Falling Commodities Crush Recyclers

The end of 2008 through March of 2009 has seen a precipitous drop in the price of commodities, particularly aluminum, steel, and iron, though copper is improving in China. This drop has caused a similar drop in the price of recycled, or scrap materials from recyclers.

As I have written previously in, "Your Garbage, My Money," recyclers were seeing a real boost in the price for their metals, etc. However, the cratering of commodities and the global economy as a whole, has seen the demand for scrap drop accordingly. eFax Annual Subscription

For all my readers who love charts, I have included charts from metalprices.com, who kindly allows the reproduction of their charts. Below, you will find charts for scrap iron, which includes steel, and scrap aluminum.



What does this spell for recyclers? Simple, the gray old mare ain't what she used to be. Like every business in the industrial supply chain, from oil to scrap to finished products, demand has fallen and everyone is pinched. Some recyclers are refusing new items, as their yards are filled to capacity. Cheap? No. 100% Free. Trade stocks for free on Zecco.com. The Free Trading Community. www.zecco.com

Some of the largest recyclers are US municipalities. Solid waste fees were paid in part by the sale of recycled local waste. Now, according to americancityandcounty.com, municipalities are seeing drops of 50% in their recycling revenue and now are considering additional user "fees" to cover the short fall. In other words, taxes. Compare Auto Insurance Quotes and Save!

However, some localities are fighting the decline in prices with an increase in supply, "Others, like the Philadelphia suburb of Cherry Hill, N.J., are even paying residents with retail vouchers to recycle through a program from New York-based Recycle Bank."

Even when it comes to trash, the market sorts itself out. As long as steel and aluminum are being produced, there will be a market for scrap, though watch for many of the smaller players to get consolidated as the demand for continues to drop.

Your Garbage, My Money

While many of my regular readers may think that I am opposed to all things green, allow me to disabuse you of that notion. I believe in doing things that are cost efficient and effective, like green roofs. You can read my blog, Clean Air through Green Roofs .

I am a big fan of recycling, particularly those things that make sense to recycle, like steel and aluminum. However, when it takes more resources to recycle than it takes to make the product from scratch, I am skeptical.

In the July 24th edition of Business Week, there is an article titled, "Cash for Trash." It discusses how not only are traditional waste management companies making money from recyclying, but venture capital money is going to firms, "...which includes everything from materials recovery to sewage biotechnology..."

There is a simple "why" to the question of increased recycling.

"The calculus is simple: As the prices of oil and other raw materials rise, recycled products become more attractive. Consider that 8% of global oil production is siphoned off to make plastic each year. Recycled plastic, however, requires 80% less energy to produce. Recycled aluminum burns up 95% less energy. Recycled iron and steel use 74% less, while paper requires 64% less."

So there you have it. Recycling now is worth it! Is anybody surprised? They shouldn't be. In a world of ever shifting commodity prices and consumer tastes, new markets show up to take advantage of any disequilibrium. When the cost of oil and metals goes down, don't be surprised to see recycling businesses fade away, just like in 2002, when "Mayor Michael Bloomberg, ...suspended the city's glass- and plastic-recycling services in 2002..." Things change, markets change, tastes change and generally that's good, because that's how markets are made.