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Depressed Commodity Markets Impact Recycling Processes As Well

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Global manufacturers are well aware of the impacts that China’s reduced demand for commodities is having on commodity prices. Add to that the unprecedented declines in the current cost of crude oil and refined petroleum products and the implications have both positive and not so positive consequences on product supply chains.

One area often overlooked but fundamental to ongoing supply chain sustainability strategies is the recycling of post-consumer materials.

Last week, The New York Times brought attention to the U.S. recycling industry being in financial crisis as a result depressed commodity and oil prices. Recycling is a commodities business, one that has become essential towards insuring sustainable supply chain practices and greenhouse gas reductions. However, as the Times reports, recycling firms are currently fetching half of what they previously garnered for post-consumer recycled materials such as plastic and paper board. The report observes:

So as plentiful fossil fuels saturate global markets, it has become cheaper for the makers of water bottles, yogurt containers and takeout boxes to simply buy new plastics. This, in turn, is dragging down the price of recycled materials, straining every part of the recycling industry.”

For this author, there was a bit of irony to the current situation since I recall that during the global financial crisis that sapped consumer and industrial market demand, a similar crisis threatened the entire U.S. recycling industry.  In fact it was the Times that brought attention to that situation even then.

Waste Management, the reported largest U.S. recycler has now reduced the total number of recycling facilities the firm operates from the previous 130 to now 100 facilities amid a 16 percent reduction in revenues from this segment. As recyclers face further losses they are attempting to pass additional costs back to cities and municipalities but are often hindered by long-term contracts.

However, sustainably responsible companies like PepsiCo, Procter & Gamble, Unilever and others are adhering to their commitments for buying more recyclable materials.

The report cites U.S. Environmental Protection Agency (EPA) data indicating that the percent of recycled waste in the U.S. has more than doubled from 16 percent in 1990 to 34 percent in 2013.  One would suspect that percentage is even higher today.

Like all other commodities, there will be cyclical cycles in markets.  With the recent signing of the Paris COP21 Agreement on Climate Change, it is important more than ever for industry supply chains to encourage additional post-consumer recycling practices, not to reduce them.

By our lens, this is an area that remains prime for private industry and government collaboration, market incentives and more efficient infrastructure to insure that supply chains attain more aggressive greenhouse gas and water use reductions.  Our planet cannot afford less in such efforts.

Bob Ferrari

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