Budget squeezes recyclers
The deep cuts that resolved California’s budget crisis have come to your recycling bin.
On July 1, the state pulled back on processing fees that it pays to recyclers and stopped some incentive programs altogether.
Recyclers say the move is eating into their revenue at a time when the prices they get for recycled materials are still half of what they were less than a year ago.
“With scrap prices down, it adds insult to injury,” said Keith Ramsey, general manager of Waste Management’s operations in North Santa Barbara County.
The state is lowering the processing fees it pays for glass by about 13 percent and its fees for some types of plastic by about 27 percent. Some fees – such as the California Refund Value that the state pays for beverage containers – won’t be affected, and consumers can still redeem them at any collection site.
But recyclers say that across the board, they expect a 10 to 15 percent cut in subsides they get from the state. Even recyclers who don’t receive much in the way of state subsidies say they’re necessary to keep the industry alive.
“Long term, the processing of recyclable material is not sustainable given the volatility of the commodities markets,” said Mario Borgatello, whose MarBorg Industries processes commercial recyclables that don’t receive subsidies, such as mixed paper and scrap metals. “When the drops occur, they’re generally huge and very painful. The bottom line is that it has to be subsidized.”
One such subsidy was an incentive program designed to get recyclers to sort their glass by color. Doing so makes it easier for the end buyers to re-melt and reuse the glass, which means the processor selling it can get a better price.
The state used to pay up to $30 a ton to recyclers who sorted glass. But the program ended when the state’s recycling fund ran short.
Ramsey, whose firm runs a transfer station on Betteravia Road in Santa Maria, said his company will continue to sort glass and eat the cost that subsidies will no longer cover.
“That money is just going to go away,” Ramsey said. “At our facility, we’ve always sorted all the color we could because we wanted a better scrap price. Glass has always been a low-priced commodity – it’s basically sand. The best price I can ever remember for clear glass is $34 a ton.”
The California Refund Value – the 5-cent and 10-cent fees on beverage containers – is still being paid out, but Ramsey said that revenue is down as well. Consumers are buying fewer beverages, and penny-pinchers are keeping the small refund for themselves. If consumers bring containers to a recycling center, the operator has to pass along the state refund and only gets to keep processing fees.
“With the economy the way it is, people are looking for more ways to get their dollars back,” Ramsey said. “Before, you may have put aluminum cans in the recycle bins. Now you’re setting it aside for your grandkids to make some money. Or if your wife just lost her job, that might be her new job.”
Commodities prices have tumbled. Late last year, some markets froze completely as demand from China and other developing nations cratered after the markets imploded.
In October and November 2008, sorted newspaper prices fell nearly 400 percent, from $138 a ton to $28 a ton, said Leslie Wells, program leader with the Santa Barbara County’s Resource Recovery & Waste Management Division. Ramsey said aluminum prices fell from $1,600 to near zero and are just now back to $875. For a few months last year, Borgatello couldn’t sell mixed paper at all, and cardboard got $20 a ton.
In Santa Barbara County, much of the recyclable-waste stream is controlled by the county, which has counted on the commodities revenue. On July 1, the county instituted a $4 a ton surcharge to its regular dumping fee for one year to make up the money it has lost.
“September of 2008 was the highest price paid in many, many years,” Wells said. “In November, it was the lowest price in many years. It was dramatic. We have certain fixed costs that we have to cover.”
Borgatello said the price for iron-based metals is still down by half. He still has 5,000 tons stockpiled in Saticoy.
“We’re taking a chance that it’s going to come back,” he said.
Still, Borgatello has leaned on his trash business to see him through.
“There’s a huge risk in being in the recycling business. There’s no risk in driving up and down the street picking up trash,” he said. “The collection business is managing to keep us whole.”
Haulers and recyclers worry because state officials can vacillate while business loan payments continue to come due. Borgatello has millions invested in his Santa Barbara processing facility, just as E.J. Harrison & Sons has in its Gold Coast Transfer Station in Ventura County.
The state legislature dissolved the California Integrated Waste Management Board when it passed its budget, with plans to merge that board’s employees into the Department of Conservation. Haulers such as Harrison & Sons aren’t even sure who they’ll answer to in Sacramento come 2010.
“The haulers have put millions of dollars into programs and facilities. The Harrisons major concern was that someone would drop the ball after we have convinced the general populace that recycling can help save the planet,” said Nan Drake, a spokeswoman for Harrison & Sons. “It’s really like a loaded gun, and it’s more like a shotgun rather than a rifle. It’s all over the place. They haven’t killed anybody, but the wounds are stinging.”
In the meantime, businesses and area governments that depend on revenue from commodities are keeping an eye on the markets.
“This is all very dependent on the global economy and China and what they’re willing to pay for certain commodities,” Wells said. “We can speculate, but that’s pretty much all it is.”