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Fee-for-service is back big time on recycler’s e-agenda

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The economic slide has been brutal to many industries, among them scrap. Hopes that electronics recycling eventually would become self-sustaining from commodity revenue have faded.

"We're no longer paying for the lowest-value products, like printers, faxes, copiers, etc. Even some items with higher metal contents are not generating enough in material value to cover processing costs," said a manager at one electronics recycler that handles most of the physical processing in-house with high-end technology.

Sims Metal Management Ltd., which boasts the world's largest electronics recycling intake, told financial analysts that high-tech recyclables may soon return to a fee-for-service model, charging clients supplying the defunct equipment.

During the high-price period, the company was profitably able to pay for discarded electronics from commodity revenue and from reselling equipment or parts that still worked. But the second half of 2008 changed all that.

Most municipal recycling agencies have been running at a loss since autumn. Madison, Wis., which keeps detailed records, recently shared its flow-of-funds tallies with AMM.

The city collects aluminum cans, steel, paper, glass and plastic. Sometimes it makes a profit from these materials; other times, it ends up writing checks to the recycling contractor. Glass never pays its way even in the best of times, although that commodity's red ink got much worse when Madison stopped asking residents to sort their recyclables in October 2005.

The earliest period with statistics, early 1991 through mid-1994, saw Madison paying its recycling contractor as much as $14,904 a month. Late 1994 and most of 1995 were positive, including the best month in Madison's recycling records a net gain of $114,561 in May 1995 thanks to peaks in aluminum cans, corrugated cardboard and high-density polyethylene.

A very cyclical decade followed. The net cost of Madison's recycling was negative for most of 1996, positive through August 1998, negative through May 1999, positive to the end of 2000, negative through April 2002 and then mostly positive to the end of sorted, or multi-stream, recycling at the end of September 2005.

The 1995-2005 annual troughs were negative $8,940, $16,190 and $15,616, in contrast to cyclical peaks of positive $20,145, $37,903 and $43,496. Single-stream recycling did fine in its first three years, with a monthly peak of $106,748 in net revenue for the city in July 2008—just before commodity prices began their plummet. December produced a negative $69,155, followed by a minor improvement as 2009 opened.

Much ink has been spilled over whether recycling makes sense when it doesn't pay its way.

An enthusiastic debater on the topic is journalist and blogger Adam Minter, a Shanghai resident whose family owns a Minneapolis scrapyard. In January, he was a guest from afar on an Irish radio program discussing recycling and China.

Minter told his blog readers he was bothered by the mindset he encountered during the broadcast that recycling is a civic responsibility rather than a business and that China somehow failed to live up to its end of an implicit bargain with the countries providing China with recyclables.

"It was an extraordinary cycle while it lasted" but was unsustainable, according to Minter. The Western economies eventually cooled and bought less from China, leaving China much less interested in foreign scrap.

Paradoxically, neighborhood recycling is more pervasive in China than in the United States, Minter said. But it is extremely responsive to price cues in its choice of materials, low in prestige and lacks any do-gooder element. It's a livelihood for poor people.

One response to Minter came from Robin Ingenthron, an environmental activist who also heads an electronics recycling company operating in Vermont and Mexico.

Ingenthron's view is that mining and primary smelting have so severe an impact on the environment that scrap should always be the preferred source of metal units. "The worst recycling is preferable to the best mining/forestry," Ingenthron posted to Minter's blog. "If the West doesn't export (scrap) copper wire, China will buy cathode and blister copper from primary smelters and mines. You need to go spend a year beside the Chuquicamata copper mine in Chile."

The tensions between recycling the business and recycling the ideology are sometimes resolved by politicians. An interesting take on that process was offered last year when George Adams began his two-year term as chairman of the Institute of Scrap Recycling Industries (ISRI).

"For the record, I have my doubts about the science of the climate change debate. (But) the climate change debate is happening whether we like it or not. Politicians across the world are climbing over each other to make laws that are somehow supposed to stop ice from melting."

Adams quoted an ISRI panelist as saying that anyone who does not have a seat at the table is likely to be on the menu. "Carbon credit trading or some other type of carbon-based economic model is highly likely in the next few years. That debate is either going to cost us money, save us money or make us money, depending on how prepared we are to participate," Adams said.


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