We salute the thousands of businesses and hard working men & women that are daily, diligently buying, selling, processing and converting
scrap and waste materials to preserve our planets valuable resources.
Often unrecognized and un-thanked your contribution to society will be appreciated by future generations.
With Skill, Knowledge and Experience of physical recycling
and endurance of
cycles, recyclers are indeed a unique breed.
During the 1980's and 1990's we offered a service called Recycling 101 that provided a reference to entrepreneurs and recycling business operators. We have shared an overview to some of the key points of that program here on our website.
Waste Stream Identification
Identification of waste or scrap materials, the ability to understand what the material is made of and where in the manufacturing waste stream it occurs.
The understanding of what it takes to Convert the raw waste or scrap material into the grade and specification of a secondary commodity required by the market. Whether it is just sorting and packaging or if further processing is required.
Recycling Logistics, understanding freight and material handling from collection & transport to market.
LTL to TL - the accumulation of less than truck load into truck load lots
Is there a market
As long as there is manufacturing of new products then there is always a market demand for secondary commodities.
Providing that recycled materials can meet the grades and specifications acceptable as secondary commodities then they can be fed directly into the manufacturing stream to replace or integrate with virgin materials.
In a new automobile, you can not tell what percentage of steel is recycled or virgin, with an aluminum soft drink can, you are not able to determine what percentage is recycled or virgin. The manufacturer will use which ever material is available and is the most economically beneficial.
Closed Loop Recycling or the concept of manufacturing widgits from recycled material poses some interesting challenges. It is difficult to design, manufacture and market any widget from new material with stable supply of raw materials, by adding the complexity of restricting your supply to finite recycled material you add a whole new level of risk in your supply chain.
The dilemma is that recycled commodities are finite, if you are successful in marketing your widgets you will create competition and the cheap supply of raw materials will be effected or the supply of raw material may disappear all together.
The economic factors of secondary commodities markets are diametrically opposed to traditional economic theory, or to say it differently, the economics are in reverse or upside down.
Typical manufacturing business invests in labour and capital expenditure to turn raw materials into value added complex manufactured products, while the recycling industry invests in labour and capital expenditure to de-manufacturing complex products and turn them back into lower valued raw materials.
Unlike the standard wholesale to retail distribution module, the recycling industry operates a reverse distribution system, collecting or accumulating LTL (less than truck load) materials and consolidate into TL (truck Loads) to take to market.
Market prices for secondary commodities have a ceiling based on discount of virgin materials markets, so all of the profits are determined by cost of acquisition less freight and material handling costs.
Recycling Economics Risks
If you wish to speculate on secondary commodities it may not be wise to invest in operational infrastructure. If your going to invest in your operations and capital expenditure then you should try to limit your risk and exposure.
Establish a business module based on a turn over margin
sale price - costs - profit margin = purchase price
You should be able to make the same profit per ton whether you sell for $100/ton or $1/ton even if you have to pay $ 100/ton net cost
Tip Fees - If it costs you more for freight and material handling than the price you can sell for, then you must charge a fee to receive the materials. This is commonly referred to as a TIP FEE.
Transfer of Liability - many inexperienced recyclers make the mistake of receiving materials for free. What you are doing is in fact transferring (or you are accepting) the liability for the goods.
Technology guys tend to fool themselves into thinking that their process makes them a profit. If you are in the secondary commodity business, all of the profit is between the buying and selling of the commodity and the processing or machinery is just a cost.
They eventually realize that the one person in the room with no windows that buys and sells every pound of material is the only one that can insure that there is a profit margin, they recognize that they are actually in the commodity trading business.
One recurring thing the we have seen from the Recycling 101 clients, new ventures had an idea and they put blinders on. Several new operations approached us after they had committed multiple million dollars in capital expenditure but had not committed any time, money or effort on the market side of their business. With one person and a small budget they could start trading the commodity they are involved with and they can quickly establish either profitability or a clear path to profitability or alternatively realize the flaw in their business assumptions. This approach can save all the time, effort and money of a catastrophic business failure.
Links to current waste and recycling info