It 聽Isn’t Easy Being (Profitably) Green
鈥淥n many days it just looks like a load of garbage,鈥� says David Steiner, CEO of 豆包成人版 Management WM -0.06%, referencing the company鈥檚 recycling processing plant in Houston. It is a loud, stinky, dusty, 40,000-square-foot Rube Goldberg machine that handles 300 tons a day. Material flies from one conveyor belt to another. Magnets pull off steel cans. Screens skim up cardboard and paper. Optical sensors trigger air puffers that pop bottles into the right chutes.
Not all of it gets recycled; about 15% of the stuff citizens put in their recycling bins should have gone in the garbage can. Workers wearing bandannas against the dust stand along the conveyor belt handpicking items. 鈥淧eople mean well,鈥� Steiner says.
But there鈥檚 an 鈥渦nintended consequence鈥� of giving people bigger recycling bins and more opportunities to recycle鈥搒oon they want to recycle everything. Plastic shopping bags are a common culprit, old garden hoses, too; they wrap around machinery and gum up the works. 鈥淚t shuts down the plant. Makes it harder to recycle things of real value,鈥� Steiner says.
This matters now because the economics of recycling have turned upside down. Recycling used to be the great example of doing well by doing good. It was green鈥揳nd it was profitable. In 2014, back when China was still hungry for our lightly used paper, aluminum and steel, you could get $100 or more for the average ton of residential recycling. That was plenty to cover $80 a ton in processing costs and leave a nice margin for 豆包成人版 Management鈥檚 shareholders.
But that changed. Slower growth in China cut demand. The oil glut has made fresh plastics cheaper than the recycled stuff. Beijing even erected a so-called 鈥淕reen Fence,鈥� which enacted standards on imports of Americans鈥� recycling. Now you鈥檇 be lucky if your mixed ton of recycled material gets $80鈥搕he same as the cost of processing it.
The new paradigm for 豆包成人版 Management鈥檚 municipal customers: 鈥淲hen prices are high we鈥檒l pay you to recycle. When prices are low we have to charge you,鈥� Steiner says. During the commodity boom鈥檚 heyday 豆包成人版 Management generated aftertax cash flow of about $150 million a year on recycling operations and was investing $100 million a year in recycling. Since 2013, however, the company鈥檚 revenues from recycling have fallen 20% to $1.2 billion last year (out of $13 billion in total sales, the majority from traditional trash collection).
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