When someone thinks about markets being connected, the oil and recycling markets aren’t the ones that usually come to mind. Yet, the oil market is significantly damaging the recycling market right now and it won’t get any better until oil prices rise again. According to a New York Times article from February, Waste Management (the main company that collects recycling) could sell a bale of plastic last year for $230. Now, the price is down to $112 for each bin. Why is this happening? Here’s an excerpt from the NYT article mentioned earlier:
New plastics are made from the byproducts of oil and gas production. So as plentiful fossil fuels saturate global markets, it has become cheaper for the makers of water bottles, yogurt containers and takeout boxes to simply buy new plastics. This, in turn, is dragging down the price of recycled materials, straining every part of the recycling industry.
These recycling companies are now struggling to stay afloat, and in turn are shutting down many facilities with the jobs there going with them. Waste Management has cut 900 jobs over the past two years and their revenues are down to $878 million, down from $1 billion they collected the year before.
A more an interesting thought is that cities are now having to pay the recycling companies for taking on the additional waste, while in the past the roles were reversed:
Last year, the city government in Washington, D.C., paid Waste Management $1.37 million to accept the recyclables it collected from residents. That represented a stark reversal from 2011, when the district earned $550,000 for sending the company roughly the same amount of material.
The unfortunate conclusion is that these environmental based companies might be pushed into a tough spot with the idea that these two markets might be connected. They might not be able to take on great amounts of recycling materials that they had in the past and the future looks like it won’t be getting any better for these companies any time soon.