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Title:
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Recycling Equipment Upgrade and Market Update
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Title
Recycling Equipment Upgrade and Market Update
Description
This report provides an update to the Transportation, Infrastructure and Innovation Subcommittee on the North Gateway Material Recovery Facility upgrade and actions taken by the Public Works Department to adjust to changing conditions in the recycling market.
THIS ITEM IS FOR INFORMATION AND DISCUSSION.
Report
Summary
In the 1980s, the Mayor and City Council led Phoenix to establish a comprehensive solid waste management approach with a focus on reducing, reusing and recycling. In response to this strategy, the Public Works Department commenced a commingled curbside recycling program. The objective of this program was to conserve landfill space, which was becoming a challenge across the United States, and to create economic value by selling select recyclable materials (commodities). In 2013, with the leadership of the Mayor and City Council, the Reimagine Phoenix Initiative was launched. This initiative established an ambitious goal to divert 40 percent of materials from the landfill by 2020. The Reimagine Phoenix Initiative aims to create a paradigm shift from a linear to a circular model of waste management. By having a circular model focus, waste is seen as a resource to be preserved and redistributed to create economic activity.
For years, China was the largest export market for recyclables generated in the United States; more specifically in western states including Arizona. In 2013, the government of China launched “Operation Green Fence,” a policy aimed at banning the import of low-quality waste through improved container ship inspections. Subsequently, in July 2017, China notified the World Trade Organization of its intent to prohibit the import of 24 categories of solid waste. This new national policy known as the "National Sword" commenced on March 1, 2018, with the impacts of the change dating back to September 2017. In addition, China announced an exceedingly stringent contamination standard which banned inbound recyclable loads with a contamination rate of 0.5 percent or more; they also reduced the number of import permits granted. These policy changes had a significant impact on a global scale as the recycling industry was not designed to meet such stringent specifications/standards.
To respond to these market signals, the City and the City's Material Recovery Facility (MRF) contractor took action by adjusting the sorting process. The City and MRF contractor also collaborated to identify equipment upgrades necessary to address the challenge with long-term solutions.
Equipment Upgrade
To position Phoenix for future success in the recycling market City Council authorized the Public Works Department to make capital improvements to the recycling equipment at the North Gateway MRF. Installation started in September 2019 and was completed in December 2019. Project finances were supported by two major partnerships: first, with Closed Loop Fund, which funded a $3 million zero-percent interest loan - loan payments are made from the additional revenues generated from the project; second, through a $1 million investment by the City of Peoria. The Public Works Department funded the remaining $500,000.
A few notable improvements are resulting from the upgrade:
Substantially improved capture of glass, newspaper, milk jugs, cardboard, drink containers and aluminum;
Ability to achieve tighter material quality specifications;
50 percent improvement in MRF throughput (processing speed); and
Increased inbound processing capacity due to increased throughput, which provides growth capacity and resiliency.
Recycle Commodity Market Update
In our last market update in April 2018, the price of cardboard and paper commodity grades were in a steady decline. This trend continued through all of 2019. For example, the price of cardboard in April 2018 was $106/ton and by December 2019 the value declined to $28/ton. For paper the price had declined from $100/ton in April 2018 to $11/ton by December 2019. These two commodities during that time represented approximately 60 percent of all the material produced from both MRFs. Although prices for other commodities such as aluminum and PET (water bottles) remained steady, the decline in market prices for cardboard and paper significantly impacted recyclable revenues, as these two commodities represent a large portion of the materials collected and sorted at the MRF.
Since January 2020, market demand for fibers such as cardboard and paper has increased significantly with mills paying up to $128/ton for cardboard and $60/ton for paper. In contrast, the price of plastics has had a small decline as the price of petroleum has remained low. As a result of the significant increase in market value for paper and cardboard since January, in combination with the equipment upgrades at the North Gateway MRF that allow the capture of greater volumes of material, the City is seeing a positive trend in gross revenue forecasts for recycling.
Concurrence/Previous Council Action
Authorization to enter to the lease agreement with Closed Loop Fund for zero-percent interest loan to finance recycling equipment in the amount of $3 million was approved by City Council on Dec. 12, 2018.
Authorization to enter into an agreement with the City of Peoria for $1 million was approved by City Council on Jan. 9, 2019.
Location
North Gateway Material Recovery Facility, 30205 N. Black Canyon Hwy.
Council District: 2
Department
Responsible Department
This item is submitted by Deputy City Manager Karen Peters and the Public Works Department.