Picking up the pieces

January 24, 2009
It's long been about the easiest gesture to make towards the environmental cause, but lately, the whole idea of recycling your household rubbish has been looking shaky. Geoff Collett reports. -------------------- It's been a big start to the year in plenty of Nelson households, if the evidence piled high in the blue bins lining the city's footpaths each morning over the past week is anything to go by: bottles, bottles everywhere, the legacy of thousands of merry nights and grimy mornings- after, now heading off to that great glass mountain in the sky for someone else to worry about.
Then again, if the blue bin is outside the gate of anyone involved in the recycling business, it could be that the volume of stubbies and wine bottles awaiting disposal is the result of some drinking to forget rather than to celebrate.
Suddenly, recycling - long the urban dweller's most convenient gesture towards that most fashionable of causes, sustainability - is looking worryingly unsustainable. Throughout the country, those who have sought to make money by gathering society's trash and preparing it for another cycle through the innards of industry are watching in horror as traditional markets crash around their ears.
Some are on their knees. Nelson city is one place that will have to decide within a matter of weeks whether it is worth keeping its weekly kerbside recycling collections afloat.
Already, ratepayers are having to dig deeper to prop the service up in the face of catastrophic collapses in the value of recyclable materials, on top of the half a million dollars the city already spends annually to get its bottles, plastics, cans, boxes and paper spirited away each week.
No one saw it coming - certainly not at Nelmac, the Nelson City Council- owned contractor that runs the blue- bin collection service. Until a couple of months ago, it passed all the material it collected for recycling on to the Nelson Environment Centre, which had the job - or opportunity - of sorting and selling it. It wasn't a difficult task for a while, as the global commodity prices that dictate the value of pre-loved cans, paper and plastics soared, stoked by the rampant Chinese industrial machine. Certainly, the numbers must have looked attractive to Nelmac when it studied them back in September and decided to take over the environment centre's share of the contract - principally for ease of management, rather than to get itself a slice of the action, Nelmac chief executive Malcolm Topliss explains.
But in a display of impeccably bad timing, by December, just as Nelmac took over responsibility for selling the tonnes of glass, paper, plastic and what have you its collectors were bringing in, prices fell off a cliff.
Nobody can quite believe it: prices down by 90 per cent and more (paper, which six months ago fetched $175 a tonne, is now selling for $5, a 97 per cent fall), and the value of some materials evaporating altogether. Reports emerged of buyers shutting their order books, containers of material destined for reprocessing being abandoned on wharves in Asia, markets quite literally closing down.
The disaster is not Nelmac's to bear on its own, though. Under its contract with the council, the council is obliged to step in and stump up more money on top of the base $570,000 it pays for the kerbside collections, when prices fall significantly. So it is ratepayers who will end up bearing much of the pain from the recycling crash. If the service is going to continue, it seems that the bill will only go up so long as prices stay down.
There is hopeful talk, if not firm evidence, that the horror show of the weeks before Christmas was the bottom of the barrel being scraped. But nobody knows for sure. It could be a long, lean year for many of the numerous recycling companies and community groups around the land. If things don't improve - there has been a suggestion of government bailouts - predictions within the industry are that some won't be around to see this looming annus horribilis out.
Matthew Nant is chief executive at Smart Environmental, one of the bigger players in the New Zealand recycling business, which also has the contract for collecting and on-selling recyclable rubbish in Tasman district.
Smart's size and contacts have helped it avoid severe strife, but it is preparing for some potentially tough talk with its various council clients, including Tasman, about the implications of the price plunge.
The Tasman District Council pays Smart about $750,000 a year to look after the district's kerbside recycling service, part of a bigger contract for running the whole rubbish disposal operation. Council utilities asset engineer David Stephenson says the council's contract with Smart does not specifically require the council to pay Smart more to help cover the plunging value of recyclable materials, and "it hasn't got to that".
But Nant says Smart tendered for the Tasman contract "on a certain price point" and "the market is well outside of where the price was when we tendered".
"The big thing on my to-do list is having these discussions with councils about what we can do just to get us through this period, and there's a big question mark over how long that may be."
Nant gives an example of the sort of scenario now facing the industry - a story doing the rounds, possibly apocryphal but certainly plausible, of how the giant American retailer Wal- mart cancelled a major order for new- season clothing. The Chinese firms that provide the packaging for the clothing, such as by reprocessing old newspaper into card, found themselves with a stockpile of product to see them through until whenever it is that Americans start buying new clothes again. The world's old newspaper suddenly had nowhere to go. It is not just the makers of cardboard for shirt packaging who have shut their doors. The recycling industry is used to fluctuations, to one product's value suddenly taking a dive because of some vagary somewhere or another.
But newspaper and glass and steel and aluminium and plastic, all at once?
"There has been no event like we've had this time, where every single product has been down, " Nant says.
The industry at large has been scrambling, often accepting prices that only cover the cost of getting rid of the stuff to avoid having to hold on to it, or - the ultimate sin in recycling - dumping it in landfills.
Neither Nelmac nor Smart Environmental have dumped recyclable materials collected from Nelson and Tasman homes.
Nant says Smart has the scale and contacts to keep product moving, even if at a bare minimum price; or, in far-flung places where freight costs are too high to warrant sending materials to market, it is stockpiling them.
Nelmac, too, has been stockpiling steel and plastic at the council's yard in Pascoe St, Tahunanui, and has been managing to move some of it here and there, including selling some via Smart Environmental.
Last month, the Nelson City Council said it might resort to dumping newspaper in its York Valley landfill.
Newsprint is expensive to stockpile because it has to be kept dry, and the council and Nelmac don't have suitable storage facilities.
As it transpired, they have since managed to scrape together a deal with the other big player in recycling in the city, Carter Holt Harvey subsidiary Full Circle, which on-sells the stuff to end users.
The price has been a pittance but, as council technical services manager Alec Louverdis is keen to make clear, at least nothing's had to be dumped. Not so far, anyway.
Louverdis is working on a report to go to his council in mid-February, which will spell out the implications of continuing with kerbside recycling collections: what's happening to prices; what the council's exposure is to propping up the service; and what choices the council has for the service, including reducing collections or even dropping them altogether.
Shutting them down is not unprecedented, it has to be said: back in the 1990s, the city's kerbside collection service withered and died when the principal market for the material, a local paper recycling plant run by Carter Holt Harvey, closed.
A collection service was revived a few years later but tottered when then contractor the Kahurangi Trust struggled. Eventually, Nelmac and the Nelson Environment Centre stepped in to take over the operation, and now it's Nelmac's alone.
Louverdis is reluctant to pre-empt his political bosses and speculate or otherwise pass judgment on the various possibilities.
But Nelmac's Malcolm Topliss, for one, will be doing what he can to prevent the collection service collapsing altogether.
Kerbside recycling has certainly been embraced by the great majority of Nelson households and, in this environmentally-sensitive, sustainability-conscious world, Topliss recognises that the alternative, walking away from recycling, isn't really an option at all.
It's a concern echoed by Sue Coutts of the Community Recycling Network, the representative body for the numerous small community-based operations that have sprung up throughout the country (mostly in small-town New Zealand) to deal with local recycling needs.
Matthew Nant, looking in from the big players' vantage point, suggests it will be these small operators who will be the first to squeak when their pips are squeezed; a shakeout of the small and the feeble seems unavoidable.
But Coutts argues that the crisis should be seen as a crossroads for the industry rather than doomsday for those who can't bear it in the suddenly frigid world of export markets.
If the future of recycling is going to remain tied to the rise and fall of international commodity markets, "then we're going to go through the constant series of boom and bust cycles" that have played out so spectacularly in the bust direction in the past couple of months, she says.
While significant proportions of New Zealand's rubbish can be reprocessed at home - Carter Holt Harvey, for instance, says it takes 200,000 tonnes of paper a year for reprocessing by its North Island mills - there's been a touch of the gold rush mentality at play over the past two years, where businesses handling recyclables have chased the high prices being offered to ship their materials off to Asia.
The obvious downside to that, Coutts points out, is that those who have wanted to see New Zealand develop its own recycling industry, to add some substance to pretences of sustainability in the way we deal with waste paper, plastic and so on, have been unable to compete.
"I really think that in terms of our own recycling industry, we have some credibility issues that we need to deal with, " she says.
Sending plastic bottles to Asia to be made into rubbish bags that are sent back here "is not really a sustainable outcome". Trying to find ways of reprocessing the materials here may not be easy, or lucrative, but the recent experience is surely the clearest evidence that it needs to be seriously looked at, she reasons.
Topliss admits he is still grappling with where the future lies, and says there is too much to be resolved out of the current crisis to have any certainty. He sympathises with the view that continually shipping rubbish off to China for reuse seems wrong, but points out that wherever the industry lands up, it needs to be economically sustainable as well as environmentally. That is clearly bigger than Nelmac, and bigger than Nelson.
The situation with glass is worth considering. By weight, it makes up roughly half of all the recyclable material collected in New Zealand (and Nelson); yet the main recycling plant is in Auckland, and it would cost more to freight tonnes of bottles from the South Island than the bottles are worth.
So Nelmac and the city council have worked with contracting firm Fulton Hogan to get it to take the 1400-odd tonnes of bottles that Nelson city households work their way through each year. Fulton Hogan processes the bottles through a crushing mill into smooth, small chips, completely free of shards or sharp edges. The glass chips are mixed in small proportions with traditional aggregate and used as sub-base material in road construction.
As much as it might sound like an ideal, even ingenious, local solution to a seemingly intractable problem, it is not perfect. Nelmac has to pay Fulton Hogan to take the bottles, to cover its processing costs. The amount is not public, and is presumably less than it would cost to dump the bottles in a landfill, but still, it demonstrates how fine - or non-existent - the margins are, and how challenging they make the whole scenario.
Still, at least it has meant that all those bottles hauled off Nelson's streets this week haven't added to the mounting headaches facing the recycling industry. And as grim as things are for that industry at large, the fact that necessity has begat an element of invention in Nelson is a glimmer, if only a faint one, of hope for the future.
As Sue Coutts puts it: "We're at a crossroads where we have to decide whether we want to change how we operate our recycling services so that they become sustainable and people understand that they're there consistently; or we need to say, 'Too bad, we don't really care about that', and accept that that's going to have some pretty serious consequences for our supposedly clean, green image."