2015-04-28_PWETC_AgendaPacket - Laserfiche WebLink

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DETAILED ANALYSIS OF SPECIFIC ISSUES AFFECTING REVENUE Slowdown in China's Economic Growth — China is the world's largest consumer of recycled paper. They use it to create the packaging for all of the goods that they manufacture and then ship back to consumers all over the world. As a result, if China stops buying recycled paper the supply quickly jumps up and the prices fall. The stagnation and decline in revenue share in the second half of the year is due in large part to the slow -down in China's economic growth, thus demand from China for all that recycled paper has plummeted. Although Eureka sends nearly 100% ofits fiber material to a local market in Saint Paul, the price is connected to global commodity pricing trends. China's Demand for Scrap Plastics — China has also slowed their demand for scrap plastics as well. In 2013 a major policy shift in China that has come to be called the "Green Fence" slowed the import of plastics. China had been one of the world's largest importers of plastics. Many of these plastics were in the end not recyclable and the negative financial, environmental, and human health impacts of these waste plastics were felt by the Chinese people. As a result the new leadership in China began enforcing existing laws in China about the prohibition of importing solid waste from other countries into China. This caused an inunediate stoppage of shipping containers entering the ports in China with each container having to be checked to assure that it did not contain solid waste (including non -recyclable plastic). This has resulted in a slowdown of imports of mixed plastic loads to China and caused additional downward pressure on the prices paid for various types ofplastic. Plastics and the Price of Oil — There has been, and continues to be a great deal of volatility in the plastics markets. Unlike paper, and metal recycling, which has been around for decades, plastic is in many ways still an evolving market. Many new companies continue to enter the market. While one company will seek a certain composition of different types of plastics; others will want a different blend. Eureka Recycling continues to work with existing and new markets to ensure that any plastics we send to market are made into new products and the chain of custody can be followed and verified. The price of oil affects all plastic manufacturers. Recycled plastics compete for a share of the market with plastics made from virgin oil. Manufacturers can either choose to make their products out of post -consumer recycled plastics or from virgin material. If the price of oil is high then manufactures will move to more recycled content. But as the price of oil continued to fall in the last months of 2014 and into 2015 more and more manufacturers are using virgin oil. This in turn causes the price that manufacturers are willing to pay for recycled plastic to drop as well. Plastics prices climbed to significant highs in the summer and fall of 2014, and then fell by almost 40% between December 2014 and February 2015. West Coast Shipping — As a result of disputes between the longshoreman's union and the ship- owners there has been an organized slowdown of work at west coast ports. This limits what conics in and goes out of the west coast ports as many ships sit idle as they wait for an opportunity to load or unload goods. Much of the recycled paper in the U.S. is shipped to paper mills overseas. While this does not inhibit Eureka Recycling's ability to move material because we use local markets, it does mean that the price for paper products is pushed down, and the glut of 9