Waste Management, the nation's largest garbage company, sold or jettisoned 30 recycling facilities over the past few years and about 900 employees were affected. KeyBanc analyst Joe Box said in a note last week that the Dallas-based waste management behemoth "could shutter more in 2016 as low commodity prices are pressuring recycling profitability."
The recycling downturn is particularly dire in California, where falling commodity prices along with cuts to the state-subsidized recycling program have resulted in hundreds of redemption centers closing in the past year. Last month, rePlanet, one of the state's largest recyclers, announced it closed 191 centers across California. On its website, rePlanet blamed the cuts on a reduction in state fees, higher labor costs and "12 months of unprecedented declines in commodities pricing of aluminum and PET plastic."
"Recyclables as commodities fluctuate in value more than any other commodity out there," said Chaz Miller, director of policy and advocacy for the National Waste and Recycling Association, a trade group that represents private sector waste and recycling companies. "It's partially just the nature of them. They are sort of the tail end of the raw material chain."
Observers say the California situation was complicated by the recycling industry's reliance on processing plastics such as PET under the state's bottle law; they get a processing fee set by the state.
Last year, PET scrap exports sank 25 percent from a year earlier, with China — the biggest buyer in 2014 — reducing volumes by about 40 percent. The broader decline in recycled commodities also reflects the strengthening of the U.S. dollar.
PET scrap prices topped out around $500 per ton in 2011, and recently were around $200, or a decline of 60 percent, according to CalRecycle. Aluminum is down about 40 percent from its peak, while aggregated blend paper is still around 50 percent below its highest price.
Waste Management chief David Steiner told analysts last month during the company's fourth-quarter earnings conference call that average commodity recycling prices fell by 17.5 percent in 2015.
"On the recycling commodity price front, 2016 has seen a continuation of the downward slide, and current prices are down $20 per ton, or 23 percent from January of 2015," he said. "These are levels that we have not seen in nearly seven years, since the 2009 recession."
Added Steiner, "We are committed to recycling and we will continue to work to change the business model to generate revenue that covers our processing costs and drive out operating expenses so that the business is sustainable over the long term."
Republic Services, another major trash hauler with recycling operations, said on its fourth-quarter call last month that average commodity prices for all materials it handled at recycling facilities fell by 16 percent in the December quarter from the prior year. When excluding glass and organics, however, the average decline for commodities was 14 percent. As a commodity, glass has held up better but some trash haulers consider it a burden, or what Republic Services termed part of the "low value waste streams."
"Nobody wants the glass," said Michael Hoffman, a Stifel analyst covering environmental services. "I don't care if you're little or big."