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Recyclings perfect storm

The business of recycling is Not What It Used To Be
by:  VERN UYETAKE, Raymond Petermeyer stands in a bin of recycled magazines and newspapers. The 83-year-old owner of Portland Recycling faced closing the company’s recycling centers at the end of 2008, including one in Lake Oswego. Market forces, combined with declining newspaper sizes and sales and aggressive curbside recycling programs, have eaten away the company’s small profits. Portland-based Far West Fibers plans to acquire Portland Recycling and carry it through the recession.

For 61 years, recycling has been a pretty good business for Raymond Petermeyer.

So good, in fact, that he came out of retirement in 2004 to buy Portland Recycling, formerly a nonprofit.

Then known as the Portland Recycling Team, the business lost $60,000 in 2003 before hiring Petermeyer as a consultant. After rescuing it, Petermeyer bought the company from its civic-minded owners, who then decided they were out of the recycling game.

But the scrap-minded Petermeyer - until now - has never been anything but in.

After a lengthy career in recycling that spans much of the West Coast and most of his life, Petermeyer still enjoys waking early in the morning and beginning rounds to the company's public recycling sites at 8 a.m. each day.

But since September, prices for recyclable material have plummeted, putting Petermeyer's business in jeopardy and making 2008 easily the worst year in recycling history.

In an economic downturn with far-reaching consequences, recycling has been hit hard.

And it's not a matter of poor management or a lack of interest in recycled material that forced Petermeyer to consider closing Portland Recycling in all three locations - two in Portland and one in Lake Oswego at 341 Foothills Road - at the end of the year.

Instead, problems stem partly from an enthusiasm for recycling that's routing most recyclable material to curbside pick-up programs, cutting into profits.

Downsizing and circulation loss at newspapers, once a recycler's mainstay, have also affected Portland Recycling's earnings.

But the largest factor in the company's suddenly slumping profits is a limping economy that has lowered prices for scrap material around the world, placing Petermeyer in the middle of a perfect storm.

The economic recession in the United States has affected world markets, stalling production for manufactured goods across the globe and lowering the demand for the raw materials that come from recycling programs.

'It seems like all of a sudden from September until now (prices) dropped. Scrap metal, plastic, all the paper grades. We're not getting paid for plastics. The residential mix, cardboard, newspaper and magazines are down about 50 percent,' said Petermeyer. 'There is no sign of relief.'

For a small operation like Portland Recycling, which earned only about $900 a month from its three facilities at its peak in 2005, the sudden drop in prices has been disastrous.

Though Portland Recycling will survive in the short term - owners of Far West Fibers, Inc., based in Portland, announced Wednesday they will acquire the operation at the end of the year - private ownership for Petermeyer will soon be a part of his past.

A lengthy career

It's fair to say that Petermeyer knows his business.

Since 1947, he has worked up and down the West Coast and built a lengthy career from his ability to sell recyclables. He worked mostly for companies that moved large quantities of raw material to the domestic and international mills that use it, including Far West Fibers.

At 83, he still climbs daily into Dumpsters to sort paper bags and junk mail from newsprint.

'I retired once, back in 2000, but after two years, I got bored and my wife said get out of the house,' he said.

For the last four years, Petermeyer has spent four to five hours a day running Portland Recycling's three recycling centers. He checks in at the sites daily, plans sales for the following day and also manages the company's six employees.

At its recycling centers (the other two are located on Northwest Quimby and Rosa Parks Way in Portland) Portland Recycling collects glass, phone books, plastic jugs, paper of all grades, tin, brown paper, cardboard, newspaper, magazines, electronics, scrap metal, plastic film nursery pots and rigid plastic.

Of those items, only electronics are taken at a cost, a service to those who use the free drop site. The rest have value as raw materials used in manufacturing.

Scrap metal is purchased by steel mills, including local mills like Schnitzer Steel Industries, Inc. It is also purchased by steel manufacturers around the globe, the largest market being in China.

Newspaper and other paper products fuel pulp mills. Most domestic paper product is recycled locally and Petermeyer sells his to Far West Fibers.

He also sells glass, sorted in three colors, to Owens-Illinois, Inc., which has some operations in Portland. That company produces glass containers for beverages in locations around the world.

Plastics from the Portland Recycling drop sites are reconstituted into new uses at a company called Agri-Plas, Inc., based in Brooks.

'We pretty much take all of the recyclables and some of the things the garbage company doesn't take,' said Petermeyer.

But recycling programs have grabbed about 50 percent of Petermeyer's business since ramping up to larger containers and allowing mixing - or comingling - of recyclables in the last two years.

In Lake Oswego, the community shifted to larger, 60-gallon trash bins through its curbside recycling program in 2006.

Steve Apotheker, senior recycling planner for Metro regional government, estimates the city's curbside recycling program increased its collections by 10 percent at that time.

That increase, coupled with similar efforts to expand curbside programs in Portland, have stemmed the flow of recyclables that once landed at public drop sites like the Portland Recycling's recycling centers.

Overall, said Petermeyer, the haul is smaller, down from 70 tons a month to just 30 tons a month.

Until September, a plan to add items that could not be disposed of through curbside programs worked.

Petermeyer added nursery pots and rigid plastic to his operation, carving out a niche recycling things homeowners struggled to get rid of.

But when the economy began to slump this fall, manufacturing slowed and prices for raw materials began falling.

Prices for scrap metal have plummeted from a high of $250 a ton to $25 a ton, Petermeyer said.

Currently, there is such a lack of demand for metal that some buyers are requiring extra sorting, asking suppliers to sift out microwaves and other devices with non-metal components.

Prices for recycled motor oil are also flat, said Petermeyer, and prices for newspaper have fallen by about 50 percent.

Between July and November, a 'residential mix' of phone books, cardboard and brown paper dropped in value from $67 a ton to zero and is now worthless.

Two months ago, Petermeyer began subsidizing Portland Recycling at a cost of $2,000 a month. If prices did not improve by January, he planned to close.

With the news that Far West Fibers would take over ownership of Portland Recycling next year, Petermeyer's outlook improved.

But across the recycling community, there is alarm.

Petermeyer said he hasn't faced such tough times since 1974, when an economic recession forced him to pay to dispose of cardboard.

Other recyclers worry that similar troubles lie ahead.

'We've never seen anything like this before'

Apotheker, Metro's recycling planner, said a forum among the Association of Oregon Recyclers is scheduled for the end of November to probe how long the depressed market for recyclables may last.

'People are saying at least through the end of the year and possibly through most of next year,' said Apotheker.

'It does not appear that we've reached the bottom. It's sort of like dominoes,' he said. 'When consumer confidence declines, even if its just in people's heads, even if they don't have one of those mortgages they couldn't pay for, if you think you might lose your job in the next two months, you might put some money away and not spend it.'

Decreased spending has stalled manufacturing in China, where production is generally high and the country's mills feast on raw material, pumping up demand and, thus, prices.

Jeff Murray, vice president of Far West Fibers, said that during early signs of the recession China's mills continued production, optimistic that consumer demand would turn around. When consumers did not resume normal spending, he said, the effects were hard-hitting.

'(The mills) were running hard and stopped abruptly and when they did that it just reverberated throughout the world,' he said.

In curbside programs, he said 80 percent of the products collected are still moving but moving at bottom record low prices.

About 15 percent of recycled materials are not moving from curbside recycling programs at all, he said.

The largest concern among recyclers is that they may have to pay to get rid of material many are now storing.

'It's a much bigger issue than recycling,' said Murray. 'This is a matter of lack of demand for raw material because of a lack of demand for manufactured products. We've had markets that go up and down but we've never seen anything like this before.'

When recyclers meet to probe the problem later this month, Apotheker said they will work to clarify whether declining prices are simply that - falling prices due to lower demands - or a dimmer, long-term prognosis for the future of recycled materials.

'There's some suggestion that it's falling price,' said Apotheker, and that the market will right itself when economic conditions improve.

He said recyclers may boost their programs by encouraging consumers to buy recycled products.

But meanwhile, governments like Metro may raise the rates residents pay for recycling while haulers take losses in the marketplace.

In the long-term, Apotheker said, recyclers may have to work to develop more local demand for recyclables.

For now the Metro area benefits by being less dependant on foreign markets than other areas of the West Coast or places further inland, he said.

Looking ahead, Murray said Far West Fiber will make its best effort to keep the Portland Recycling centers running.

When the company acquires the drop sites in January, Far West Fiber will push harder on electronic waste, which may yield returns as new laws take hold to govern the recycling of electronics.

Far West may also change the hours at the recycling centers and will work to market their services, Murray said.

'We would like to encourage people who have materials that do not work well with curbside recycling to take them to us,' he said.

When they arrive, they will still see Petermeyer running the recycling centers.

He will cap off his long career working for the same company he retired from in 2000, helping to keep what was his business afloat.