Plunging commodity prices spur closure of California recycling centers

By Paul Ploumis (ScrapMonster Author)

July 27, 2016 12:13:38 AM

LOS ANGELES (Scrap Monster): The sharp drop in recyclable prices has led to closure of more recycling centers across the State of California. As per media reports, Kings County currently has only eight recycling centers in operation. Recycling centers noted that the money that they get from daily operations is not even sufficient to pay their bills.

There has been a sharp drop in the number of certified beverage container redemption centers. Previously California had around 2,100-2,200 such centers that allowed consumers to claim deposits on used bottles and cans. Over one-fifth of the redemption centers have closed during the past year. Estimates indicate that more than 450 centers have closed during 2015. Year-to-date, another 270 redemption centers have closed and more are likely to close soon. This has limited the easy access of consumers in redeeming their deposits. Consequently, beverage container recycling rate has dropped by nearly 1% over the previous year during second half of 2015.

A report published by Container Recycling Institute (CRI) indicates that California’s beverage container redemption centers have collectively lost nearly $20 million in 2015 alone. The combined loss since 2012 is around $42.7 million. The report notes that the State uses an outdated system to calculate payments to recycling centers, which is not adequate to cover the real recycling costs. Customers are still paid a nickel or dime per bottle. However, the state’s payment to recycling centers is insufficient to meet the operating costs.

The state’s payment formula does not reflect the real-time changes in scrap prices and is based on the 12-month average from the previous year, with a minimum 3-month lag time. CRI data indicates that the actual scrap value during the period July-Sep ’15 was $100 lower than the value calculated using the back-dated formula. Meantime, government sources indicate that the State Senate is seriously looking at the issue, but a solution to the issue is yet to be presented. A major redesign to the recycling program is the need of the hour, the Senate noted.

The prices set by the state for plastic, aluminum and glass has declined considerably during the past year. For instance, soda cans which were paid 77 cents per pound a year before, is now paid only 52 cents per pound. Also, the state payment to recycling centers for plastics has reduced from 18 cents during last year to 10 cents. The downturn in oil prices has created a situation where virgin materials are cheaper than recyclable bottles. The surplus aluminum production by China has sent aluminum prices to historically lower levels. The increased use of virgin plastic and aluminum has led to closure of recycling centers. These closures have resulted in hundreds of job losses.

The CRI study report noted that the smallest redemption centers are the worst affected. The average recycling costs at these centers are often twice as much as those at larger centers. This results in significant operating loss, consequently resulting in closure of facilities. The report calls for thorough re-evaluation of the current payment calculation system. It recommends that payments are more tied to recycling centers’ revenues, which will help to keep even small centers open.