Revisiting Recycling in late 2021

The two biggest macroeconomic worries in the US right now are burgeoning inflation and supply chain issues. A plausible narrative for both is that the rolling global COVID pandemic has disrupted our ability to efficiently move products to markets, while loose money policies have ignited inflation.

These both sound bad. But with markets, sometimes good or bad results depend on who you are. A disrupted supply chain for one business is an opportunity for another business. And high prices? Well, in recycling commodity markets for example, it’s the best market they’ve seen in the last ten years. 

Colored trash bins used to recycle paper, plastic and glass.

What does this mean? Recycled materials – in the big four categories of paper, metal, glass and plastic – all have secondary markets. The business goal of a recycling provider is to sort, package, and sell as cleanly as possible these four types of materials to the end user.

“Cardboard and paper prices are both on the rise. Plastic prices have skyrocketed compared to what they were, let’s say, five years ago,” Josephine Valencia, Deputy Director at the City of San Antonio Solid Waste Department, tells me. Her explanation points to the same macro trends we’re all worried about.

Valencia continues explaining high prices of recycled commodities, “In the past two years, and this is just my guess, it’s COVID-related supply shortages. There’s a shortage of just about everything these days. And I think that has really driven up the price of certain [recycled] commodities.”

So if you’re in the recycling business, these are the best of times.

If your personal subscription to the online newsletter “Resource Recycling” has recently lapsed, allow me to quote a few price changes for you. 

Baled steel cans have risen from $78 per ton last year to $250 per ton. 

Baled aluminum cans jumped from $0.45 a pound last year to $0.77 a pound last year. 

On the paper side, corrugated containers trade for $171 per ton, up from $60 per ton last year. Another paper product, sorted residential paper, sells for $117 per ton compared to $38 per ton a year ago.

As the band Chic used to sing back in 1979, These. Are. The. Good. Times.

If you were hoping to have a disco-era earworm stuck in your head for the rest of the day, dating back to the last time we saw high inflation, you’re welcome.

For Recyclers

When last I checked in with the recycling markets in 2019, a few trends were made clear to me. 

First, glass is infinitely recyclable but generally a money loser for recyclers unless it can be sorted by color and delivered to a nearby glass recycling operation. Second, paper and cardboard was in a multi-year decline because of the lack of demand for newsprint (RIP the newspaper industry!) and the awkward adjustment to a world in which ubiquitous Amazon cardboard didn’t fit traditional cardboard-sorting machines. Third, plastic prices were in freefall because China had begun refusing most deliveries. Fourth, metal was the only reliable money-maker.

But high prices in 2021 have swung recycling programs from losses two years ago back to a money maker. Things are a lot better now in San Antonio, for example, says Valencia. 

I’m going to simplify the math a bit, but here’s the basic deal in my city. We pay approximately $50 a ton to dump recycled bins with the city’s provider, which currently is the large waste processor Republic Services. Republic sorts and processes the stuff, and then sells it in the secondary commodities market, and agrees to share half the resulting revenue with the city. If the revenue from sales generates $120 per ton, the city makes $60, and can count a “profit” of $10 per ton. That’s approximately the economics – admittedly simplified – right now. 

In a bad year like 2019, the revenue share didn’t quite cover the upfront $50 cost to deliver, so the city had a “loss.” A bunch of other factors makes my explanation overly simple – they average out prices, contaminated commodities change the final revenue-sharing formula, losses can be carried forward – but Valencia endorsed my explanation as basically approximately true.

A factor which tempers the celebration of 2021 recycling profit is that – just like any business – the city’s costs are also affected by inflation. In the past year, the cost of purchasing new plastic household bins has increased from roughly $50 a barrel to $75 a barrel. Because they are made of plastic and plastic prices are way up. With a million barrels in circulation right now, that price increase affects the annual budget in a real way. And just as the price of new and used cars has increased, so too has the price of garbage trucks. In that past year, that’s gone up from $365 thousand per truck to $425 thousand per truck, says Valencia. Because of course trucks are made up of steel and plastic, all of which costs more now than last year.

“On the one side I can say, I’m excited as the city recycling revenues have gone up, so we’re making money. But on the other side, at the end of the day, we’re not sitting on a windfall because even though our revenues went up all our expenses went up as well,” continued Valencia.

Like any volatile financial market, hindsight is 20/20 and past performance is no guarantee of future results, included for recycled commodities. We don’t know what happens next.

By the way, the multi-generational fix that recycling experts would ideally have us do remains the same: Wean us off the big blue unsorted barrel of mixed commodity waste. We should all be sorting the multiple waste streams in our households into many different smaller homogenous-material barrels. Civilized countries (and by “civilized” I explicitly exclude here both the United States and the Republic of Texas) have figured out how to do this basic sorting at home. Everyone would recycle more stuff and make more money. 

A version of this post ran in the San Antonio Express News and Houston Chronicle.

Please see related posts

Recycling Markets were broken in 2019 – Part I

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Green Sustainable Organic Waste Business

The camera zooms on a young Dustin Hoffman-looking character receiving career advice from an older man about where “there’s a great future.” An avuncular hand thrown over his shoulder. 

“I’ve got two words for you, kid. Are you listening?” 

The confidential tone, poolside setting, sotto voce.

“Organic. Waste. There’s a great future in organic waste. Think about it.” 

Palm raises. Index finger extends. “Will you think about it? Shh. Enough said.” 

End scene.

Anyway, that’s a sneak peak at the draft of my new screenplay for the remake of “The Graduate, 2021.”

Everyone from households, food processors, restaurants, and even sewage processors want to pay to have their organic waste taken away on a daily or weekly basis. If you can get paid to remove that organic waste and turn it into useful saleable products – like mulch, ground-cover, feedstock, and enriched soil – you might have yourself an interesting business. Increasingly, corporations and governments are looking for providers who can do just that. 

In January 2021, Denali Water Solutions LLC – a national organic waste processor – purchased New Earth, a division of San Antonio-based Leonard Holdings. Until December 2020, New Earth held the contract for processing household organic waste for the City of San Antonio. 

New Earth, with locations in Katy, TX, Conroe, TX, and San Antonio, TX was the largest privately held organic waste and compost processor in the state. Denali needed to enter the Texas market and approached New Earth

Denali, owned by private equity giant TPG, is in acquisition mode. 

Indicative of how Leonard Holdings, headed by third-generation CEO Neal Leonard, views the opportunity of organic waste, is how they decided to sell. They took most of the company’s sale proceeds in the form of a 7 percent stake in Denali. 

“We went from 100 percent ownership of three processing locations in Texas to a 7 percent ownership in Denali’s 24 locations around the nation,” Leonard told me. Leonard essentially made a bet that organic waste is a growth business.

CEO Loenard said, “This transaction allows New Earth to achieve the scale and diversification necessary to continue as a pioneer of organics recycling. Our family is very excited to remain an investor going forward, in what we expect will be the national leader of organics recycling.”

Indeed, between our conversation and this writing, Denali acquired yet another company in mid-February 2021, Organix Recycling, described as “the largest pre-consumer food waste collector and recycler in the United States.”

With that transaction completed, Denali will have 1,400 employees in a vertically-integrated organic waste business.

Personally, I’ve been a bit obsessed with household organic recycling since receiving my green curbside bin from my city in 2016. In 2017 I visited the heaping, steaming mounds at the New Earth facility.

But that represents the large-scale opportunity of organic waste in 2021. My obsession recently brought me to a tinier-scale organic waste service company.

For Christmas this year my family bought me a monthly subscription to Compost Queens, a residential compost service. For $10 per month,1 I collect our kitchen’s food scraps into a sealable bucket and sprinkle them regularly with brown magic pixie dust. The dust begins the fermentation process and prevents odors. The magic pixie dust provided by Compost Queens is actually called “bokashi flakes,” and is a Japanese organic recycling process that introduces bacteria and fungi to catalyze the breakdown of food waste anaerobically. 

After my bucket fills, I drop it off at a nearby convenience store. Then I collect a clean empty bucket. Whenever I run out of bokashi flakes, I pick up a fresh jar of the magic dust at the same store. It’s all included as part of my subscription plan.

The household bucket of Compost Queens

I still use my large green city-provided bin, primarily for yard clippings. The Compost Queens service has a few advantages over the green bin, however, that make it worth paying extra for. The first is smell, eliminated by the bokashi flakes. The second is ants, which really, really, like my green bin when it’s warm outside. The sealable lid and the fact that I store it on my screen porch keeps away critters.

Kate Jaceldo, the younger “Queen” of the mother-daughter founding duo, described to me their last four years of growth as well as their future plans. They grew from 60 residential subscribers in 2018, to 150 in 2019, to 300 now, in early 2021. Restaurant customers like Magnolia Pancake House (3 locations), Snooze (3 locations), and Pharm Table depend on Compost Queens to arrange commercial pickup in a truck. Compost Queens financed the truck purchase for commercial pickups by raising $13,000 through a 2019 Kickstarter campaign.

New Earth processes an average of 400,000 tons of organic waste each year, which translates to roughly 7,700 tons per week. Compost Queens handles less than one one-thousandth of that volume, collecting an estimated 7 tons of waste per week, according to Jaceldo. New Earth manages three facilities over 250 acres in Texas, while Compost Queens handles most of their compost production on a half-acre in partnership with Talking Tree Farm in Schertz, TX.

Still, Jaceldo sees potential for growth in her little business, just like Leonard of New Earth. She expects they will get to a sustainable financial scale on a subscription basis at 400 residential households, enough to pay her part-time workers a living wage. They target 1,000 residential subscribers in three years. Apartment dwellers and those outside city limits are a natural market for Compost Queens. Even city homeowners with the green bin, like myself, have found the service useful as well. 

Compost Queens began selling its bags of processed “finished soil” for gardeners in December, as well as bags of bokashi flakes for households who plan to retain and create their own compost. Those sales, plus services such as delivery of soil enrichment for gardens and farms, are part of their ongoing mission around improving the local food cycle. 

Will you think about it?

Similar to many startups, Jaceldo describes the chicken-or-egg problem of scaling up to meet her commercial customer base, while enduring longish sales cycles. COVID disrupted their growth plans, as many businesses retrenched last year. 

I define “green” and “sustainable” businesses as ones that are profitable, that can last and grow through the business cycle. New Earth got there. Compost Queens hopes to get there by year end.

At the high-end industrial end of the market, the Leonard family has shown the serious scale involved in organic waste. At the hyper-local end, I’m enjoying my own small contribution to a sustainable food cycle, with my family’s $10 per month subscription.

“Organic waste. Will you think about it? Shh. Enough said.”

Please see related posts:

On New Earth and organic recycling

On Recycling as a Commodities Business (Post 1 of 4!)

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  1. The price went up to $15 per month a week after I wrote this!

Organic Waste – My Kind of Green

Inigo_MontoyaWhen I think about environmental action, my mind goes to the words we commonly use – particularly “sustainable” and “green.” And like the Princess Bride’s Inigo Montoya, I do not think these words mean what traditional environmentalists think they mean.

Because of my particular definitions, I am oddly excited about my city’s organic compost plan. I’ll explain why in a moment, but first, those words.

To me, an environmental plan is “green” when we make money or save money – cool, paper, greenbacks. A “sustainable” environmental plan is one that continues because everyone sees it as in his or her own personal financial self-interest. A “sustainable” environmental action, therefore, is one not easy stopped by a political change or a slight shift in market prices. If people want to do the right thing environmentally and it’s also in their interest financially, then that action will sustainably continue.

Ok, so why do I get all tingly about my city’s green organic composting barrel that showed up at the end of my driveway a few months ago?

After a little bit of research I found out that a business managing organic waste can make money – in a green, sustainable way. As it turns out, my city, and indirectly taxpayers, can save money from organic composting. The final piece – the specific financial benefit for households – is only weakly established, in my opinion. San Antonio is working on this as well, but that’s probably the part that needs the most strengthening in the years to come.

Figuring out how a private business makes money is why I visited the headquarters of New Earth, the company that has the contract with the City of San Antonio to collect organic household waste.

New_EarthIn theory, I’m enamored of their business model. They get paid to take in raw waste, and they get paid to sell compost. Getting paid both coming and going!

Organic waste dumpers – like landscapers, tree-clearing developers, and now the City of San Antonio – pay New Earth for the privilege of dropping off organic trash, the first source of the company’s revenue. New Earth then applies its processes – the art and science of industrial-scale composting – to that waste over 1 to 3 months. At the end, they produce ground cover, mulch, and compost bags for sale to landscapers, developers, and gardeners.

Of course, I’ve simplified the attractiveness of New Earth’s business model.

Like any real business, profit is not as easy as it at first seems. New Earth takes considerable financial risks.

Here’s just a sample of why it’s risky: Handling trees and brush cleared from a new construction site is relatively easy – you run the trees through a chipper and you have a relatively uniform product at the end. However, properly filtering household organic waste – produced from hundreds of thousands of sometimes careless trash-tossers like you and me – is a far more risky and manual-labor intensive process. Clayton Leonard – until recently the President of New Earth – explained to me that New Earth had to double their workforce to handle the city contract. They also had to invest in a multi-million dollar piece of equipment to sort through the waste. Leonard climbed up with me onto one of their giant sorting machines.

compostWe watched the household waste pass through a conveyer belt while guys with rakes – some of their new hires – separated the non organic waste from the pile. Pro-tip: Neither your old iPhone case nor your plastic bags should go into organic waste. Not all households, I saw from the conveyer belt process, have gotten that memo.

I mention all this to say that it takes significant capital and labor costs to try to make money on a citywide organic waste contract. The key point for me, however, is that New Earth is being run in my version of a green, sustainable way – to make a profit.

At the same time, the City of San Antonio has their own green, sustainable, reasons – saving money. Here’s how.

When the city hauls and dumps regular trash, it pays an average of $24 per ton to local landfills for that privilege.

When the city hauls and dumps organic waste over to New Earth it pays $16.50 per ton. The city is incentivized therefore to redirect as much volume of trash as it can to organic waste. As New Earth’s Leonard told me, “In order for us to survive, we have to be cheaper than a landfill.”

going_greenAs the city fully rolls out the green barrel program – scheduled for completion in April 2017 – it hopes to get a lot of residents dumping their compostable waste into those barrels. The goal for the household organic waste program is 60,000 tons per year, according to Nick Galus, Assistant Director for the Solid Waste Management Department. At current prices, that would save an estimated $450,000 per year.

As a public entity, Galus notes, their goals are a combination of financial gains and sustainability, traditionally understood.

“Our goal is to capture the greatest amount of the waste. The cost isn’t the driving force. We’re trying to get to our goal in the most cost-conscious way,” he said.

Interestingly, San Antonio is the first major Texas city to roll out an organic recycling program city-wide. The fact that other Texas cities haven’t done the same – despite some financial incentive to do so – indicates that there are risks for a city as well. Any city, including San Antonio, has costs for rollout and household education. Other Texas cities have pursued strategies focused on yard waste, according to Galus, making it costly to switch over to a plan that also accommodates food waste.

The San Antonio goal is to have 60 percent of all waste hauled by the city be recycled, composted, or repurposed in some way by 2025. They’re at 33 percent as of 2016.

If San Antonio can show cost savings, the case becomes more compelling for other cities. If they can even figure out the household financial incentives, the whole process becomes my kind of green and sustainable.


A version of this post ran in the San Antonio Express News and Houston Chronicle.



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