Stay-at-home orders are hitting container deposit systems hard, leading to significant declines in the volumes of high-quality recyclables moving to material processors.
Eight out of the 10 states with container redemption systems have enacted temporary measures limiting deposit returns in some way. The fallout for recycled material processors has been expansive.
With less material coming in, companies are shouldering higher costs as they scramble to supply their customers and adapt to the fast-changing landscape. In other cases, they’re curtailing operations temporarily.
The material shortage comes only weeks after states began adopting stay-at-home orders and other regulations limiting economic activity to prevent the spread of the novel coronavirus.
“We’re learning how critical recycling is to the supply chain for packaging,” said Susan Collins, president of the Container Recycling Institute, “and how vulnerable it is to this kind of disruption.”
Most programs impacted
Collins’ organization has compiled information about how deposit systems are changing due to the coronavirus. Most of the states that have made changes have relaxed the requirement for retail stores to redeem containers, she said. This is the case in Connecticut, Iowa, Maine, Massachusetts, New York, Oregon and Vermont. In Michigan, the regulation went a step further, defining container redemption as non-essential.
These regulations have had different impacts around the country.
In Oregon, where the beverage distributor-managed Oregon Beverage Recycling Cooperative (OBRC) runs the state’s container redemption system, returns are down but have not vanished. Retailers have largely suspended acceptance of containers for redemption in line with the state’s emergency regulations, but OBRC operates a number of standalone redemption centers that remain open with social distancing policies in place.
In the first week of April, OBRC’s returns were at about 45% of the total returned during the same time last year, said Jules Bailey, chief stewardship officer for OBRC.
Bailey noted that “everything is very volatile” and that returns could vary significantly from week to week. Part of that is due to the fact that OBRC has a program through which people can fill a bag with containers and drop the full bag off at a redemption center.
The retail collection suspension has a significant impact. Bailey said there are areas with no returns coming in at all because OBRC has no redemption centers in those regions. And even where redemption centers are available, more people are likely simply staying home due to the virus.
Redemption options have diminished significantly in Iowa, as well. The state suspended retail collection requirements. And even though some stores continued to redeem containers shortly after that regulation, a statewide stay-at-home order contributed to a drop in returns.
“We’ve noticed that the redemption basically stopped at the time of the shelter in place order,” said Mick Barry of Mid-America Recycling, which handles deposit material and other recyclables in Des Moines, Iowa’s largest city.
Because Mid-America also processes the city’s curbside recycling, the company is well-positioned to gauge whether people are putting deposit containers in their curbside carts. So far, the company has not seen a spike in curbside recycling of deposit containers, Barry said.
“People are storing,” Barry said. “That’s the impression we’re getting.”
As retail options diminished in Iowa, the state’s network of independent redemption centers has faced its own challenges. For instance, redemption center operator Can Shed first enacted social distancing policies at its walk-in locations and then closed its centers in Cedar Rapids and Iowa City altogether until further notice. Other independent centers are staying open but limiting their hours.
Returns stop suddenly
In Michigan, describing the situation as a “supply disruption” doesn’t quite cover the scope.
“There is no supply,” said Tom Emmerich, chief operating officer at Schupan and Sons, the largest processor of deposit containers in the state.
Under Michigan’s system, all container redemptions are done through retail locations. So when the state’s governor on March 24 ordered the public to suspend non-essential activities, that had an immediate impact on deposit volume.
“Although bottle return services are often located within grocery and convenience stores, they are not considered critical infrastructure,” state officials wrote in guidance on the order.
“Within two days, the supply stopped,” Emmerich said.
He noted Schupan understands why the order was made and that the country is in unusual times. But he pointed to a couple potential points of concern. Residents may stockpile containers and wait until the retail redemption sites reopen, leading to a chaotic situation. Starting the system up again in an organized way is going to be a key challenge, Emmerich said.
“Otherwise, you’re going to have complete chaos,” Emmerich said.
Collins of the Container Recycling Institute agreed. “The restart all needs to happen in a very thoughtful way,” she said.
The stop in deposit collections is also problematic to manufacturers, Emmerich said. Michigan deposit containers are very highly sought after for manufacturing because they’re some of the cleanest recycled feedstock around.
Beyond the deposit disruption, drop-off recycling and some curbside programs in Michigan have suspended service due to the coronavirus as well, further limiting supply.
California volume drops off
For plastics recycling company CarbonLite, a major processor of recovered PET, the impact has been substantial, but only for the company’s California operations.
In normal times, CarbonLite’s Riverside, Calif. processing facility uses exclusively PET recovered through California’s container deposit system. But in recent weeks, that stream has been hit hard. Restrictions on public gatherings and a move to suspend requirements that retailers redeem containers have reduced availability of deposit bales markedly.
Leon Farahnik, CEO of CarbonLite, said his company is instead bringing in curbside PET bales, sometimes being forced to truck them in from neighboring states. About 60% of the operation’s feedstock now comes from curbside sources.
“We have no choice,” Farahnik said. “We have to combine curbside and deposit bales, if it’s available.”
In the past, CarbonLite had “ample material” from the deposit stream, which generates up to 600 million pounds per year of PET, Farahnik said. But the reduction in public activity from the coronavirus, along with recent substantial rainstorms, have added to supply problems that were already occurring in the state (in recent years, California has seen widespread redemption center closures).
The shift in feedstock has spurred substantial operational changes at the facility.
Curbside bales have much more contamination than the deposit stream. That’s not a problem for CarbonLite’s facility in Dallas and its upcoming plant in Pennsylvania, where the equipment is prepared to handle curbside contamination levels. But in California, where the facility was built under the assumption of cleaner material, it’s a different story. For CarbonLite, that means bringing in additional manual sorters.
“Curbside bales have a lot more junk in them, so you have to have more people to collect junk out of the system,” Farahnik said.
The facility is considered essential under California regulations, so it is allowed to continue operating. The company is producing as much as it can under the current circumstances, Farahnik said, but he noted the impacts have been clear.
“It really affects our financial side,” Farahnik said. With additional labor expenses and reductions in bale yield due to the switch to curbside supply, the cost increase has been a “measurable amount,” he noted.
For now, CarbonLite, which supplies major beverage producers, will be absorbing those costs.
“You have to do what you have to do, because you don’t want to shut your plant down,” Farahnik said.
Glass shortage as demand surges
Glass processor Strategic Materials benefits from all the states with container redemption programs. The company relies on the material because it’s clean and typically pretty consistent in quality, said Laura Hennemann, vice president of marketing and communications for Strategic.
In recent weeks, the coronavirus has quickly limited the amount of material Strategic brings in.
“We have seen a drop-off in deposit glass to the point where, in some of our facilities, we’ve had to curtail some of our operations just because we’re not getting enough feedstock,” Hennemann said.
For example, in a New England Strategic Materials facility that relies entirely on deposit glass, inbound supply is down by 60% to 80%, Hennemann said.
The impact for the company varies by region, because some of the company’s facilities are more dependent on deposit glass. But even facilities that use primarily MRF glass are getting hit. Although consumers are recycling more at home because of stay-at-home orders, restaurants, bars, casinos and other large glass-generating businesses have shuttered, leaving a void in that sector of collection.
Consumers are using more glass packaging products, which is “driving a huge demand,” Hennemann said. “But on the supply side, we’re not getting the volumes we need to continue to feed the demand.”
A similar problem is emerging in Iowa. Mid-America saw 60% of its inbound deposit glass disappear in the last couple weeks of March. That shortage, Barry said, is creating a supply problem for glass bottle manufacturers, who rely on the cullet produced by Mid-America’s glass beneficiation line.
Manufacturers hungry for material
Collins of CRI said the supply shortage is particularly problematic right now. Beverage container sales are up markedly as more residents are consuming drinks at home rather than at restaurants and bars.
“At exactly the time they need more material to make these beverage packages, the availability of the material is less, so that makes it even more disruptive,” Collins said.
Beverage packaging firms are largely designated as “essential” and are operational. Owens-Illinois, for example, recently reported operating at 85% to 90% of its production capacity. And demand for beverage packaging overall is up in the past few weeks.
Specific sales figures are not yet available. But according to Gary Hemphill of Beverage Marketing Corporation, which researches statistics on the industry, “beverages experienced a sales surge in March due to pantry-loading or what some others have called pantry-overloading.”
Bottled water has experienced a particular sales surge, Hemphill told Resource Recycling.
What the supply disruption means for manufacturers will become clearer in the weeks and months to come. Keeping up with the greater demand could mean using more virgin material temporarily if that is all that’s available.
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