Black & white & red all over: How a glut of newsprint sucked the profits from recycling

Winnipeg is feeling the pinch from low prices for a common recyclable commodity — but it isn't the plastic many Canadian cities are struggling to sell.

Rock-bottom prices for recycled paper are the main reason Winnipeg is raking in far less revenue from the sale of materials recovered from residential blue bins. 

In 2017, the City of Winnipeg made $2.4 million collecting, sorting and selling recyclable goods. The same waste-diversion program ran a $5.7-million deficit last year and is expected to lose another $9 million in 2019, according to budget documents.

Increased operating costs are responsible for a fraction of the change. But the market for recyclable goods is the main reason the city is raking in far less from the sale of these commodities, the bulk of which are paper products such as newspapers, flyers, magazines and other household paper.

In 2017, the sale of all recyclables earned Winnipeg about $5.4 million. That dropped to $1.8 million in 2018 and is expected to drop even further this year, said waste diversion supervisor said Mark Kinsley.

Paper, he said, is responsible for "approximately 95 per cent" of this downward revenue trend.  

By weight, the newsprint category makes up about 44 per cent of all the recyclables Winnipeg sells. And up until two years ago, China was buying almost all of North America's recycled newsprint, flyers, magazines and household paper.

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Those shipments have dropped by about two thirds since China stopped accepting used North American paper that was contaminated with other products. Winnipeg no longer sends China any paper at all.

"We sent so much bad paper to China over the years. The outside looked good, but on the inside, they buried bad material," said Barry Chaplik of Chaplik Trading Company, an Illinois paper distributor and broker. "Then they just stopped taking it."

The result has been a glut of used paper on the North American market, along with lower prices for the now-plentiful commodity.

"When China basically closed the door, because nobody can meet their new high standard of quality, that has to be dispersed through other markets," Kinsley said. 

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Over the past two years, high-quality used residential paper has lost 80 per cent of its market value, according to RecyclingMarkets.net. Mixed paper, meanwhile, was trading in April at a negative price — meaning sellers were paying buyers to get rid of the product.

"Until China opens their doors again, we're going to feel the pain for a long time," Chaplik said.

While the City of Winnipeg doesn't reveal who buys its recyclable goods, about 75 per cent of its mixed paper still heads overseas to Asian markets, all of them outside China, Kinsley said. The rest remains in North America.

Unlike some other cities, Winnipeg is not exposed to the highly publicized move by China to stop accepting lower-quality shipments of North American plastic recyclables.

"We're lucky," Kinsley said. "We got into a contract for our plastics to stay in Canada." Winnipeg sells all of its recyclable plastics, boxboard, cardboard and aluminum to buyers in Canada and the U.S. 

The only two recyclable commodities that remain in Manitoba are glass, which is ground up and used as a base for roads at Brady Road landfill, and steel cans, which are recycled at a plant in Selkirk, Man.

"I'm always happy to remind people of that," Kinsley said of the plant 30 minutes north of Winnipeg.

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In mere months, Winnipeg expects to be able to improve the quality of the recycables it ships out of town. A new Canada Fibers plant will begin sorting residential recyclables this fall, replacing an existing Emterra facility.

The new plant will be equipped with optical sorters capable of separating high-grade paper from the recyclable stream, Kinsely said,

It will also require less downtime and deal with contamination more efficiently than the existing plant, he added.