Plant operators reflect on a few turbulent years
Running a successful material recovery (MRF) facility means adapting to a changing flow, investing to upgrade equipment, and navigating the uncertainty of the end market. Three prominent MRF leaders recently explained how they are tackling these challenges.
The 2021 Resource Recycling Conference, held virtually in August, hosted a panel covering current trends in the MRF industry. The session brought together Kate Davenport, co-chair of Eureka Recycling, Brent Hildebrand, vice-president of recycling for GFL Environmental, and Palace Stepps, president of Sonoco Recycling.
During the session, the three explained how they are preparing for and responding to China’s import restrictions, including Green Fence in 2013, National Sword in 2018, and the country’s import bans that have gone into effect. This year.
Experts also described how contract restructuring and rising commodity prices allow for greater investment in processing system upgrades.
Before the ban
Sonoco Recycling is a transporter and MRF operator linked to packaging and industrial products giant Sonoco Products. Stepps said his company had doubts about a possible ban on fiber imports into China. Such skepticism was common in 2017, given China’s status as the world’s largest consumer of mixed paper at the time.
“From the paper division’s point of view, we didn’t think the Chinese could actually follow through on what they promised to do, just because of the dynamics of the market,” he explained. With a lack of sufficient national collection in China, as well as a shortage of virgin fiber available in the country, many industry watchers anticipated that a ban was simply not achievable due to demand from the Chinese paper industry for raw materials.
“Until the very last month, when they issued import permits from OCC [old corrugated containers], we thought there might be some sort of change of mind, if you will, from a government perspective, ”Stepps said.
But the Chinese government has in effect banned imports of blended paper from 2018, and it has extended restrictions to exclude OCC and all other recovered fibers in early 2021.
For some MRF operators, previous planning has helped mitigate the impact of restrictions abroad. Minneapolis-based Eureka Recycling, for example, had never accepted some of the low-value plastics that were hit hard by the ban.
“We approached recycling with a real environmental benefit, always having a philosophy of where our material goes, traceability,” Davenport said. The organization wanted to know that its recyclables are really finding end uses, she said.
This mindset led Eureka to accept only PET, HDPE and PP, rather than accepting all typical mixed plastic resins. The decision had some earlier drawbacks: Eureka lost a few city contracts because city programs wanted to have an “all plastics in it,” Davenport noted. But it helped Eureka weather the troubles in the plastics market when China shut the door.
“So like other… programs really struggled with figuring out what to do with those 3-7 balls, we didn’t,” Davenport said. “I think that’s a lesson for the rest of the industry, in that we really have to understand what happens to the material, and what it transforms into, not just someone wants to buy it.”
Integration and contracts facilitate the movement of paper
Mixed paper markets collapsed following the Chinese national sword, which officially took effect in early 2018. In January of the same year, mixed paper was trading at around $ 32 per tonne, up from 84. $ per ton a year earlier, according to RecyclingMarkets.net.
By early 2019, blended paper had fallen to less than $ 5 a tonne. Sometimes the grade fell below $ 0 per tonne, which meant that the MRFs were paying to get rid of it.
For Sonoco, the company’s position as an integrated recycling and manufacturing company has proven to be beneficial in moving blended paper during market conflicts.
“We had internal uses. One of the things we did was spend more time in our paper mills than we had before, which is probably the biggest and most noticeable change, ”Stepps said. Sonoco first announced that it was investing to increase its recovered fiber consumption capacity in 2018, and the company has continued these efforts this year.
Non-integrated FRMs found that the long-term contracts they put in place were helping them keep moving paper amid the turmoil.
“We’ve always, as a freelance, been really focused on quality, which means we’ve got long-term contracts with people,” Davenport said. “We had a long-term contract with a stationery company for all of our paper grades. It really helped us weather this storm. “
She added that Eureka was still feeling the impact of falling fiber prices, but the ability to move paper was important.
Davenport also noted that Eureka’s focus on contracts meant it was likely losing potential revenue during times when paper prices were soaring because Eureka was not playing the market.
“But in terms of the overall average, I think it has been beneficial to us,” she said.
Hildebrand of GFL Environmental, an American and Canadian MRF transporter and operator, offered a similar perspective. He agreed that long-term contracts level out over time, in terms of losing top prices but keeping movement during bear markets.
“I think it helps everyone in the chain,” he said. “It helps the factory know what’s coming. It helps the CPU budget a bit better.
Upstream contracting is also key to weathering market storms, Hildebrand noted. MRF contracts with local programs or carriers were “out of whack for a lot of people” before the change in the Chinese market, he said. Some examples include contracts that guaranteed that the MRF would pay the local program for recyclables, regardless of market dynamics, as well as contracts that did not specify a quality threshold for the materials collected.
These types of contracts between municipal programs and MRFs have declined, and contracts in general have changed dramatically in recent years.
“I think the management of inbound contracts is also an important part of the operation of a facility,” said Hildebrand.
The evolving flow demands additional changes – and capital
The market swings brought on by China’s ban came during another major industry shift, with e-commerce increasingly dragging OCCs into the residential flow. The two forces combined, with the MRF struggling to move material that they had always been able to move and simultaneously dealing with changes in what they could expect to come in the gates.
“Back when National Sword happened, we were seeing the amount of OCC in our flow quadruple – you know, dramatically increasing – with e-commerce,” Davenport said. “So we continued to have to invest every two years because we see more plastic, we see plastic lean, we see more cardboard, so as that flow changes we have to invest a lot more.”
Eureka spent between $ 1.5 million and $ 2 million every two years or so on facility upgrades, Davenport said. That money went to new optical sorters and, starting this year, robotics to extract plastics and aluminum from the paper stream.
Davenport said that one of the reasons Eureka chose to invest in robotic sorting is that the equipment requires less MRF downtime for installation than other systems.
“I think this is something that is not adequately discussed, which is to say that it is really difficult for an MRF to close even for two weeks to install new equipment,” he said. she declared. “I think that’s a challenge we’re going to continue to need to talk about. We cannot stop the flow of inbound hardware to completely shut down, reconfigure, and install some of the new technology that is out there.
Stepps linked the trend of restructuring MRF contracts with the capital investments that recycling facilities need to make. Changing old standard contracts has helped recycling facilities operate with enough profit to justify investments to create higher-value products, he explained.
“It’s been huge for us,” Stepps said.
Meanwhile, the current market surge also allows for more investment in processing infrastructure, Davenport said.
When you get 8 cents a pound for polypropylene, that doesn’t cover the cost of the optics of $ 750,000 to $ 1 million, ”she said. “But when you talk about some of the values that we see right now, we are, and I think that’s a really important thing to point out, especially when we talk about politics and REP. I think this highlights the need for the value of the hardware to cover the necessary investments. “
A version of this story appeared in Resource Recycling on September 21.