Matium Monday Vol 3. - Santa Came!! / The Economic Viability of Recycling

The Matium family hopes you and yours had a very Merry Christmas and here is to an incredible New Year!

We do have BIG NEWS!

After a year of far too many rejected loads, double brokered shipments, and flawed accounting…

Santa has joined Matium to optimize his supply chain for 2024!

Welcome to the Network, Santa!

Last week our CEO, Bailey Robin penned a very important blog post. Within it , he delves into a topic of significance to our industry as well as something you might be pondering as you look at your recycling bin after yesterday:

The Economic Viability of Recycling

If you are an average consumer, the furthest you may venture into recycling is researching what your county is able to collect and recycle. You may argue over the dinner table about which paper and plastic products go in recycling. Do you unscrew the cap? It may feel like you do everything you can to make the world more sustainable, but still the news articles print terribly low recycling rates. Why is that?

If you are in the recycling industry, your exposure is far deeper. You may have started with a partner and a few thousand dollars by renting some warehouse space and putting in a grind line. You began by recycling the waste generated from the local meat packaging plant or distribution warehouse. Over the years, you have seen drastic 50%+ swings in the prices you are able to sell that material on the market. You try your best to stack up cash in the good times to safeguard your business and your family during the hard times, but you never really know how long those hard times will last. You do your best to recycle any opportunity that comes along, but you consistently get dragged into working for little-to-nothing when the petrochemical producers drive down pricing to move their volume. Due to you focusing all of your time on operations, you rely on your customers to tell you what they can and can't pay while hoping for markets to improve.

If you are a manufacturer, your focus has been and will always be how to make products for your customers as cheaply as possible. You have found a safe-haven from scarce and inflated resin markets by buying recycled material. In these markets, you choose to spend $0.40/lb on regrind rather than spending $0.80/lb on resin. When external factors collapse the virgin resin markets by 20, 30, or even 50 percent, you move back to buying resin for its availability, reliability, and cost. You try to support those recyclers who have helped in the times of scarcity, but there is only so much demand to go around.

When this happens, resin finds its floor in the $0.30-40/lb range. This forces the recycled markets to drop into the $0.20-30/lb. With labor costs rising in the US, the cost to convert waste into usable plastic approaches $0.20/lb. Once a load of recycled plastic is ready, the recycler pays another $0.03-0.06/lb in freight to deliver it to the customer. This dynamic produces an oversupply of recycled material and the recyclers in the market are forced to drive the number down to keep cashflow up. In every downturn, dozens of recyclers close their doors and eliminate consolidation points in the market that by default eliminate carbon emissions from logistics waste. What do we do about it? How do we make recycling a business worth getting into and staying in? What variables do we have left?

Well, after spending 5 years trading over 7500 transactions totaling 325 MMLBS of plastics predominantly in the recycling industry, I have a few suggestions. We can make better decisions by having better data and we can decrease the average cost per transaction by eliminating manual redundant work. In 2020, my cousin Alex Lambrides and I founded a company called Matium to do exactly this. We took the entire process map from the first concept of raw material supply to its final concept of product demand to create a material medium that would increase transparency and decrease waste. To understand how this applies to the problem, it is best to understand the costs of a bulk material transaction

Each transaction in the material supply chain is manifested by information, financing, and logistics. For information, the recycling industry has little-to-no market standards or transparency. The procurement activity that moves BILLIONS of pounds of plastic in this country per year optimizes on this very high-tech platform called email.

Due to the lack of standards and transparency and the analog method of procurement, the industry inherently wastes millions of dollars and millions of tons of carbon per year by choosing sub-optimal transactions. For financing, the industry relies on the distribution and brokering arm of the market. These fees often cost recyclers and manufacturers between 5-15% of the gross sale. For logistics, these are typically worth 5-15% of the gross sale with another 10-15% of that transaction being spent on freight brokerage. Gathering this, we can note that the average recycled bulk plastic transaction cost is between 5.5-17.5% of the gross sale.

Now some may say the brokers, me in my past life, are to blame. The issue with this notion is that it is the brokers that keep the market moving. Brokers are the trusted source of material specification, pricing, and financing in a market that still operates as the wild west. As people move in and out of procurement positions with the companies us consumers all depend on to package our food and build our cars, it is the brokers that retain the experience and information needed to keep plants moving. Brokers are the folks that live and breathe plastics, and the brokers must be supported too. Brokers, along with everyone else, feel the pain of transactions. They move millions of pounds of plastic relying on the information from buyers and sellers to validate each transaction. When there is a lapse in information transfer, transactions can be rejected upon receipt which cost the broker thousands of dollars per transaction. Those with years of experience and plenty of battle scars are able to navigate this well, but those entering the industry are sent into battle with nothing but hope and a couple emails.

If you haven't come to the conclusion yet, the materials industry is stuck in the 1980's. We must provide solutions to the industry that move all parties to a reality of less waste and more productivity. In concrete terms, we must decrease the cost of transaction and increase the transaction velocity in the recycling markets. To do this, we must remove manual work, increase data collection, and optimize decision making for each transaction. By each business in the industry cutting out $200 of labor per transaction, the industry as a whole will save over a billion dollars a year. The economic viability of recycling has promise, but it will take the industry working together in an improved standard process to realize.

At Matium, we are pushing the industry forward and call all businesses to do the same. It is a large task, yet necessary. It is imperative to bring more minds to this problem and provide the industry with a path to sustainability that includes everyone. Learn more at matium.io.

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