AMRF CHALLENGES AND HOPES

Are you ready to

effect change?

ORGANICS MANAGEMENT

WASTE RECOVERY

GLOBAL CORPORATE SUSTAINABILITY

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3

A facility that takes mixed targeted recyclables, fractionates them by size, positively or negatively target sorts by characteristic, to make a freight-ready package to go to market.

What is a Materials

Recovery Facility,

Really?

52.8%Landfill

12.9% Waste to Energy

MU

NIC

IPA

L S

OL

ID W

AS

TE

25.4%*Avg. recycling rate

34.3%2013 EPA US Recovery Rate*

*US EPA defines Recovery Rate as Recycling and Composting. 65% of US population has curbside access. C&D is accounted for separately.

8.9%Avg. organics recycling rate

THE U.S. WASTE AND RECOVERY SYSTEM

Avg. LF tipping

fee is $51.82/ton

Largest 20% of N. American

MRFs account for 50% of

recycling throughput-

Avg. TPM 7,800

THE CHALLENGES AND HOPES

CHALLENGES

• The history of the composition of a ton of recyclables

• The historic value of a ton of recyclables

• Outside economic influences

• MRF operational costs and trends

• Municipal Contracts with lopsided risk

• Municipal contract disruptions

5

HOPES

• End market development in the U.S.

• Public-Private Partnerships

• Emerging technologies

• Packaging studies and pilot solutions

6

THE EVOLVING TON

-8.3%

-3.4%

-0.7%-1.4%

-0.4% -0.3%

0.1% 0.2% 0.5%1.6%

2.6% 2.9%

6.5%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

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D E C R E A S I N G P R E VA L E N C E I N C R E A S I N G P R E VA L E N C E

CH

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0

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4

7

•Value of a ton of MRF recyclables is 53% lower than 5-Year average

•Dropped in value every month 2019

•OCC/Aluminum decreases in 2019

•Metals and Plastic make up 75% of Current Value, but only 7.5% of the stream by weight

MRF MARKETS- 25-YR. LOW IN GOOD ECONOMY-

PREDICTION: CONTINUED NEGATIVE PRESSURE

© RRS 2017

N OT M A N Y P O S I T I V E

I N D I C AT O R S E XC E P T

U . S . E C O N O M Y

R E T U R N T O $ 7 5 - 1 0 0

AV E R AG E

C O M M O D I T Y VA L U E

U N L I K E LY

$

P

R

I

C

E

O&M• Impacts of China- Slowing down the

line• Rise of film and clamshells• More units per ton = less throughput• Labor shortage

Fixed Cost• Trend towards automation• Larger regional footprint• More technology

Residue• Aggressive MRF interpretation• Impact of China- tighter quality

standards• Enforcement• “Wish” Cycling

AFTER RISING FOR A DECADE- MRF COSTS BEGIN STABILIZE SLIGHTLY LOWER IN 2019 AS REPORTED PUBLICLY

MATERIAL RECOVERY FACILITY COST CATEGORIES

Inbound Processing $/Ton

COST

CATEGORY2009 2015 2019 Change

Fixed $12.00 $20.00 $25.00 108%

O&M $46.00 $54.00 $56.00 22%

Residue $4.00 $8.00 $10.00 150%

TOTAL $62.00 $82.00 $91.00 46%

2019 FACTORS LEADING TO SLIGHTLY LOWER MRF COST

10

• Higher cost, higher contamination contracts

• Reject, Abandon/no renewal, no bid

• Automation

• Operations focus to reduce losses

• Active Rejections and charge backs

• Closures/consolidations of old or poorly-

operated facilities

• Reduced materials accepted- contract changes

CONTRACT DIFFICULTIES DUE TO MARKET CHAOS

A

Legacy High Risk Contracts Lead to

Disruptions

• All MRFs reporting higher costs

• Residue percentages are soaring from

MRFs - at least 33% higher than 2016

• Both sides hurting due to risk sharing

IMPACTS- NET PROCESSING FEES UP 40% IN 2 YEARS JUNE 2019

City St. Date Processing Fee Parties to Agreement

Sunrise FL 7/20/18 $100/ton Sunrise, WM

North Lauderdale FL 6/26/18 $96/ton North Lauderdale, WM

St. Petersburg FL 6/9/2019 $90/ton WCX/St. Petersburg

DeBary FL 8/1/18 $80-120/ton DeBary, Waste Pro

DeLand FL Sept. 2018 $80/ton DeLand, Gel Recycling

Deltona FL 1/8/19 $77.50/ton Deltona, Waste Pro

Ormond Beach FL Sept. 2018 $77.50/ton Ormond Beach, Waste Pro

Sunrise FL 7/20/18 $100/ton Sunrise, WM

Volusia County FL Sept. 2018 $80/ton Volusia County, Gel Recycling

Baltimore MD 6/20/18 $82.93/ton Baltimore, WM

Gouldsboro ME 7/31/18 $140/ton Gouldsboro, Casella

Kennebunkport ME 3/13/19 $211-276/ton Unknown

Westland MI 3/4/19 $80/ton Westland, ReCommunity

Kirkwood MO 9/7/18 $115/ton Kirkwood, Republic Services

Harrisburg PA 12/6/18 $35/ton Harrisburg, Penn Waste

Philadelphia PA 11/28/18 $170/ton Philadelphia, Republic Services

Milwaukee WI 5/15/19 $53.89/ton,

80-20 Rev. Share

Milwaukee, ReCommunity

CURRENT MRF DEFICITS AND IMPACTS- DISRUPTIONSJUNE 2019

DISRUPTIONS- Southeast US

Enterprise AL Closure

DeBary FL Closure

Deerfield Beach FL Closure

Deltona FL Closure

Iberia Parish LA Closure

St. Martins, Wardsville and Taos MO Closure

Scott City MO Closure

Lincolnton NC Closure

Harris County (partial) TX Closure

Fort Smith AR Disruption

Pensacola FL Disruption

Savannah GA Disruption

DeKalb County GA Disruption

Greenville SC Disruption

Chattanooga TN Disruption

Memphis (partial) TN Disruption

Ormond Beach FL Disruption/Material Removal

Lafayette LA Disruption/Material Removal

South Central SWMD AR Future Closure

Little Rock, North Little Rock AR Material Removal

Gulf Breeze FL Material Removal

Polk County FL Material Removal

Gwinnett County GA Material Removal

New Orleans LA Material Removal

Wildwood MO Material Removal

Wentzville MO Material Removal

O'Fallon MO Material Removal

Gulfport MS Material Removal

Rock Hill SC Material Removal

Tega Cay City, Chester and Lancaster Co. SC Material Removal

Sherman TX Material Removal

• Reported Southeast material

recycling disruptions in media

sampling

• Large concessions on less

valuable materials- especially

glass (about 30 programs per

quarter)

• Less than 5% of programs

affected so far- estimate 15-

20% as contracts cycle

CONTAMINATION INCREASES- PUBLIC RANGE AVERAGESMUNICIPAL PROGRAMS, WM, BILL MOORE, GAA, RRS, KESSLER

14© RRS 2017

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

7%

8%

8%

10%

10%

10%

12%

16%

16%

16%

18%

20%

22.50%

Single Stream ContaminationPublic Repor ting

Range- 8-45%

29 MRFs 11 MRFs

CONSOLIDATION- TREND OF ACQUISITIONS

15

88 MRFs

PUBLIC WASTE COMPANIES- 307Waste Management — 88Republic Services — 91Waste Connections — 64Advanced Disposal Services — 22Casella Waste Systems — 18

PAPER COMPANIES- 64WestRock- 22Pratt- 18Cascades- 18GP-6

22 MRFs

HOPES

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• End market development in the U.S.

• Public-private partnerships

• Emerging technologies

• Packaging studies and pilot solutions

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END MARKETS

NEW PAPER MILLS ARE IN DEVELOPMENT

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MIXED PLASTICS MARKETS ARE NOT DEAD!

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EMERGING TECHNOLOGIES

• Robotic Sorting Using AI Image Recognition

• High Level MRF Automation

• Evolution of Screens and Optical Sorters

• Higher Capital

• Higher Quality Material

PUBLIC/PRIVATE COORDINATION

CURRENT STATE OF

CARTON RECYCLING IN

U.S.

EXPECTED GRADE 52 INFRASTRUCTURE IN NA BY Q3 2019

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• Contamination affects recovery and commodity value.

• “Wishcycling” is not recycling.

UNDERSTANDING CONTAMINATION

THE ADDITION OF MODERN PACKAGING IS BEING STUDIED

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26© RRS 2017

CORPORATIONS NEED RECYCLED CONTENT TO MEET GOALS

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•Trade organizations are voluntarily expanding the recycling opportunities of the materials they produce•Carton Council (CCNA)

• Foodservice Packaging Institute (FPI)

• They are funding, technical assistance, outreach support, and best practices support municipalities

•Partnerships and Collaborations are exploring how to recover materials that are becoming more prevalent in the stream •Materials Recovery for the Future (MRFF)

RECYCLING IS EVOLVING EVERY DAY

WRAP-UP

Recycling is not dead

28

It’s time to

take stock,

evaluate

and

improve

Landfilling

everything

is not the

answer

Collaboration

results in

innovation

Recycling is

constantly

evolving

Abbey Patterson

Senior Associate Consultant

Resource Recycling Systems

apatterson@recycle.com

678-640-2500

29

THANK YOU

MRF FIBRE COMMODITY INFLUENCERS

• Oversupply-- Indonesia .5%; 1.25MMT

MRF fibre.

• “contamination” limit restricts MRF paper

grades

• Market Pulp off record high pricing by

C$400 (36%)- RISI; profoundly ”weak,

inventories up 60%”

• US paper production down 4.7% in worst

showing since 2009

• Amazon affect vs. Frustration Free Flex

• Still quality OCC is moving and price

stabilizes

30© RRS 2017

31© RRS 2017

Not adjusted for inflation; considering CPI– would appear much worse

Residential Single

Stream Price Ticker

BehaviorMay 2019

UBC, OCC, and PET now account for +69% of Single Stream value

OCC stabilized in last 3-months; only commodity to see an increase in September. High quality #12 (DS) is coveted by China. OCC increases for first time in nine months. MRF grades report still tough to get orders

SRPN- Surprising price stability $0-15 CDN. RISI- “…as MRFs close, or (stop producing higher sort-cost SRPN, price stable

All Resin pricing falling during quarter, Saudi Arabia bombing might change that

Steel slide increases acceleration, Steel CDN bales decreased by 15% continuing 6-month trend since start of 2019

TO PUT IT SIMPLY

•Values are Decreasing

•Processing Costs are Increasing

• End Markets are Harder to Find

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CURRENT MRF DEFICITS AND IMPACTS TO PROCESSORS AND PUBLIC SECTORJUNE 2019

Addressing the Gap

•Made up by processing fees•Since China ban 2 years ago-$30/T/year-Existing Contracts obsolete for both sides and do not address:• Today’s losses if risk is part of contract• Higher residue costs•No easy ways to adjust agreements incrementally

U.S. MATERIAL RECOVERY FACILITY AVERAGE

Bottom Line Impact Avg. Size MRF

Category June 2019

Revenue (from graph for

June 2019 Avg. Indices)$30.57

MRF Single Stream Total Cost $91.00

Loss Per Ton ($60.03)

Average Sized MRF (Tons/Mo) 7,800

Loss Per Month based on

Revenue($468K)

Loss Per Year ($5.6M)

35© RRS 2017

Not adjusted for inflation; considering CPI– would appear much worse

Residential Single Stream

3-Year Look$CDN/MTMay 2019

$140

$100

$81

$54

$27

$(20.0000)

$-

$20.0000

$40.0000

$60.0000

$80.0000

$100.0000

$120.0000

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Mixed Plastic #3-7

Colored HDPE

Natural HDPE

PET

Steel Cans

Aluminum Cans (UBC)

Aseptic and Gable-topCartons (Grade #52)

Corrugated Containers(OCC Grade #11)

Sorted ResidentialPapers and News (SRPNGrade #56)

Mixed Paper (Grade#54)

Glass 3 Mix (Shown as acost)

Residue (Shown as a cost)

$(20.0000)

$-

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$60.0000

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$100.0000

$120.0000

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Mixed Plastic #3-7

Colored HDPE

Natural HDPE

PET

Steel Cans

Aluminum Cans (UBC)

Aseptic and Gable-topCartons (Grade #52)

Corrugated Containers(OCC Grade #11)

Sorted ResidentialPapers and News (SRPNGrade #56)

Mixed Paper (Grade#54)

Glass 3 Mix (Shown as acost)

Residue (Shown as a cost)

Feb. $72.92

May $47.88

Aug. $40.45

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Mixed Plastic #3-7

Colored HDPE

Natural HDPE

PET

Steel Cans

Aluminum Cans(UBC)

Aseptic and Gable-top Cartons (Grade#52)

CorrugatedContainers (OCCGrade #11)

Sorted ResidentialPapers and News(SRPN Grade #56)

Mixed Paper(Grade #54)

Glass 3 Mix (Shownas a cost)

Residue (Shown asa cost)

Sep. $39.91