Published in Manufacturing
A move by China to ban imports of recyclable materials has upended the U.S. market and led to increased costs for office furniture manufacturer Haworth. The company has implemented an initiative that’s led to reductions in recyclable waste while also avoiding sending it to the landfill. A move by China to ban imports of recyclable materials has upended the U.S. market and led to increased costs for office furniture manufacturer Haworth. The company has implemented an initiative that’s led to reductions in recyclable waste while also avoiding sending it to the landfill. COURTESY PHOTO

'Chilling effect:’ Manufacturers, recyclers feel brunt of China’s ban on recyclable materials

BY Friday, August 31, 2018 08:03pm

A Haworth Inc. policy to avoid sending waste to landfills has put the company in a bind as the recycling industry struggles to react to a glut of materials flooding the market.

As overseas markets become “almost nonexistent,” recyclers are now raising prices on haulers to cover lost revenue, or are adjusting their recycling programs, according to Bill Gurn, Haworth’s facilities and operations maintenance manager. The Holland-based office furniture maker now is losing “thousands of dollars” to those additional costs for what had been a breakeven or slight benefit to the company, he said.

“When China closed the doors on recycled material, there were not enough sources in the U.S. or other countries to take all the material being generated in the U.S., and there is still not,” Gurn told MiBiz. “Some of us have been saying for a long time we needed to build markets for the waste material we generate because even with China in the mix, there was not enough demand to drive up value.”

The upheaval in the recycling industry comes as China instituted its so-called National Sword policy, which bans other nations from sending most recycled materials, including mixed paper and plastic bottles.

“Now we have all this material from those that want to keep it out of the landfills and are faced with a market that has shrunk,” Gurn said. “That means that material that should be kept out of the landfill will probably end up there because there is no demand or profit for it.”

West Michigan manufacturers and recyclers have felt the brunt of China’s shifting policies, which were instituted so the country could focus on cleaner materials sourced from within its own borders. By closing off the country to the imported materials, China effectively upended the U.S. market, leading to increased costs for customers and creating difficulty for firms hoping to move recyclable materials. In some places nationally, the market disruption has led recyclers to dispose of the materials in landfills, according to reports, although industry sources say such practices have not taken hold in West Michigan.

According to Gurn, manufacturers that produce a larger volume of recycled material have an easier time moving it than smaller companies, but the situation is still leading to headaches for a company of Haworth’s size.

“The commitment to remain landfill free/zero landfill means the cost to do so is greater than it has ever been,” Gurn said.

CHANGES COMING

Given the “chilling effect” of the shift in Chinese policy, many recycling outfits have been forced to raise their prices to adjust to the new market realities. That’s the case for the Kent County Department of Public Works, which is adjusting prices for inbound recycling loads on Jan. 1, said director Darwin Baas.

“This has had a devastating effect on the industry nationally, (and) we’ve been impacted at the local level,” Baas said. “We’ve been fortunate enough to move the material, but we’re upside down right now. This is the most disruption we’ve seen in the market.”

The Kent County Recycling and Education Center, a single-stream recycling facility, was receiving $85 to $90 per ton for its mixed paper as recently as March 2017, but “we aren’t getting paid anything now,” Baas said.

“It’s being collected, it’s being brought to us, (and) we’ve got the cost of processing it, transporting it, and we’re not being paid anything for it,” he said. “The downside — the chilling effect for our industry — is when China made the decision to cut off mixed paper and the other items are no longer imported, it flooded the domestic market.

“We can move it, but we can’t monetize it.”

Three years ago, the county’s recycling center started shipping its paper to the Valparaiso, Ind.-based Pratt Industries Recycled Paper Mill, which makes paperboard out of the scraps.

In a typical week, the county ships seven truckloads with an average weight of 42,000 to 43,000 pounds of mixed paper, Baas said. The mixed paper accounts for about 40 percent to 50 percent of the recycling center’s business.

The prices for another formerly lucrative recycled material — corrugated board — have also been cut in half, according to Baas.

The county’s recycling center currently charges $35 per ton for inbound loads of residential recycling from curbside programs, drop-off centers and other subscriptions. However, the Department of Public Works will raise its prices to $65 per ton starting in 2019, Baas said.

The facility works with the City of Grand Rapids, as well as waste haulers including Granger, Waste Management, Republic, Bob’s Disposal, Herrington Disposal and Arrowaste, among others.

“We’ve already communicated (the price increases) with our haulers that have contracts with us,” Baas said.

The department remains committed to recycling all the materials it receives, which isn’t the case in other parts of the country, especially on the West Coast, which relies solely on the Asian market to move its mixed paper inventory, he added.

“It’s important that folks in West Michigan know that all of the material that we are receiving, we’re able to broker and move,” Baas said.

MANAGING INVENTORIES

Although China’s decision to ban most recyclable material is not affecting the Grand Rapids-based Bata Plastics Inc., the move has resulted in changes for the overall recycling industry, which is struggling with “out of control” inventories as it seeks other options for the recyclable items.

“We are not a huge exporting house,” Matt Hammond, vice president of Bata Plastics, told MiBiz. “However, the indirect effect to our company — because of what China is doing — there’s all sorts of supply in the domestic markets in North America that frankly wasn’t here before. The markets are very saturated, and we’ve been buying (with) the demand soft.”

Bata Plastics typically buys and sells post-industrial plastics from manufacturers and scrap dealers. Hammond noted some companies are reconsidering their recycling programs because “you’re sending them a bill instead of sending them a check.”

As well, consumers and manufacturers must become “more astute” in their recycling processes, he said.

“For a long time, you could just throw everything in a box and it would get sorted,” Hammond said. “We’re finding that the practice of mixing everything and sending it overseas … is forcing the consumers and the manufacturers to really tighten up their sorting (and) segregation practices.”

According to Hammond, companies like Bata can still find opportunities domestically, but “it’s going to take some investment.”

“It’s also going to take changing some culture,” Hammond said. “In the United States, we are very good at wanting it quick, fast and easy. … It’s really (about) getting the United States up to the level of (European) practices. Domestically, we have the ability, but it’s one of those moments in time when you have to roll up your sleeves and find new applications and look at things a little differently than maybe the easiest way to resolve a situation.”

STAYING AGILE

In reacting to the market for recyclable materials, West Michigan manufacturers are “working to be agile and adapt quickly to the changes,” said Heidi Frasure, an environmental scientist at Steelcase Inc.

The Grand Rapids-based office furniture manufacturer had to develop new processes to divert various materials from the landfill. In one example, Steelcase had been recycling shrink wrap used in packaging, but the company’s vendor stopped accepting the material in March, Frasure said.

By making extensive changes to its processes, Steelcase was able to find a “beneficial reuse” for the shrink wrap in feedstock for decking products.

“We are looking at each process and making improvements based on commodity, keeping circular economy opportunities in mind,” Frasure said. “Due to the market changes, there are opportunities with every commodity that we are currently working through by taking a high-level supply chain approach and looking at source reduction as the top priority.”

Similarly, Haworth implemented a program called High Volume Production Waste, where it tracks material coming into its internal recycling center so it can identify waste reduction opportunities and share that information with its manufacturing plants.

Already, Haworth’s North American operations reduced its recycled material by 4 million pounds from 2016, even though Haworth’s business increased over the same period, Gurn said.

“This means that even though we were building more product, we still reduced our waste,” Gurn said. “That helps in many ways by reducing material costs, waste sent to the recycle center for processing and the cost to recycle.

“For those committed to the environment and being landfill-free like Haworth, we will continue to struggle to find recycle opportunities and are not willing to go back to the landfill.”

According to Gurn, the U.S. should have been “developing, encouraging and supporting businesses” domestically to use recycled material to stave off issues currently affecting the industry.

“This would have built a market for the recyclable material we generate in manufacturing and our homes,” he said. “The markets in some cases have gone from (other companies) paying for recycled material, to lower revenue, to taking it for zero value, to paying the recycler to take the material.”

Sidebar: Forum to tackle recycling industry ‘crisis’ Sept. 10

The West Michigan Sustainable Business Forum will host a town hall discussion on recycling industry issues caused by the Chinese National Sword trade policies. The Sept. 10 lunch event runs from noon-2 p.m. at the Mercy Health Saint Mary’s Richard J. Lacks Sr. Cancer Center, 250 Cherry St. SE in Grand Rapids. Featured speakers include representatives from the Michigan Department of Environmental Quality, Padnos and Steelcase. Cost is $15 for members, $20 for non-members. Visit wmsbf.org or call (616) 422-7963 for more information.

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EDITOR’S NOTE: This story has been updated from its previous version to note a change in Matt Hammond’s title at Bata Plastics. 

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