Environmental consciousness can contrast with markets. Some politicians regularly demonize big corporations. However, while climate change is a political issue–that deserves better governmental action–plastic recycling has been out of the spotlight. That may be changing with the State of California’s investigation of ExxonMobil.

Recycling

Plastics can be described as difficult or impossible to recycle. According to the Los Angeles Times, they break down into microplastics and unfortunately are ingested by humans, so that persons absorb a credit card worth regularly. Court systems could provide a means of redress or draw attention. Maybe it is the case that some powerful individuals have carried out nefarious acts for which an energy giant is culpable or liable? Plastics are composed of petroleum products or by-products.

The stock market is questionable currently and may be volatile for years. Despite widespread criticism of short selling as a dangerous or risky type of trade, some financial winners are identified with it. (Consider stock of today’s Compagnie Financiere Richemont SA, a Swiss retailer of jewelry with substantial business in China, which is enforcing lockdowns as its method of thwarting Covid-19. Additionally, the cost of gold, a commodity, has gone up and may continue to).

While not vouching for their stocks, there are publicly-traded businesses with long-term prospects. They are involved in solid waste and environmental services. Green attributes include an emphasis on recycling and also recapture of landfill gas (methane) as an energy source. Methane is cleaner than coal, but not by much when there are leaks. Emissions and climate change are a pressing issue without easy answers.

Republic Services Group (RSG) is a corporate actor that is involved in waste collection and recycling. Per the company, recaptured gas is a renewable energy source that reduces emissions. There are similar firms, such as Waste Management (WM), and also an enterprise with significant operations in Canada, Waste Connections (WCN). They should all be influenced by the wider economy, as if there is a slowdown in activity, such as with construction, then there is a reduction in demand for waste hauling. 

Just last week, we had a disappointing report of negative Gross Domestic Product, albeit with some better underlying data. A recession may be in the cards. Despite additional matters of inflation and externalities, recycling has not gained attention of economists in the media.

There are believed to be relations, or at least correlations, involving commodities, currency and inflation. When price levels are rising, as currently a problem (5.2% core PCE and a CPI metric closer to double digits), commodities may become expensive. However, if rising interest rates support the US dollar, that tends to cheapen them, as they are priced, or denominated, in our currency. Though the dollar has strengthened, as shown by a UUP fund in light blue, commodities appreciate faster, as GSG in dark blue.

Recycled goods are a commodity and their price has gone up. In July 2021, Republic Services reported that prices had risen to $170 per ton, up from $101 the previous year. Then, on February 10, 2022, the corporation declared that recycled commodities are now fetching $218 per ton. Management is assuming $187 per ton in 2022, consistent with the full year average of 2021. That estimate sounds conservative, though Waste Connections reports falling prices for Old Corrugated Containers, which are identified with ease of recycling–in contrast to plastics.

There are international activities. China has refused plastics shipments for recycling since 2017. Meanwhile Taiwan is identified as a success story. However, there are no issues reported of domestic protectionism, be it a tariff or other barrier to trade that is affecting recycling.

Waste Management recently stated that it is witnessing “Consistent and strong demand on the fiber side,” and Waste Connections reports “higher recycled commodity revenue due to strong fiber values.” Fiber should include products such as nylon. Also, per Waste Management, mixed paper has been stable over the last couple of years and the firm observes a demand increase for plastic streams.

Any added need or use for once-used plastic is surprising, if correct. The US EPA says that a high single digit percentage of all plastics are recycled. That is despite the fact that some specific types, such as polyethylene terephthalate (PET) bottles and jars, have rates about 29%.

In consideration of California’s interest in ExxonMobil, it is remarkable that 30% of Republic Services environmental solutions is in upstream oil and gas and 70% comprises petrochemicals. Petrochemicals are used to make plastics, and there are specific examples of what can be recycled. There is no indication that Republic Services is involved in plastics production; or deception, the oil and gas industry might be responsible for some problems.

As with climate change, recycling of plastics is an urgent issue. If something can be accomplished through a judicial system it might be helpful. Actual rates of plastic reuse or reproduction are questionable, though waste management firms sell them commercially. Prior to any significant litigation, the price of recycled goods, when priced by the ton, are up. 

***the author owns shares of GSG and may invest in UUP***

5/8/22 Republic Services is evidently scheduled to open a Polymer Center in 2023 that specializes in plastics recycling, as to “Advance circularity.”

6/8/22 US Department of Interior has issued an order to reduce single use plastic on federal lands.

8/17/22 WSJ has a different story.