May/June 2020
By Katie Pyzyk
The novel coronavirus has upended lives globally, and ALL recycling sectors are Feeling the effects. this may be the most challenging threat the industry has ever faced.
Most people never saw it coming. Word of a novel coronavirus spreading in Wuhan, China, first hit the news in early January 2020. Outside of China, people took little notice because other recent epidemics and pandemics—H1N1, the Zika virus, SARS, MERS—had been contained without significant worldwide effects. This virus was different, however.
We now know that whether or not they show any symptoms, people can carry and spread the coronavirus through close contact with others, which let it spread undetected for months. As infection rates, hospitalizations, and deaths grew, the World Health Organization declared COVID-19 a pandemic March 11, and the U.S. government declared a national emergency March 13. Federal, state, and local officials imposed increasingly drastic measures to curb the spread of the virus, creating a path of economic destruction that many worry will have serious long-term consequences as well. The effects are rippling throughout the recycling industry just as they are through all other sectors of the economy. “We’re part of the manufacturing supply chain. … If one link breaks, the whole thing breaks. Right now, several links are broken,” says Adam Dumes, vice president of Cohen Recycling (Middletown, Ohio).
By the end of April, economists could quantify some of the effects the coronavirus is having on the global and U.S. economies. The International Monetary Fund predicts the global economy will contract 3% this year, worse than the 0.1% contraction during the 2008-09 financial crisis. No country is immune to economic pain from the pandemic, it notes: For the first time since the Great Depression, advanced economies and developing economies both are in recession.
The U.S. Bureau of Economic Analysis’ advance estimate indicates U.S. gross domestic product fell 4.8% in the first quarter of 2020, a sharp turn from the 2.1% growth the United States saw in the fourth quarter of 2019. The Congressional Budget Office predicted in April that U.S. GDP will decline 12% in the second quarter of 2020, equivalent to a 40% annual rate of decline. It also predicted 14% average unemployment in the second quarter, compared with 10% average unemployment during the worst point of the 2008-09 financial crisis. In early May, the U.S. Bureau of Labor Statistics reported that the U.S. unemployment rate reached 14.7% in April, its highest point since the Great Depression. The BEA also said U.S. exports fell 9.6%, or $20 billion, in March compared with February; imports fell 6.2%, or $15.4 billion, in the same time period.
Scrap recycling was a $110 billion industry in 2019, but potential recycling industry losses from the pandemic are estimated at about $20 billion, says Joe Pickard, ReMA chief economist and director of commodities. More than 30,000 scrap recycling jobs also are at risk, he says. The effects on any one recycling business vary based on its location, what role it plays in the value chain, and which commodities it handles. Some companies continued to operate in March and April with few interruptions; others faced partial or complete shutdowns due to state and local measures to contain the virus; still others shut down voluntarily due to health and safety concerns or because of disruptions in their primary sources of supply. ReMA is only aware of a handful of recycling companies that have reported COVID-19 illnesses or fatalities, but many companies report that employees’ family members, friends, and other extended contacts have contracted the illness.
Recyclers’ concerns start with how to protect the health and safety of their employees; whether and how to operate—especially as states begin to relax emergency restrictions even as infection rates continue to rise; and how the coronavirus pandemic will affect the industry going forward.
Safety first
For most scrap businesses, the first and most widespread coronavirus-related effects were teaching employees about and adhering to the Centers for Disease Control and Prevention’s advice regarding effective hand-washing and surface cleaning, then providing them with the proper disinfectants and personal protective equipment. Next came “social distancing”—ensuring workers can remain six feet apart from each other and from customers or other yard visitors. Many scrap brokers, salespeople, administrative workers, and others who do not need to be on-site transitioned to working remotely. Scrap companies began looking at what other changes they could make to protect employees’ and customers’ health and safety. “It’s like every other safety thing in the business: It’s on your mind constantly, and you don’t take a break from it,” says Zach Mallin, vice president of Mallin Cos. (Kansas City, Mo.).
ISRI has been sharing best safety practices via virtual town hall meetings, e-mail updates, e-newsletters, and its website (isri.org/covid-19). Recyclers also have been sharing their best practices with each other. The uncertainty accompanying the novel coronavirus complicates EHS efforts, however. In late April, health experts were still not certain about all the ways the virus is or is not transmitted, how long an infected person is contagious, or whether after infection and recovery someone is immune from reinfection. The CDC, the Occupational Safety and Health Administration, the WHO, and other authorities are disseminating guidelines and action plans based on the best available information, but they change as more concrete data becomes available.
One example that affects recyclers’ day-to-day operations is the chance of someone contracting the virus from contact with recycled materials. The virus “was detectable … up to four hours on copper, up to 24 hours on cardboard and up to two to three days on plastic and stainless steel,” according a March 17 press release from the National Institutes of Health citing research published in The New England Journal of Medicine. The length of time a virus is detectable is not the same as the length of time it’s infectious, however. “SARS-CoV-2 may remain infectious on surfaces or objects for up to 72 hours, but most virus on the surface of common materials becomes inactive (noninfectious) after the first 24 hours. There is limited evidence that virus particles on those products transmit disease,” according to an April 9 article in the Journal of the American Medical Association.
The research shows the amount of virus a person is exposed to factors into the potential for infection, and the amount on an object reduces quickly with time, with 99% of it disappearing from cardboard, stainless steel, and plastic in eight hours. In April, the Food and Drug Administration tweeted that “there is currently NO evidence of human or animal food or food packaging being associated with transmission of the #COVID19,” information that also appears on the FDA website. Out of an abundance of caution, some recyclers reported in March and April that they had temporarily stopped accepting aluminum and steel cans; others said they were having customers put used beverage containers for recycling directly into larger storage bins and segregating that material in the yard for a short period of time, from a few days to a couple of weeks.
Operating decisions
By late March, nearly every state government ordered the closure of “nonessential” businesses to reduce person-to-person spread of the virus. ReMA staff, volunteers, and lobbyists worked at the national, chapter, and state levels to ensure governments designated recycling an essential service so recycling companies could continue to operate. “That’s been key to keeping our members’ doors open,” says Leonard Zeid, vice president of marketing at Midland Davis Corp. (Moline, Ill.) and outgoing president of ISRI’s Paper Stock Industries Chapter.
“We were worried that [materials recovery facilities] would get shut down. Thankfully, that hasn’t really played out, and recycling has been deemed an essential service pretty much everywhere,” says Eadaoin Quinn, director of business development and procurement at EFS-plastics (Listowel, Ontario), which receives much of its supply from MRFs.
MRFs are experiencing a higher volume of incoming residential material as more people work from home, but commercial collections have dropped precipitously due to the closure of non-essential businesses. A small number of MRFs have limited their operations, such as by running lines more slowly, to implement social distancing on sorting lines, where workers previously worked shoulder to shoulder. Others have closed, saying they can’t enforce social distancing, especially on manual pre-sorting lines. Adequate staffing on pre-sorting lines is important because incoming residential material usually has higher contamination rates than commercial material, they say. In California, Athens Services (City of Industry), CR&R Environmental Services (Stanton), Advance Disposal Co. (Hesperia), and five Waste Management facilities temporarily slowed or ceased operations, with some sending collected recyclables to landfill; several had started resuming operations by early May. MRFs in Arkansas, Michigan, New York, and South Carolina are among those that suspended or slowed operations as well.
Commercial and industrial recycling facilities usually have indoor and outdoor processing areas where employees are better able to maintain the proper distance. For tasks where employees normally have close contact with each other or with customers, managers report making changes such as increasing the distance between them, implementing physical barriers, or reducing their workforce. At Kripke Enterprises (Toledo, Ohio), which had a processing staff of 27 people, “we determined that we couldn’t do a couple of processes because they put people too close together,” says President Matt Kripke. “We originally went down to nine [people], then furloughed all hourly employees out an abundance of caution.” As of early May, “we have now brought back 10 hourly employees and four managers and hope to bring back another eight to 10 in the next few weeks,” he says. “We are testing out processes with fewer people to ensure our employees’ safety, not just from a COVID perspective, but also in terms of effective material handling.”
Cohen Recycling is among the many scrapyards that ceased retail operations in March to avoid potential infection spread. It reopened its retail operations May 4 with reduced hours and new safety protocols in place, Dumes says. All Green Recycling (Charlotte, N.C.), which handles consumer and commercial electronics, also closed its doors to walk-in customers. “We used to accept consumer drop-offs but stopped that for the time being,” says Peter Jegou, the company’s president and co-founder, and the company stopped allowing visitors altogether. Other recyclers that continued retail operations scaled back the number of customers allowed on site, put down ground markers to illustrate how far apart people should be, and required e-mailed paperwork in lieu of exchanging physical paperwork and IDs.
Communal spaces within scrap facilities, such as meeting rooms and kitchens or break rooms, are another story. In-person meetings migrated online or transitioned to telephone calls. Some businesses are asking employees to use break rooms in shifts to maintain proper distance; others say employees are taking breaks and eating in their cars.
Economic conditions have forced business owners to confront difficult decisions about whether to retain employees or lay them off and hope to re-hire them when business picks up. Most sources for this story report making every effort to retain all employees, even if it means reducing salaries. Others say they resorted to layoffs and intend to rehire later because government assistance programs make that option more advantageous to employees. ReMA received anecdotal reports in early May that some scrap businesses were beginning to rehire, but no firm numbers on the trend were available yet.
Many say they have applied for at least one form of assistance through government stimulus programs, such as the federal Payroll Protection Program. That program sets certain requirements for maintaining employee rolls and pay levels to qualify for loan forgiveness, adding more complexity to those decisions. ReMA has been helping members navigate the available resources and application processes through online town hall meetings and webinars, most of which are available on ISRI’s COVID-19 resources page.
Market disruptions
After employee health and safety, the next biggest priority for recyclers is evaluating pandemic-related market disruptions and financial impacts. Those who trade internationally—especially in Southeast Asia and India—noticed trouble earlier in 2020 because the virus struck in those areas before the United States. “There is no movement. You cannot sell material overseas right now,” says Sunil Bagaria, president of GDB International (New Brunswick, N.J.). China implemented lockdowns that slowed or stopped scrap material shipments. India enacted an incredibly strict national lockdown that deemed almost no businesses essential, halting both recycling and scrap-consuming operations there and leaving scrap in transit or at ports with no one able to retrieve it. These international trade disruptions also caused U.S.-based recyclers—especially on the West Coast—to report they were having a hard time obtaining shipping containers.
North American business closures occurred in droves at the end of March and beginning of April. That’s when recyclers here really noticed the repercussions. “We’ve all seen the retail business slow with soft market conditions, but things coming to a complete stop is unprecedented,” Dumes says. KW Plastics in Troy, Ala., hadn’t encountered many coronavirus effects in March, mainly due to its location in a rural area, General Manager Scott Saunders says. By mid-April, coronavirus shutdowns and their negative impacts on other parts of the value chain led to a 15% reduction in KW’s business for the month compared with the previous year. The loss is “bad, but not a worst-case scenario,” Saunders says.
W Silver Recycling (El Paso, Texas) primarily does business in Mexico, says CEO Lane Gaddy. For weeks, “everything seemed pretty steady” on the industrial service side, he says, although it had a falloff in demand when business closures peaked in April. In late April, “we’re seeing more disruption in our industrial base” than the company did early in the pandemic, he says. “It’s very much sector-driven. … Automotive has serious problems ahead of them.”
The pandemic threw supply and demand dynamics out of whack. In the paper market, “we’re seeing right now a tremendous increase in demand for material and a tremendous drop-off in supply for most grades,” Zeid says. As many U.S. workers shifted to working from home and remaining at home as much as possible, their reliance on e-commerce and surge-buying of groceries increased demand for corrugated cardboard in those segments of the box business. It also significantly decreased the supply of office paper available for recycling, which is one of the main grades used to manufacture toilet paper—over 56% of all toilet paper is made from recycled paper, Zeid says. Demand for toilet paper and tissue products also is booming, with news outlets noting empty paper products aisles in stores across the United States. This created a very strong imbalance in the Sorted Office Paper scrap market, Zeid says.
Overall, recyclers report a major slowdown in scrap movement, and low prices “have not helped,” Mallin says. Kripke points out that in aluminum, “December was a buyer’s market. In January, it flipped to a seller’s market. Now I wouldn’t even call it a seller’s market because there’s nothing to sell.” Ferrous and nonferrous metals experienced “a tradeoff,” Pickard says. As manufacturing production paused and construction slowed, demand for scrap slowed as well, but that has been offset by a lack of scrap supply. “If demand had dropped off and supply remained the same, the losses would be a lot [worse than] with this drop in both,” he says. Aluminum has been the hardest-hit sector, with the price dropping more than it did for other commodities, although aluminum was already experiencing challenges before the pandemic, he says.
Sluggish material movement has led GDB International to cut one shift on its three plastic pelletizing lines. “Scrap shipments are down by 80%. ... It’s better not to continue to produce until markets start to open up a little bit more,” Bagaria says. Part of the idling also is for health and safety reasons: GDB would need three times as many people on-site if it were to operate all its pelletizing lines, which would make it difficult to enforce social distancing guidelines. The company intended to further scale up its pelletizing operation this year with additional machinery slated to come online in the first quarter. But it ordered the equipment from China, and the shipment is significantly delayed due to that country’s lockdowns, Bagaria notes.
EFS-plastics has not experienced a change in material volume, but the makeup of the material stream has changed, Quinn says. Whereas it previously received a fair amount of takeout containers and coffee cups, those items are less prevalent with more people staying at home. “Also, people are purchasing in bulk, so there are fewer smaller containers,” she says. Recyclers say polyethylene and polypropylene resin prices were depressed because of low virgin resin prices prior to the pandemic, so “it’s like a double whammy—prices went down and then the pandemic,” Bagaria says.
Losing momentum?
Another long-term concern, especially for MRFs and plastics recyclers, is manufacturers backing off from their sustainability commitments. 2019 was considered a landmark year for plastics recycling due to greater public attention to sustainability, brand commitments to make products reusable and recyclable and to use more recycled resin, and local and state legislation to mandate recycled content. Some states loosened or suspended sustainability measures during the crisis, however, which could trigger a backslide. For instance, California’s single-use plastic bag ban requires that reusable plastic bags distributed at retail establishments contain at least 40% recycled content, but the state suspended the bag ban during the coronavirus emergency. Massachusetts, New Hampshire, and Oregon are among the other states that suspended single-use plastic bag bans over concerns that reusable bags might carry the virus. Similarly, certain food and drink establishments and grocery chains have reverted to using disposable containers instead of reusable ones out of a fear that reusable cups, bowls, or bags might transmit the virus from customers to employees. “Everyone’s distracted right now because of COVID-19. If we don’t think beyond that … we’re not going to get back to where we were before all of this,” Quinn says. Another possible setback came in April, when Washington Gov. Jay Inslee vetoed a bill that would establish minimum recycled content requirements for certain beverage containers. The mandate would have taken effect in 2022 with a 10% postconsumer resin requirement, which would have increased until reaching 50% in 2030. Inslee cited pandemic-related budget concerns as the reason for the veto.
Plus, all 10 states with beverage container redemption programs temporarily suspended—either explicitly or implicitly—the enforcement of takeback requirements at retail businesses for workers’ safety, despite OSHA’s guidance that handling recyclable materials generally does not require special precautions to prevent infection. The deposit program suspensions are considered a large contributing factor in the sharp drop-off in UBC collection, as those programs are the source of about one-third of the domestic UBCs collected for recycling.
Bright Spots
Some electronics recyclers and refurbishers saw an uptick in business early in the pandemic as businesses needed technology to accommodate remote work and families sought additional devices for working from home and children’s distance learning. ER2 (Mesa, Ariz.) says its laptop sales spiked in March. “Overall, our sense of urgency to produce our refurbished products has increased incredibly and forced our operations to be efficient without sacrificing quality,” says CEO and co-founder Chris Ko. Demand for refurbished electronics did not increase across the entire sector, focusing mostly on refurbished consumer devices instead of commercial and industrial technology, these companies say. “We’re getting recycling from hospitals because they seem to have collected a lot of old electronics or replaced their equipment. It’s a consistent supply like normal … but there is no surge in business,” All Green’s Jegou says. “Our regular business-to-business customers [mostly] are holding off pickups until the ‘stay at home’ [order] is lifted,” he says. Electronics recycling companies that did see a boost in business say it did not continue much past the end of March.
Recyclers and those who supply equipment and services to the industry also are displaying their community spirit by supporting medical facilities and others in need. The Pratt Foundation, associated with Pratt Industries (Conyers, Ga.), donated $1 million toward COVID-19 treatment trials. A plethora of companies, including Manitoba Corp. (Lancaster, N.Y.) and G&T Trading International (Clifton, N.J.), have donated N95 masks and other PPE. GDB International stockpiled masks early in the pandemic at the advice of its five staff members in China. After supplying its employees with the PPE, the company donated the remainder of the stockpile—about 14,000 masks—to essential workers across the country. “This is a common enemy, and either we will all win or all lose. Losing is not an option, so everybody has to do their part,” Bagaria says.
Long-term effects
Eventually, people will get back to work, manufacturing will pick up, and scrap will move again. In early May, many states began to loosen restrictions on business operations and public activities, especially in areas that were less hard-hit by the coronavirus. As businesses begin to return to normal and scrap begins to flow again from commercial and industrial operations, it’s possible some impacts of the coronavirus pandemic will be fleeting, but others are likely to last, recyclers say. “This is definitely a game-changer worldwide. It affects everybody,” Mallin says.
Expect more scrap company closures and industry consolidation, these sources say. Remote work will continue to some degree, even at companies that previously frowned upon it. Many think supply chains will change for everything from toilet paper and PPE to medicine and technology. “A lot of people want to nearshore and bring production back to North America. We see these sloppy global supply chains changing to a [Mexico-Canada-America] solution,” Gaddy says.
The recycling industry has weathered hard times before, but the current crisis may be the most significant challenge it has ever faced. “There will always be scrap, and we’ll always be making stuff. … But in six months, I think we’ll be living in a different world,” Mallin says.
Katie Pyzyk is a contributing writer for Scrap.