beer bottles from the trash bound for the landfill, prices did the predictable—they cratered.

Consider the market for cardboard, which Matsch said “is a very valuable material that’s easily recycled, but it had a big hit.”

In July 2008, a ton of cardboard and recycled paper was selling for $200, according to U.S.. News and World Report; by December, the price had plummeted to $20 per ton.

“When the economy falls off, the demand for products goes down,” Lombardi said. “What happens in my industry is that secondary materials keep coming. The market price falls to zero. …The drop was as steep, deep and fast as anything I’ve seen in 30 years.”

The hit was compounded for Eco-Cycle, which, at the same time, introduced single-stream recycling for its customers, meaning everything—paper, bottles and cereal boxes—could go into the same bin. It was a move meant to inspire more participation, and it did. Matsch said recycling in Longmont went up 11 percent after the change. But it also meant the task of separating the material fell to Eco-Cycle. What was more convenient for the customer was more expensive for them.

For a few tense months in 2009, during which Lombardi’s hair “went gray,” Eco-Cycle lost about $50,000 per month. The only choices in such a downturn, he said, are “to be extremely rich to handle these things or go out of business.”

Or you can be like Eco-Cycle, which years ago negotiated a life-saving contract with a buyer for its fiber and aluminum products, Weyerhaeuser. Signed in 1996 and good for 20 years, the contract guarantees that Weyerhaeuser buy Eco-Cycle material at market rates in boom years and at floor rates in times of downturns. Lombardi described it as a pair of companies trading “stability for supply,” with each getting what they needed. In Eco-Cycle’s case, that meant never getting stuck with recycled material it couldn’t sell and being able to stay in business.

Likewise, a contract with the county helped lower Eco-Cycle’s exposure to the down market. It requires Eco-Cycle to pursue goals that are good for the community—increasing the volume of recyclable material collected, processing them cheaply and selling as high as possible— and caps its profits at 9 percent. Anything above that goes back to the county’s recycling tax fund.

“In exchange for a limited profit, Eco-Cycle has a modified and lowered risk profile vis-à-vis unpredictable market prices, thus bringing stability to the program, which is good for planning and the public,” he said, likening it to contracts communities make with utility companies; essentially, recycling holds the same importance as electricity in Boulder County. “We really can’t go away.”

That hasn’t been the case elsewhere in the country. A lot of small private recycling companies couldn’t hold on through the recession and have gone out of business, leaving the task of recycling up to businesses and residents, who often had to decide if it was worth the hassle and expense of driving to the next closest recycling facility or simply take their bottles and cans to the local dump. In other cases, counties or private companies stopped taking certain materials they couldn’t sell or stockpile, effectively ending recycling for cardboard or paper, for example.

Things never got so dire in Boulder County—because of the Weyerhaeuser deal, Eco-Cycle never stopped taking certain materials. The markets began to rebound for the scrap industry in 2009 and prices have largely returned to their old levels. In fact, they rebounded a little too well, and Lombardi said many commodities saw a correction in the early months of the year. Recyclers need to get used to such fluctuations, he said, and those that survived should follow Eco-Cycle’s example of pursuing long-range contracts that ensure their continued existence, even in the face of an economic meltdown. Now that recycling has become an ingrained practice, communities are continually increasing the percentage of their waste that’s diverted away from the landfill. He cited San Francisco, which is close to diverting 80 percent of the waste that would otherwise be bound for the landfill; the city Boulder is at about 50 percent and continuing to improve.

“This is not something you want to go away because you have a bump in the markets,” he said.