1. The role of recycling in growing the economy Jerry Powell Resource Recycling Portland, Oregon www.resource-recycling.com

2. What well look at today Changes in recycling markets through the decades An assessment of where markets might be headed A display of the regional opportunities at hand for economic growth through recycling Questions and (attempted) answers

3. Recycling markets A history of U.S. recycling markets over the past three decades would focus on: -- market growth, especially globally -- the removal of much of the markets volatility (except for late 2008) -- domestic market contraction -- investment and consolidation

4. Recycling market growth In many ways, recycling has moved from being a green, niche market to a fundamental way to acquire raw materials. This growth has been aided by: -- technological innovation, such as deinking -- rising disposal fees -- growing scarcity of virgin raw materials

5. Recycling market growth Examples of technological innovation: -- from corrugating medium to linerboard -- bottles-to-bottles plastics recycling -- optical sorting of plastics and glass -- recycled plastic decking products

6. Total MSW generation (by material), 2009 243 million tons (before recycling)

7. MSW management in the United States, 2009

8. MSW recycling volumes and rate

9. Recycling rates for selected products, 2009

10. We have seen growth in collections

11. We have seen growth in processing

12. We continue to grow

13. Recyclings growth Yes, more than 10,000 communities, where 63 percent of Americans live, now collect recyclables curbside. Yes, 193 million Americans can set out recyclables weekly. But our progress has slowed. Recycling rates have flattened out.

14. UBC recycling rate

15. HDPE recycling rate

16. PET recycling rate

17. Paper recycling rate

18. Steel recycling rate

19. Less market volatility The value of recyclables has risen over time: Material 19902010 ONP and OCC$40-$60$130-$160 Aluminum cans30-40 cts70-90 cts PET bottles10 cents30 cents

20. Less market volatility At the same time, recyclings price moves are less severe. What explains most of the growth in recycling markets over the past two decades and the rising level of market stability? Hint: Its a five-letter word.

21. Less market volatility We have seen a fundamental shift in critical recycling markets. The continuing rise in Chinese demand, even during a recession, has resulted in systemic changes in the American recycling market.

22. Plastics exports

23. Ferrous scrap exports

24. Less market volatility Even with rising exports, recovered material pricing has been very attractive, except for a recessionary dip in late 2008.

25. Homopolymer HDPE bale prices

26. Aluminum can prices

27. PET bale prices

28. Recovered paper prices (18 grades combined)

29. ONP No. 8 price

30. Ferrous scrap prices (No. 1 HMS)

31. Less market volatility So what happened in the Great Recession of 2008-2009?

32. Impact on exports in the first quarter of 2009 MaterialVolumePrice Paper- 14%- 22% Plastics+ 15%- 32% Aluminum- 40%- 31% Ferrous Scrap+ 12%- 26%

33. Domestic market contraction The crunch created by high export demand has had a profound impact on a number of domestic recycling industries. Well look at two examples: PET bottles and newsprint.

34. Domestic market contraction PET reclaimers have lost share to Chinese buyers. This is the share held by exports for bales of plastic bottles from the U.S. MRFs: 200022 percent 200235 percent 200437 percent 200651 percent 200857 percent 201050 percent

35. Domestic market contraction PET reclaimers are thus operating at less and less of their combined capacity: 200484 percent 200686 percent 200880 percent 201073 percent

36. Domestic market contraction The situation is far worse for recycled newsprint producers, including mills here in Tennessee.

37. Paper collections continue

38. Use of recovered fiber by U.S. paper industry sector

39. Recovered paper exports

40. 2010 recovered paper market 2010 Marketplace 61% 39% 2010 Marketplace 61% 39% Versus 2009 +7.0% -3.8% +3.4% Versus 2009 +7.0% -3.8% +3.4% Million Tons 31.3 20.2 51.5 Million Tons 31.3 20.2 51.5 Domestic Exports Total

41. Newsprint: a serious problem North American shipments in million tons: 2007: 12.2 2008: 11.2 2009: 8.1 2010: 8.6 This is a loss of 30 percent in just three years.

42. Paper recycling markets: Bankruptcies AbitibiBowaterNewsprint CaraustarPaperboard Newark GroupPaperboard Smurfit-StonePaperboard.

43. Paper recycling markets: Closures Blue HeronOregon City, OR CaraustarChattanooga, TN CaraustarRichmond, VA CaraustarCharlotte, NC International PaperAlbany, OR Smurfit-StoneMissoula, MT SonocoRockton, IL SonocoLancaster, OH

44. Investment and consolidation We are going through a multi-year period of industry consolidation. New investments are being made, especially in collection and processing, and end users are buying competitors.

45. Investment and consolidation More and more recyclables will be collected and processed by fewer and fewer players. Mergers and acquisitions will continue.

46. The impact Big supplierMillion tons/year ReCommunity1.0 Greenstar North America2.0 Republic/Allied Waste3.3 Waste Connections1.0 Waste Management8.5

47. The impact Big consumerMillion tons/year Abitibi-Bowater2.0 Caraustar3.0 Cascades2.1 Georgia-Pacific4.0 International Paper5.0 Rock-Tenn/Smurfit4.7

48. The impact Steel companyProcessing plants Commercial Metals36 Nucor58 Schnitzer Steel42 Steel Dynamics27

49. The impact Paper companyProcessing plants International Paper33 Newark Group11 Rock-Tenn/Smurfit37 Sonoco17 SP Newsprint21

50. 6: Continued consolidation Top 50 recovered paper processors: o handle nearly half of all collected fiber o operate 612 plants o average plant does 3,200 tons per month Source: Moore & Associates, 2010.

51. 6: Continued consolidation Top four metal processors handle 23 million metric tons per year o Sims: 7.2 million metric tons o OmniSource: 5.8 million metric tons o Schnitzer Steel: 5.2 million metric tons o David J. Joseph: 5.0 million metric tons

52. Investment and consolidation Consolidation and investment are changing recycling. For example, MRFs are getting bigger. As more and more large, regional, hub-and- spoke MRFs come on-line, youll see smaller and smaller communities moving to single-stream recycling collection.

53. Investment and consolidation And more people will be provided single- stream recycling collection service: 2005 – 29 percent of the population had access to single-stream collection 2010 – 64 percent had access

54. The future: deindustrialization The lack of attention in the U.S. toward an industrial policy will hurt recycling. As piles of recyclables climb, states will be urged to, once again, launch recycling market development programs.

55. The future: deindustrialization Only 9.3 percent of American worker force is in manufacturing. The U.S. added 937,000 jobs in 2010, while Foxconn, Chinas largest employer, added 300,000. The company now employs one million.

56. The future: Chinese economic growth Recycling markets will again shift as China becomes a developed country: -- modest return of U.S. manufacturing -- higher westbound freight rates will dampen demand for U.S. recyclables -- investment by China in raw material production in Africa, Asia and elsewhere -- China will become much more self-sufficient in recycling

57. The future: Chinese economic growth National Association of Manufacturers: Chinas challenge to U.S. manufacturing has peaked, and its competitive advantage is in decline.

58. The future: Chinese economic growth National Association of Manufacturers: Chinas challenge to U.S. manufacturing has peaked, and its competitive advantage is in decline.

61. Chinese CRT glass processing

63. Resource Recycling Portland, Oregon

64. Resource Recycling Portland, Oregon

65. Regional opportunities Three large opportunities exist here, especially given the strength of the region in terms of recovered fiber, plastics and metals. The first is business retention.

66. Regional opportunities Ahlstron, American Tissue, AbitibiBowater, Buckeye Technologies, Cascades, Chattanooga Paperboard, Domtar, Kimberly- Clark, Kruger, Lydall, PCA, Ponderosa Fibres, Rock-Tenn, Sonoco, Southern Cellulose, Tamko, Temple-Inland

67. Regional opportunities

68. The second opportunity is to increase supply. Here are just some of the ways: -- serve more sources, such as multi-family -- charge higher tipping fees -- make recycling participants do a better job (the 20-60-20 theory)

69. Regional opportunities -- consider mandatory requirements -- consider deposits -- provide convenience, convenience and more convenience -- implement pay-as-you-throw systems -- institute MRF best practices

70. Regional opportunities The third opportunity is to establish new businesses in the region that rely on recovered materials. Place recycling and composting as key elements within any economic development initiative.

71. Conclusion We are far from being a sustainable practice, and more effort is required for us to move forward. That is recyclings greatest challenge going forward.

72. Sustainability Economy EcologyEquity

73. Conclusion We are ready once again to move forward. And we must.

74. Energy consequences of not recycling Material Annual lbs per Household Barrels Saved per Ton Barrels Lost Annually Energy Value Lost (@$75/bbl in billion dollars) Value per Household Fiber1,821.61.7085,425,000$6.407$116.14 Aluminum Cans27.040.0028,936,875$2.170$40.47 PET Bottles39.016.3028,115,870$2.108$23.87 HDPE Bottles30.116.3020,454,870$1.534$18.41 Glass Bottles883.40.124,543,855$.341$3.98 Steel Cans19.21.801,141,756$.085$1.30 Total2,820.41.93168,618,226$12.645$204.16 168,600,000 barrels or 3.5% Source: SWANA/SRI

75. We are sending money to the landfill

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77. Drop me a line Jerry Powell Resource Recycling jpowell@resource-recycling.com