Recyclers are fighting to stay alive as tanking commodity prices bring down the value of recycled industrial and post-consumer materials.

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During the past year, the Recycling Depot has slashed its workforce to 15 employees from 35 as it struggles with plunging prices and a lack of demand for scrap metal. Joe Salvatore, who manages Recycling Depot’s two Seattle locations, said he’s experienced downturns before, but none as severe and long as this one.

“Let’s say somebody brings me a hot-water tank, maybe 135 pounds of steel,” he said. “At one time we were paying 11 or 12 cents a pound. … Now we are only paying 1 penny a pound.”

His company and other recyclers throughout the country are facing the worst downturn in decades as prices for various commodities — steel, copper, aluminum and oil — have plummeted, putting once lucrative enterprises into survival mode.

Prices for so-called “virgin materials” have fallen so much in the past few years that recycled materials have lost their edge in the market.

“2015 was the worst year in decades, if not ever,” for recyclers, said Joe Pickard, chief economist for the Institute of Scrap Recycling Industries (ISRI), a trade group for private recycling companies. “2016 has gotten off to a difficult start.”

The recycling industry generated revenues of $106 billion in the United States in 2014, according to ISRI. In the Seattle region, recycling fuels more than 1,600 jobs and about $365 million worth of economic impact, according to ISRI data from 2015.

Industry veterans say this downturn is worse and has lasted longer than previous declines. The industry took a hit after the 2008 financial collapse but bounced back within a year.

“The question is: When is it going to turn around?” said Doug Glant, CEO of Seattle-based Pacific Iron and Metal, a family-owned firm that has been in business for 99 years. “If it doesn’t turn around in the next two to three years, then a lot of other companies will not be around. That’s sad. Some of them are already struggling and laying people off.”

The bulk of the U.S. recycling industry involves materials and facilities the average American never comes across. It involves people who collect scrap materials such as aluminum cans, old appliances, wrecked cars and the like, as well as waste from factories, construction sites and utility companies.

Cascading effect

Depressed prices create a downward spiral for recycling companies. First, they make less money on what they do sell. Second, they process less material because there’s less incentive for suppliers to collect scrap metal.

Salvatore explained that not too long ago, the company would pay around $3 for a pound of copper and resell it for $3.50 to $4 per pound. Now it pays about $1 per pound and might sell it for $1.25, which cuts profit by one-half or more.

Just a few years ago, he said, scrap haulers could unload a truck of washing machines and water heaters at a recycling center and walk away with $30 for 500 pounds of steel. Now, that same haul nets $5.

“It’s discouraging to have to pay people small amounts of money compared to what they were being paid even just a year ago,” said Jonathan Howe, owner and operator of West Seattle Recycling, a facility that takes materials such as metals, plastic and paper products.

Global forces have put the squeeze on recyclers, said Pickard, the economist. Growth in China, the largest buyer for several types of recycled materials, has slowed significantly.

Meanwhile, worldwide production of oil and metals such as steel and copper has not abated, flooding the market and forcing down prices.

Add to that a strong dollar, which makes buying U.S. materials more expensive for customers in other countries.

Municipal fallout

Global economic pressures are also mounting on city-run operations that collect residential materials curbside, another part of the recycling food chain.

The contents of household recycling bins end up at places like Recology’s materials-recovery facility in Seattle’s Sodo district.

The cavernous building houses an assembly line of highly specialized machines as tall as a house.

The process starts with workers on bulldozers moving hills of materials to sorting machines.

Other workers hover over conveyor belts plucking items that don’t belong, such as plastic bags, which can shut down the whole operation if they get caught on sensitive machine parts.

The paper, cardboard, aluminum, glass and plastic will pass through multiple machines to isolate each material as much as possible.

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One machine uses infrared sensors to instantly distinguish paper from plastic and then sends up a puff of air to separate them.

At the end of the line, the machines push out bales that are loaded onto trucks and sent off to companies in the United States or abroad that will reuse the material.

The facilities and the machines, which have to be custom-designed, require a huge capital investment, and there are overhead costs such as staffing, said Christopher Doherty, spokesman for the National Waste & Recycling Association.

“Recycling isn’t free,” he said.

Plastic, which is made from petroleum products, brought in a lot of revenue for recycling companies when oil prices were high, but now it’s less expensive for makers of plastic products to use virgin materials.

Some cities have idled recycling facilities. Some are cutting recycling programs altogether, primarily because the revenue from recycling plastic has dropped significantly, The New York Times reported last month.

Less profitable

In recent years, both recyclers and cities made money from recycled plastic. But its value has dropped by about 40 percent in the last three to five years, said Hans Van Dusen, who manages waste-disposal contracts for Seattle Public Utilities.

Executives at Waste Management, a Houston-based industry giant that collects residential trash and recycling for part of Seattle and dozens of other Washington cities, have said the high costs and low margins on recycled materials are dragging down profitability.

“We want to see recycling thrive because it’s the right thing for our environment and it’s the right thing for our customers,” James Trevathan, Waste Management’s chief operating officer, said during a Feb. 18 conference call with investors. “We just want to make sure it’s the right thing for our shareholders.”

Recycled materials aren’t bringing in the same big profits they were just a few years ago, but that shouldn’t spell doom, said Kevin Kelly, a Recology spokesperson. Seattle contracts with both Recology and Waste Management to collect trash and recyclables.

“We have to work harder to find markets, but the ability to actually recycle the material has not been affected,” Kelly said. “These are commodity markets, and they change over time. From our standpoint as a company, we want to return materials to their best and highest use, and we don’t think that includes landfill.”

Close to 80 percent of the recycled material that comes to Recology’s South Seattle facility is paper or cardboard, which haven’t lost as much value as other materials, thanks to more demand for boxes and packaging.

Call it the Amazon effect of more consumers wanting goods delivered to their homes instead of buying them at a store.

More costly option

The alternative to recycling is to send materials to a landfill, which is still more expensive than recycling, at least in Seattle.

“You have to pay to get rid of it one way or another,” Van Dusen said.

Sending garbage to a landfill costs about $52 per ton. As long as the cost of recycling doesn’t go above $52 per ton, then recycling makes financial sense.

In 2011, for example, the recycling companies paid the city $29 per ton of recycled plastic, but in 2015, the city paid $24 per ton to recyclers.

Still, compared with landfill, recycling produces a net savings.

“We save our ratepayers money every month,” Van Dusen said.

Not to mention Seattle’s commitment to increase how much waste ends up recycled or composted instead of in a landfill.

In 2014, Seattle diverted 57 percent of waste from landfills, up from 50 percent in 2008. The national average was 34.3 percent in 2013, according to the Environmental Protection Agency.

The city set a goal of reaching 60 percent in 2016 and 70 percent in 2022.

Current market conditions are tough, especially for small recycling companies, but the outlook is promising for the industry, said Pickard, of the scrap-recycling association.

“We still live in a world of finite natural resources,” he said. “As the global population continues to urbanize and demand for infrastructure investments and demand for raw materials grows … recyclers are well-positioned in the long term,” he said.

In the meantime, local recyclers don’t have many options other than to wait.

“We don’t want to shut down,” said Salvatore, of the Recycling Depot. “We want to keep going until profits start coming back again.”