Recycled Paper: Realities and Forecasts
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MRF operators, brokers and others recently discussed why fiber is still “the elephant in the room” in municipal recycling conversations.
During a recovered fiber session at the 2019 Resource Recycling Conference and Trade Show in New Orleans, stakeholders from throughout the paper recycling sector discussed where the market is and where it’s headed.
Fiber is the “elephant in the room” as far as the value of the residential mix that municipalities receive, said Dave Claugus, vice president of Pacific Northwest MRF operator Pioneer Recycling Services.
The session featured experts from the American Forest & Paper Association, Gemini Corporation, the Continuous Improvement Fund, Sustana Fiber and Pioneer Recycling Services. It was moderated by Mick Barry of Mid-America Recycling.
Why the fiber focus?
Paper is the “main event” at a MRF, said Claugus. In the Pacific Northwest, paper makes up 75% of the material that comes onto the tip floor Monday through Friday.
“That means that paper moves the price of whatever the processor can pay or needs to charge the municipality,” Claugus said.
For example, if paper moves by $10 per ton, it is going to influence the combined value of recyclables by $7.50 per ton. If PET moves by $10 per ton, on the other hand, that would influence the combined value of the recycling stream by just 25 cents per ton due to its smaller volume in the stream.
Claugus argued there is an inelastic supply of recycled paper at the MRFs, meaning the supply does not respond to price and is relatively fixed.
“The generators of this material are totally disconnected from price. They have no price signal and so they don’t respond,” he said. This dynamic represents a “huge change” from when Claugus got started in the industry 40 years ago, he added, and the inelasticity has “profound” implications for the pricing of the material.
Under this dynamic, “when you have a shift in demand you’re not sliding gently down a supply curve, you’re falling off a cliff, and that’s why the pricing for recycled materials are so volatile,” he said.
Claugus also offered his opinion that volatility is the norm in the pricing of recyclables and that stability is the exception. And recognizing these realities, he said, is key to making sustainable recycling contracts..
Original Source: Resource Recycling
