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Marketplace Morning Report

One victim of falling oil prices? Recycling

Raghu Manavalan Sep 4, 2015
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There are a lot of places oil ends up that you might not realize, like shampoo, clothes and plastic bottles. Dropping oil prices are usually good news for most consumers, but the price of oil is so low now, it’s actually cheaper to make new plastic bottles than recycle old ones.

That drop not only means landfills have a few extra tons of plastic bottles on their heaps, but businesses that sell recycled plastic are also feeling the crunch. In the last quarter alone, Waste Management, the largest waste hauler in the U.S., lost $59 million because of lower recycling revenues.

“Frankly, that’s been happening to us now for the last three year,” Waste Management CEO David Steiner says.

“In the history of the recycling markets going back to the early ’90s, you’ve had a couple dips, and they’ve been very short terms. They’re at most two, three months — even in the Great Recession of 2009, we had a dramatic downturn, but it only lasted four months. This is the first time we’ve seen commodity markets down for, you know, three-plus years.”

Steiner notes that it’s not all due to falling oil costs. China’s sluggish growth and increased contamination of recycling — aka, everyone notices you putting regular trash in your recycling bin — are also increasing costs for the company.

That’s led to 10 plant closures of Waste Management. Steiner estimates that about 50 to 100 people were laid off after each plant closure.

‘[Recycling] is not just something that’s good for the environment, this is something that’s good for employment in the United States,” Steiner says.

Waste Management doesn’t rely solely on recycling — it only makes up about 10 percent of its total revenue; the company made about $250 million in net income the last quarter. But Steiner says recycling is still worth worrying about.

“My definition of a crisis is looking out into the future and seeing a future where recycling rates are going down. Some people might say, ‘Well, we’re still recycling 25 percent, and maybe that’s a good thing.’ I don’t view that as a good thing, I view that as a crisis. What we’re trying to do is to help drive recycling rates up not down. Is it dramatically going to affect the earnings of Waste Management? Absolutely not. From a recycling perspective, from the environment’s perspective? I think we’re staring down the face of a crisis.” 

 

 

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