CAN RESIDENTIAL RECYCLING WORK IN THE U.S.?  

Bill Caesar, CEO WCA

The problems with residential recycling today

· Commodity prices

· Contamination

· Processing costs

· Commercial terms

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The problems with residential recycling today

· Commodity prices

· Contamination· Processing costs· Commercial terms

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2011* 2014* Change

OCC $ 153 $ 101 -34.1%

ONP $ 133 $ 66 -50.8%

MXP $ 110 $ 54 -50.8%

UBC $ 1,602 $ 1,506 -6.0%

Steel $ 276 $ 191 -30.8%

HDPEn $ 678 $ 897 32.4%

HDPEc $ 492 $ 571 16.2%

PET $ 645 $ 343 -46.8%

*Commodity prices are the average price for the year

The problems with residential recycling today

· Commodity prices

· Contamination

· Processing costs· Commercial terms

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Sources of contamination

• Single stream – trade-off between volume, collection efficiencies, and contamination

• “New” recycling areas

• “Monstrous hybrids”

• Glass

The problems with residential recycling today

· Commodity prices· Contamination

· Processing costs

· Commercial terms

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• Poor processing yield (and cost to dispose of residue)

• Shortage of experienced managers

• Hard to find competent (and legal) labor

• Limited equipment innovation

The problems with residential recycling today

· Commodity prices· Contamination· Processing costs

· Commercial terms

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• Haulers use recycling as a “loss leader” on muni contracts

• Munis demand outrageous terms (and we agree . . .)

> Fixed/floor pricing (above zero)

> Unlimited contamination

> No cost for glass in blend value

Residential SS MRF Economics – not so attractive

Processing Economics· Single-stream “on the tip floor

at the MRF”

· Processing cost

· Disposal (10% trash)

· SG&A

Total Costs

· Commodity sale

- Inclusive of “claims”

- Inclusive of glass @ -25/ton

EBITDA

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Investment Economics· Land (lease)· Building (buy)· Processing equipment and balers*· Yellow iron

All-in ~$12 million

$ 0/ton

$60/ton

$ 5/ton

$85/ton

$ 5/ton

$70/ton

$15/ton sold

For a ~10K ton/month MRF, the payback is

~7.5 years with current prices/costs

*30-40 TPH system with two balers$50/ton T&D for disposal; 30% glass by inbound volume2x10 hour shifts, 6 days, 80% uptimeDepreciation of $7M over 10 years = $60K/month

($135K/month)

What has to change to make recycling sustainable?

Recyclers have to earn a reasonable return over a business cycle

How? Manage the things they have control over:- Price inbound material properly- Manage contamination- Improve operating efficiencies

Hope for strong commodity markets . . .

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Prerequisites

• Communities have to want to recycle (and “recycle right”) – regulation?

• Communities have to be willing to pay for it

• Global demand for commodities

• Technical innovation