One weekday morning earlier this month, out in the middle of the Arizona desert, Republic Services' Salt River Recycling Facility was uncharacteristically quiet. Closed for more than $3 million worth of upgrades, it's being held up as the latest example of the company's response to changing recycling dynamics.

Acquired in the 2017 purchase of ReCommunity, this site handles material from Scottsdale, surrounding municipalities and the Salt River Pima-Maricopa Indian Community that owns the land. Republic invested in some upgrades last year, including a ballistic separator, but the present work is more extensive. When the MRF comes back online, the company hopes to increase throughput by 3-5 tons per hour — essentially bringing it back to "historic" pre-China ban levels.

As explained by Pete Keller, vice president of recycling and sustainability, this is similar to the company's targeted investment approach at facilities around the country. The Phoenix MRF that is taking material while this one is down for about five weeks is itself slated to get a $4-4.5 million upgrade later this year. The company's Tucson MRF is set to get new optical sorters soon, its Seattle site received new equipment last year, and others are in the works.

At the Scottsdale site, bales await pick-up in an otherwise empty receiving area next to a loading pit that has been filled in to make way for a new drum feeder currently sitting out in the back lot. Once material goes up the line, it will encounter a new OCC screen deck, with a new glass breaker and 8-inch minus scalping screen underneath that will send undersized material directly to the container system. New front-end equipment is also being installed to clean up glass, which remains in the local program due to area demand from Strategic Materials.

Republic's team explains that these types of upgrades are being covered in part by price increases for municipal customers. Yet, as Vice President of Municipal Sales Richard Coupland notes, even commodity revenues from the cleanest streams still can't cover operating costs alone per their formula.

This messaging is part of a similar refrain from the two people who have largely acted as the company's public face on recycling issues at recent government events, conferences and the like. Flanked by a glass case of unwanted objects that have entered the facility's doors – baseball cards, weaponry, a trophy – Waste Dive sat down with Keller and Coupland to hear the latest on Republic's approach for 2019.

Municipal trends

During Republic's latest earnings call, which took place after this interview, CEO Don Slager described the worst effects as being largely behind them as long as customers are willing to conform to higher cost expectations. According to Republic, an estimated 20% of its municipal customers have agreed to mid-contract price increases. More are said to be in the works as another round of local meetings is planned across the country.

"We probably had another 450 or so customers that understood the need to assist, but timing with elections and budgets and everything was just something they had to navigate," said Coupland. "Our message to them is that the model's never going to return to a place that those programs will not have risk going forward."

As Republic and others have been saying for years now, that business model needs to include fixed processing costs to cover operations before any potential commodity value can be shared via rebate. It's also not uncommon to see advocation for cities to drop certain materials from their lists of acceptable items, at a time when many cities want to expand those lists instead. In many cases, Coupland said this may run counter to the weight-based goals of local governments.

"[A]s I look in the future and I see my customers being elected on the platform of 'zero waste,' I'm saying to them, 'we have to get you on a footing that the container that you aspire to go to has to stand on its own.'"

Beyond the usual conference circuit, Keller and Coupland have been spreading their messaging through media appearances, events such as a "Can We Save Recycling?" forum co-hosted with Governing magazine, and a "Recycling is Broken" webinar hosted by the International City/County Management Association.

But for the apparently growing number of municipalities that have become converts, there are still plenty of others that remain resistant to making change. On a broad scale, beyond just Republic's clients, some have described feeling trapped or pressured between budgetary/political constraints and the demands of service providers. Coupland acknowledged that feeling, and said his team is finalizing survey results that show a willingness among residents to pay for recycling, which he believes can help them make their case. 

"I'm hopeful that that type of information will allow elected officials and city staff to have a little bit more courage to make the change without the fear that that's a political platform that's going to be dangerous for them."

The GHG factor

While the company has in some ways been less vocal about it than Waste Management, Republic also subscribes to the idea that not all materials have the same greenhouse gas reduction benefits from a life-cycle analysis standpoint, and plans to start emphasizing that through presentations such as the new chart below.

"A lot of our findings are similar to the findings that you would see from Waste Management," said Keller, citing glass as a common example of a material that is reliant on local end markets for GHG savings to pencil out. "We need to expand the narrative around doing things that have economic and environmental benefit. That's something that I think you'll see more of not only from us, but others in the future. There's this notion that a ton equals a ton equals a ton. It doesn't when we're trying to achieve certain benefits."

"[W]e have to increase the conversation around what 'right' looks like, because the current state of affairs in the world doesn't align with tonnage as the measurement of success. And that's got to get to the statehouse, it's got to get to the local cities, and our contracts shouldn't have 25-30 items in the material list when there's only equipment out here to extract five things," said Coupland. 

Market horizons

During the earnings call, Slager said the company has "overcome the operational hurdle" of moving material to new end markets following China's scrap import policies. Underlying that relative stability, however, are ongoing challenges with the value of the material itself.

According to Keller, material remains in demand — it's just a question of getting the supply to the right place to meet it. Mixed paper remains especially difficult as the industry waits for more domestic capacity to come online in the next two or three years.

"Mixed paper continues to be our biggest challenge because it's trading nationally today anywhere from -10 to +10, and it represents a big and growing fraction of what we produce ... We're moving it as a company, we've continued to find other outlets, other markets," he said. "We've worked with our existing mill buyers to buy more, but that doesn't help the value proposition today, given the supply situation."

Asked if that means Republic might advocate for municipalities to drop mixed paper, the two said their goal was to create a contract structure that leaves such choices up to the customer. Coupland described it as a "decoupling" of commodity values from contract decisions.

"Let's get to a place where you just pay for the processing and pay for the collection ... and then pay us a reasonable price to run the processing gear. Then the commodity value on the average basket, whatever happens to it over time as you clean up the stream, let the municipality enjoy that," he said. "So you remove the reliance that all of us painted ourselves into the corner saying, 'I have to get $200 a ton in order to pay for the trucks and the equipment in the MRF.' We have to separate those if we're really going to be serious about sustainable, durable programs."