1
GRC Annual Conference St. Simons
Island, GAAugust 2015Recycling Megatrends
Bill MoorePresidentMoore AssociatesAtlanta,
GAwww.MARecycle.com
2
Moore Associates Paper Recycling Market
Consultants

• Recovered Paper Market Experts
• Based in Atlanta, Global Practice
• Market Research
• Strategic and Tactical Business Assistance
• Pricing Analysis
• Recovered Paper Sales Procurement Assistance

3
My Personal Background

• Less well known about me is my broad
  environmental industry and recycling background
• Environmental business professional since 1975
  long before it was fashionable
• Air, water, and waste responsibilities in the
  chemical industry
• Hazardous waste, Superfund, groundwater work in
  the late 1970s/early 1980s
• All material recycling work in the mid 1980s
• First recycling specialty before paper was
  plastics

4
Presentation Format

• First well cover modern recycling history
  (since the 1970s)
• The overall megatrends forecast going forward in
  US recycling will be covered throughout
• A fairly deep dig into paper recycling issues,
  our strong suit
• A look at plastics recycling, an important and
  fast growing segment
• Finally a look at EPR and organics recycling
• Closing with a Future Trends summary

5
US MSW Recovery Rate1960 - 2012
6
Legislation that Moved Recycling Forward 1970s

• 1970 The Big Year!
• Earth Day
• National Environmental Policy Act (NEPA) -
  established a US national policy promoting the
  enhancement of the environment
• EPA formed
• NEPA led to the Resource Conservation and
  Recovery Act (RCRA) to regulate solid and
  hazardous waste
• While RCRA applies to solid waste, the early
  years focused on hazardous waste regulation
• While not solid waste, the Love Canal issue
  (hazardous waste induced groundwater
  contamination in western NY in the mid-1970s)
  added fuel to the disposal/groundwater
• Led to the 1980 passage of Comprehensive
  Environmental Response, Compensation, and
  Liability Act (CERCLA
• commonly known as Superfund)

7
Resource Conservation and Recovery Act (RCRA)

• While RCRA regulates solid waste, it has very
  little direct attention to recycling
• It did address recycling commodities markets and
  required the Federal government to purchase
  recycled content products paper, motor oil,
  etc.
• This approach to end market stimulus became a
  model for many states to follow and even
  businesses
• The most important effect of RCRA on recycling
  set the environmental standards for the disposal
  of MSW, thereby forcing closure of substandard
  landfills it caused disposal costs to steadily
  increase for thirty years, the most important
  driver of recycling

8
Modern Recycling Collection History 1970s

• Up until the 1980s, recycling primarily took
  place through scrap yards (focused on metals) and
  paperstock plants not residentially oriented -
  buy backs, newspaper drives, etc.
• Commercial/industrial recycling always happened
  on an economic, avoided disposal, market
  supply/demand basis
• There were a few ONP only household collections
  in early/mid 1970s and even some activity in the
  1960s as the first recycle fiber based newsprint
  mills emerged in New Jersey and Illinois.
• First real multi-material residential recycling
  programs started in the US in Somerville
  Marblehead, MA (1976)

9
Residential Curbside Comes of Age the Middle
1980s

• Almost at the same time, three areas of
  residential curbside collection emerged, with
  pretty different approaches
• New England/New Jersey dual stream collection
  one household bin, two compartments on the truck
  paper (usually only ONP) and containers (only
  steel Al cans and glass). Materials were
  sorted/processed at the first generation true
  MRFs
• Ontario, Canada the blue bin system which
  featured collection vehicles with three or four
  bins and the materials were sorted at the
  truck-side
• Northern California three bins in the household
  and the truck ONP, metal containers, glass
  containers processed at simple MRFs

10
Curbside Recycling Turning Point

• 1986/87 When San Jose, CA decided to implement
  a city wide residential curbside recycling
  program after piloting it in a small area
• Pilot programs in parts of cities were the
  approach in the late 1980s as city official
  wanted to determine would it work (would people
  participate!)
• First very large city (about 750,000 population)
  to have full curbside recycling program
• Three bin program popular at the time in
  California, modeled after the Santa Rosa, CA
  program run by local company Empire Waste
  Management
• Mississauga, ON was Canadas first large curbside
  program 1986 (population 375,000)

11
Multi-Material Processing Facilities the Early
Years

• As mentioned earlier, paperstock plants and scrap
  yards were the earliest processing facilities
• Some of these emerged as the first MRFs
• Peter Carter Resource Recycling Systems (CT)
  the godfather of the modern multi-material
  processing facility
• His facilities in the northeast US were the first
  real MRFs
• Several operations in Connecticut (Hamden?)
• Camden, NJ the first real MRF to process dual
  stream material (at a scrap yard)
• RRS assets were acquired/rolled up over the years
  into todays ReCommunity

12
MRF Style History (courtesy of Nat Egosi, RRT)
13
Late 1980s

• Mobro the garbage barge the Flying Dutchman
  of solid waste a barge of MSW from Long Island
  that wandered the Atlantic for months in 1987
  going as far as Belize seeking to dispose of its
  cargo ultimately going back to NY where it was
  incinerated
• Significant number of old, environmentally
  unsound dumps closed as a result of the
  implementation of Subtitle D of RCRA
• Perceived shortage of disposal capacity
  throughout the US
• Skyrocketing landfill costs, a number of costly
  waste-to-energy plants built
• Higher disposal costs/perceived landfill capacity
  shortage accelerates move to recycle
• A number of states enact recycling legislation

14
US Average Annual MSW Gate Rates1990 to 2014 -
/Ton
15
Residential Recycling Grows 1990s

• All three types of earlier collection/processing
  operations grew in the first half of the decade
  truck-side sort, two (dual stream) and three
  compartment trucks
• New materials are added
• Plastic containers usually only PET HDPE
• Additional paper grades added, Mixed Paper OCC
• The first single stream programs emerge
• Toward the middle to later 1990s, truck side sort
  and three bin trucks start to fade because of
  high collection costs
• By the end of the 1990s dual stream collection
  still leads with single stream gaining

16
Recycling in the 2000s

• Residential
• Single stream collection gains market share
• Dual stream programs decline
• Mixed Waste Processing starting to emerge
• Organics at the curb
• Many new materials added, poly-coated packaging
  and others
• Commercial/Institutional/Industrial
• Has remained fairly similar over the last thirty
  years, with efficiency improvements
• Single stream commercial emerges and gains
  momentum
• Recyclable commodity quality continues to
  deteriorate as collection systems change and
  recovery rates go higher

17
Number of Operating MRFs and Mixed Waste
Facilities in the United States
Source Governmental Advisory Associates, Inc.
Database of Materials Processing Facilities in
the United States. Westport CT., 2015.
18
Growth in Single Stream MRFs
Source Governmental Advisory Associates, Inc.
Database of Materials Processing Facilities in
the United States. Westport CT., 2015.
19
The Current Decade

• Greening and sustainability movement takes hold
  in both the general public and businesses/governme
  nt follow suit spurs recycling even further
• Sustainability becomes an important factor in
  source reduction, material/packaging choices
  changes the attitude of the generators of MSW
• Extended Producer Responsibility increasing?
• Partly because of recycling, the amount of MSW
  disposed of begins to decline. Disposal costs
  moderate, disposal capacity not an issue
• Recycling becomes mainstream
• Quality of recyclables bottoms out
• Interest in Mixed Waste Processing increases
  see next slide

20
Operational and Planned Mixed Waste Facilities by
Year
Source Governmental Advisory Associates, Inc.
Database of Materials Processing Facilities in
the United States. Westport CT., 2015.
21
Paper Recycling
22
Global Paper and Board Production (Million Tonnes)
23
Chinese Production by Major Paper GradeMillion
Tonnes
Grade 2002 2010 2016
Newsprint 1.85 4.30 3.97
Mechanical PW 0.15 2.05 3.53
Woodfree PW 10.85 20.52 27.18
Containerboard 10.85 37.50 57.20
Tissue Paper 2.73 5.25 8.54
Other PB 11.41 23.49 30.80
Total PB 37.83 93.10 131.22
24
The Change in North American RCP Consumption Over
Time
2x ONP
9x ONP
Source Numera Analytics
25
OCC Recovery Cost vs Price vs Recovered
26
OCC Future Demand Trends

• Chinas huge appetite for OCC drives the world
  price
• Over the next five plus years, we may see
  unbleached kraft pulp be competitive with OCC
  especially at the top of the pricing cycles in
  China but supply of the grade is limited and
  expensive
• An even more likely scenario is the use of
  additional virgin kraft pulp in place of some OCC
  in the US Southeast (expect kraft
  pulping/recovery system debottlenecking projects)
• New OCC based containerboard mill projects in
  Asia (including China), Europe, Middle East, and
  North America (newsprint, etc. machine
  conversions,
• SP Fiber Technologies is a good example)

27
Mixed Paper Market Issues

• Serious downside/bottom of the price cycle
  problems over supply
• Quality fiber length, mix, and non-paper
  contaminants significant capital expenditures at
  the mill needed to use the grade and low yield
• Not a grade that was historically desirable to
  produce, but RMP changed that. Grade with a
  limited market modern Chinese mills and our own
  Georgia Pratt Industries changed that a
  purposefully produced grade now

28
ONP Supply/Demand Issues

• Downturn in global use of newsprint
• Merging with Mixed Paper price and
  quality/fiber composition
• Supply short nature of the grade will keep bottom
  of the cycle prices higher than historical
  performance
• ONP is an uneconomical raw material for producing
  newsprint over ¾ of the pricing cycle
• Newsprint mill shutdowns over the last five years
  have been biased toward recycle
• Mechanical virgin pulp is far preferred to
  recycled (ONP) from both a cost (in the US,
  different in high electric cost regions e.g.
  Europe) and quality standpoint

29
ONP Demand(continued)

• All new ONP demand growth is from
  cartonboard/boxboard where it is a minor part of
  the furnish (lt20) and is often obtained from
  Residential Mixed Paper
• But ONP is such a supply short grade and use in
  cartonboard/boxboard makes it unrecoverable for
  use in newsprint which causes the bottom of ONP
  market to be fairly high by historical metrics
• Clean, high quality 7/8 deinking ONP for
  newsprint/recycled mechanical fiber grades
  becomes a specialty, at a premium price to
  regular ONP

30
US Printing/Writing Papers Supply
31
World Tissue vs Printing/Writing
Production(Million Tonnes Note not all tissue
is made from recycled fiber)
PW Consumption
Tissue Production
32
Major Recovered Paper Quality Issues

• Plastic film contamination of all grades
• Glass is a serious contaminant in both ONP and
  Mixed Paper and a costly item from a
  collection/processing /MRF equipment operating
  cost perspective
• Mixed collection leads to both higher non-paper
  and other fibers contamination
• OCC quality degradation from increasing recycled
  fiber based containerboard (short fibers) and
  more boxboard content
• Unbleachable fiber and other contaminants in ONP
  and high grades

33
Plastics Recycling

• This section comes largely courtesy of Moore
  Recycling Associates and specifically my
  colleague and plastic recycling expert, Patty
  Moore

34
PET

• Demand outpaces supplyUS reclamation capacity
  growing
• Bale quality droppingInability to enforce bale
  specifications
• Thermoforms may provide reliefIssues need
  addressing
• Look-alike containers
• Size, shape
• Labels, inks, glues

35
HDPE Bottles

• Potential supply stagnant
• US supply vs reclamation capacity in balance
• NHDPE bottles hit an all time high price in 2014

Resin SalesB lbs Bottles RecycledB lbs Recycling Rate
2008 3.2 .94 29
2009 3.4 .98 29
2010 3.3 .98 30
2011 3.2 .98 30
2012 3.2 1.02 32
2013 3.3 1.05 32
36
Film Bags

• Tremendous opportunity for growth
• Commercial Collection is Key
• Discourage Curbside
• MRF Difficulties
• Low Value

37
Barriers to Overcome

• Most scrap plastic is sold on a spot-market
  basis need reliable pricing index
• Lack of accepted standard terminology but
  recent new ISRI specifications

38
Extended Producer Responsibility (EPR)

• To date in the US, mostly aimed at special
  recyclables batteries, electronics, etc.
• Many believe it is the future of recycling
• Some retailers/consumer product producers are the
  strong supporters of EPR as the magic bullet
• Strong pushback from packaging producers
• Existing recycling infrastructure providers also
  are generally opponents
• Traction in Europe Canada
• Likelihood of broad adoptions in the US?
• Source of state and local funding for recycling
  programs important factor

39
Source Product Stewardship Institute (PSI)
40
Organics Recycling

• This section comes largely courtesy of Kessler
  Consulting, Inc. of Florida and specifically my
  long term colleague and organics recycling
  expert,
• Peter Engel

41
Organics Recycling

• A large part of the waste stream
• Yard waste recycling came on quickly early in the
  1980s
• Food waste recycling is the new frontier
• Anaerobic digestion an old idea, gaining again?
  Has a long history of application to biosolids.

42
Recovery of Organics
Source EPA MSW in the U.S., 2012
43
Food Scrap RecoveryPoised for Growth Facing
Challenges

• Food scrap recovery is next frontier for meeting
  high diversion goals
• Food scrap recovery mandates / disposal bans
• Collection and processing infrastructure are
  immature and not well integrated
• Organics recycling facility capacity insufficient
  to meet demand
• Organics recycling facility regulations are
  inconsistent and not standardized

44
Anaerobic Digestion Comes of Age

• Renewal energy from organics
• One of the earliest demonstrations of this
  technology applied to MSW took place in south
  Florida Refcom 1970s
• Standardized designs and multiple vendors for
  high solids digesters
• Business models include diverse product stream
  digestate, bio-gas, electricity, heat. Energy
  recovery essential to financial viability
• Manure digesters support farm economies and
  nutrient management

45
Future Trends
46
Overall and the Drivers

• US MSW recovery rates are expected to grow only
  slowly no return to the fast gains of the mid
  1980s through early 2000s
• Legislative initiatives will only occur at the
  state level and be limited, focused on special
  materials/situations
• Disposal costs, much like recovery rates are
  expected to increase only modestly
• Global end use markets for recyclables will
  expand slowly and adjust to accommodate to the
  available supply

47
Disposal

• Waste to Energy growth will be limited as it has
  been for almost twenty years now
• Pay As You Throw/volume based disposal approaches
  will grow slowly
• We will continue to rely on landfills as the
  primary means of disposal after recovery of
  recyclable materials
• Mixed Waste Processing and conversion of major
  parts of MSW to fuel substances or other useful
  materials after removal of some recyclables may
  play a role.

48
Processing Facilities

• They will continue to increase in size, feature
  more sophisticated equipment, and continue the
  positive trend of operating more like
  manufacturing facilities
• Single stream facilities are here to stay
• Increased emphasis on incoming material quality
  and decreasing MRF residue (the current level at
  many programs is unacceptable)
• The jury is out on Mixed Waste Processing
  Facilities if they cant produce usable recycled
  commodities, they wont happen

49
Producing Paper Board Using Recycled Fibers

• For the last several decades, recycled fiber has
  had a distinct cost advantage over virgin fibers
  for the production of newsprint, away from home
  tissue products, containerboard, and recycle
  paperboard. But not for printing/writing grades
  and high end packaging.
• Increasing recovered paper costs over the next
  ten years may change the cost advantage dynamic
• Higher commodity cycle costs
• Lower quality, shorter fibers and non-fiber
  contaminants - lower yields, higher processing
  costs

50
Plastics

• PET prices will be depressed for the next year
  (or so) due to an over supply of virgin resin
• All recycled plastics including mixed resin rigid
  plastic will increasingly be sold to domestic
  buyers (rather than exported) who will further
  sort it. Bales will increasingly be priced based
  on yield so quality suppliers will get more for
  their plastic bales than those of lower quality.
• Design for recyclability will become increasingly
  more important
• Film, bag and wrap collection will continue to
  grow quickly

51
EPR and Organics

• EPR
• Strong interest from retailers/consumer product
  interests
• Implementation in Canada Europe
• But how well will it fly in the US?
• Funding source for local government recycling
  programs
• Organics
• Food scrap recovery programs will expand
• The favorable economics of anaerobic digestion
  will drive expansion
• A major challenge will be the impact of
  contamination in source separated organics or
  organics recovery facilities, and the issues
  related with biodegradable plastics both in the
  organics and recycling stream.
• Compost production and use will become
  increasingly specialized to address specific
  market needs

52
Quality

• By 2010, recyclables quality had fallen to the
  lowest acceptable level inevitable outcome of
  higher recovery rates
• The inverse relationship of quality and price of
  recyclable commodities
• Domestic manufacturers have had trouble using the
  lowest quality material for quite some time new
  overseas capacity provided demand (especially
  China)
• Chinas Green Fence set the new bottom
  largest impact mixed plastics and Mixed Paper
• Quality initiatives by a number of organizations
  Recycling Partnership, NWRA, AFPA, Waste Mgt,
  etc.
• Generator education and incoming quality to the
  processing facility

53
End Markets

• Global
• Demand for recyclable raw materials will grow to
  meet the growing supply
• US
• Manufacturing industry doing well, slow but
  steady increase in the use of recyclables but
  varies by material
• India
• On a percentage basis, strong growth in
  recyclable demand
• But starting from a low base and will the country
  be able to sustain growth as China has?
• China
• Overcapacity/low operating rates in recyclables
  end user capacity
• Will domestic packaging demand increase to absorb
  capacity? History tells us it will!

54
Thank You for Your Attention

• WWW.MARecycle.com

Moore Associates