"Buy American" is back.
At least when it comes to recycled scrap materials.
Scrap materials are now the nation's largest export category by volume, and continue to set yearly records, with nearly $30 billion in recycled commodities — notably metals and paper fiber — moving overseas, up from $22 billion in 2009.
“Scrap exports play a vital role for the recycling industry specifically, and also generally for the U.S. economy,” says BobGarino, vice president at Export Tax Advisors, a firm that helps U.S. firms export scrap.
The export boom is part of a broader growth spurt.
The U.S. scrap recycling industry has “clearly recovered from the depths of 2008 and 2009,” says Garino, a recycling vet with decades in the sector.
Industry revenue rose to $77 billion in 2010, up 43 percent from $54 billion in 2009.
Trash To Cash
Canaccord Genuity’s cleantech analyst Eric Prouty says several critical global trends —economic growth overseas, high commodities demand, higher energy costs and better recovery technologies — are “creating what we call a ‘perfect storm’ scenario for the recycling industry.”
The top three markets are big developing markets China and South Korea as well as Canada, the U.S.’ principal trading partner. Together, these three countries consumer nearly half of exported U.S. scrap.
With a growing recycling infrastructure diverting more U.S. waste from landfills, as well as systems R&D investments from integrated waste handling firms like Waste Management, the U.S. is now recognized as the world leader in scrap.
It’s not just the amount of waste being generated in the world’s largest economy, he says; it’s that the best technology is used to recover various waste streams, making the U.S. scrap more “pure” than other countries.
“For scrap, the favored supply market for all buyers is the U.S. since it can supply the quantity and quality needed,” he says.
One of the beneficiaries from booming recycled commodity prices is cash-strapped municipal governments.
Ecomaine, the waste disposal agency for 21 communities in southern Maine, bought out the lease on its $1.5 million single-sort recycling systems eight years early, thanks to increased volumes of scrap selling for better prices.
Single-sort systems involve end users putting all recyclables — paper, metals, glass and plastics — into one container which gets sorted at a depot. These are now common in many residential areas.
Taking the sorting responsibility away from residents typically increases recycling volumes, and volume is how money gets made in recycling, says Ecomaine’s general manager, Kevin Roche.
“The key ingredient is tons,” he says.
Roche says his program doubled from 15,000 tons of collected materials in 2002 to 35,500 tons in 2010, and he hopes to increase volumes further.
The downside of this “trash rush” is that traditionally local buyers of recycled materials are often muscled out by bigger players.
Constant improvement in collection infrastructure, along with better global logistics, has led to international buyers dominating the markets.
Roche points to recovered paper fiber markets — after ferrous metals, the second most exported recycled commodity, with 19.6 million tons sent abroad — as a classic example.
“In the 1980s, newsprint was sold to local firms to make insulation or for animal bedding,” says ecomaine’s Roche. “Today it’s a different class of buyer.”
Chinese firms now snap up paper fiber to make new packaging to then export finished goods to the U.S.
But this globalization of scrap commodities may simply be mirroring the consumption of virgin commodities, says Canaccord’s Prouty, with booming developing markets in a rush to secure resources.
“There is growing recognition that the world’s natural resources are scarce, finite, and costly to acquire,” he says.
Recycling of metals like copper and zinc is “absolutely essential today, as some research indicates that rising demand could completely exhaust the world’s supply of these metals within the next several decades,” he adds.
Given that most of the inexpensive extraction of critical resources in the world has already been done — “peak copper” anyone? — Prouty says “the high and growing costs of mining virgin natural resources create an important catalyst for increased recycling.”
This burgeoning international marketplace will be what propels the sector forward, he says.
He says the recycling industry is at a unique point in its history.
“The industry has proved its early skeptics wrong — recycling is worth it,” says Prouty. “Recycling is economical, it is profitable, and it represents one of the most pragmatic solutions readily available to conserve scarce natural resources, reduce production costs and lessen total energy consumption.”