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June 25, 2018

China's new scrap-restriction policies disrupt CT's recycling industry

Photo | HBJ File Workers at the Materials Innovation and Recycling Authority plant in Hartford remove contaminants from a single-stream recyclables conveyor belt.
Photo | Pablo Robles MIRA's Thomas Gaffey reviews a bale of recyclables at the quasi-public agency's single-stream facility in Hartford.
Contributed photo A more recent shot of baled fiber being stored at MIRA in Hartford.

Connecticut residents and businesses may soon receive a lesson in the true cost of recycling.

Industry officials say that a recent shift in China's import policies has caused steep drops in the value of several high-volume recyclable commodities, including mixed paper and corrugated cardboard, which has sent the industry scrambling for new markets and buyers.

China, the largest foreign buyer of U.S. recyclables, has banned some recyclable commodities and cracked down on others with stringent new limits on how much contamination — meaning non-recyclable scrap materials — can be in the bales it buys (just 0.5 percent in many instances).

The new restrictions fall under China's “National Sword” policy that began kicking in last year and are aimed at cleaning up the East Asian nation's notorious environmental problems. Connecticut industry officials say the policy serves as a ban on certain recyclable commodity imports from the U.S., as few facilities here can produce bales with contamination rates of less than a few percent.

That's a major problem for Connecticut, which processes an estimated 1.25 million tons of recyclables each year, according to state data.

The situation has already translated into higher recycling costs and threatens to have an even bigger impact when current contracts between sorting facilities, haulers and municipalities expire over the next few years, should conditions persist.

There is some disagreement over whether China might blink and roll back its restrictions. Some believe the country needs more raw materials for industry than it can produce on its own, while others say this is the new normal.

Meanwhile, public and private recycling facilities in the state are scrambling to find new markets for their commodities, but it won't be easy to replace China.

“The concept that there's trouble in paradise is an important message to get out there,” said Steve Changaris, northeast manager for the National Waste & Recycling Association (NWRA), which represents private waste and recycling companies and equipment manufacturers. “It may cost more money to get this job done in the future.”

Michael Paine, chairman of NWRA's Connecticut chapter and president of East Granby waste and recyclables hauler Paine's Inc., said if prices for recycled commodities remain suppressed, sorting facilities will have to pass on higher costs to haulers and ultimately customers.

“At the end of the day, we have to pay our bills,” Paine said.

Lee Sawyer, legislative director at the state Department of Energy and Environmental Protection (DEEP), said so far, the agency hasn't received any waiver requests from recycling facilities that would allow them to burn or otherwise dispose of materials that are on Connecticut's mandatory recycling list. That happened earlier this year in Massachusetts, industry news publication Waste Dive reported, due to strained processing capacity at some Bay State facilities. Recycling operators have been forced to slow their conveyor belts to allow for more contaminants to be picked out of the recycling stream.

Connecticut facilities have done the same to meet China's new scrap restrictions, Changaris and others say.

Sawyer said DEEP is closely monitoring how China's new rules impact the cost of recycling for Connecticut's recycling industry, as well as municipalities and their residents.

“It's going to be a wakeup call for people to see how expensive this may get and how much cost is passed along to residents,” Sawyer said.

Regardless, DEEP will continue to promote recycling, Sawyer said.

“Our biggest concern is people might think we shouldn't recycle anymore,” Sawyer said. “We hope we can weather this storm and get back to a better place. In the meantime, we can't stop doing it.”

Hartford plant feels the squeeze

At the quasi-public Materials Innovation and Recycling Authority (MIRA) in Hartford, Thomas Gaffey, director of recycling and enforcement, has watched with concern lately as extra bales of paper have piled up at the 64,000-square-foot Murphy Road recycling plant.

Less than two years ago, Gaffey said MIRA was getting about $75 a ton for mixed paper.

“Right now, you're lucky if you're not paying to get rid of it,” he said.

When Gaffey spoke with HBJ in mid-June, there were nearly 700 bales of paper and other materials in his facility awaiting buyers, about double the typical amount. A few weeks prior, the backlog had accumulated to around 1,800 bales before MIRA was able to sell them off.

“It's getting tight,” Gaffey said. “I've never seen it this full in 30 years.”

He calls China's new rules a game- changer for the industry. Though some hope China might reverse or walk back the policy, Gaffey has a more pessimistic view.

“I don't think the impact from China is going to go away anytime soon,” he said. “I think it may be forcing a new norm that we're going to have to deal with.”

Lately, MIRA has been selling more of its bales to brokers from India, Vietnam, Indonesia and Malaysia. And for now, it's largely protected from financial downside by its contract with plant operator Republic Services, which bears the cost of paying to get rid of bales and also provides revenue-guarantee payments and other favorable terms to MIRA.

Gaffey said such contract terms are unique, and he's worried that once the deal expires in 2021 future offers won't be as generous.

“There's no doubt that we won't see a contract like this again, I don't believe,” he said.

In fact, Arizona-based Republic is asking MIRA to reopen its current contract because of losses it's suffering from plummeting commodity prices.

Republic spokesman Russ Knocke said the company is committed to recycling, but that changes are needed.

“In Hartford, like in many communities across the country, recycling has reached a crisis point,” he said. “In some communities, contamination levels are now putting the future of local recycling programs at risk.”

As of June 2017, MIRA had long-term contracts for both waste and recycling with approximately 40 municipalities. Its waste contracts include a per-ton “tipping fee” haulers (and ultimately, their customers) must pay, but so far, MIRA has not charged a fee for accepting recyclables.

Gaffey said that's changing in the private market and may change at the government-subsidized MIRA, depending on its financial picture.

“All the other [material recovery facilities] are charging for recycling,” he said.

Indeed, at the Housatonic Resources Recovery Authority, which contracts with a recycling company on behalf of its 11 member towns in Fairfield and Litchfield counties, recycling tipping fees have been creeping up, Executive Director Jennifer Heaton-Jones said.

Four years ago, HRRA members were charged $10 per ton for their recyclables. That rose to $25 a ton two years ago. It jumped to $40 earlier this year. HRRA has also seen declining rebate payments from its recycling contractor, Winters Brothers.

Heaton-Jones said the recent movement in fees and rebates is due to China's policies.

“Yes, absolutely,” she said. “It's just that ripple effect of the restrictions.”

Jonathan Murray, operations director at USA Hauling & Recycling, a private MRF operator, said tipping fees for recycling enable his facilities to remain viable.

"There has always been a cost to recycle but many communities have enjoyed, no fee or a small fee or even a rebate for many years because the sale of the commodities was sufficient to cover the cost of operations," Murray said. "With the change in the value of the commodities the cost to recycle must be shared for recycling businesses to be viable."

The long view

Some in Connecticut are trying to take a more measured view of China's import policy shift.

Among them is Tom DeVivo, owner of Willimantic Waste, which processes recyclables in Windham.

DeVivo said the private family business has chosen not to stockpile recyclables, even if it's meant paying to have them moved, rather than selling them.

“We keep it moving. We want fresh and clean inventory,” he said.

Falling prices hurt, but DeVivo said Willimantic Waste has tried to diversify by doing more waste collection, renting dumpsters and selling more scrap iron.

He recalls a time in the early 1980s, back when his father ran the business, that paper prices plummeted and bales stacked up because they couldn't move them.

“My father had paper everywhere,” DeVivo said. “This is just a storm that we're facing for my generation. Good times don't last forever but neither do the bad times.”

Related story: China policy adds new challenge for CT’s recycling efforts

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