For reverse logistics companies that handle electronics, a critical part of doing business is cohesion with the electronics recycling business. Having strong relationships with e-scrap processors and repair outfits will ensure old or broken TVs, computers and other plugged-in products are handled in the most cost-effective and environmentally way possible.

But it’s also true that maintaining such relationships can be a difficult proposition because the e-scrap sector has proven to be volatile of late.

Earlier this month, for instance, ECS Refining, one of the largest privately held electronics recyclers in the U.S., shut down. Though ECS had previously filed for Chapter 11 bankruptcy, the sudden closure surprised many in electronics recycling.

Over the last five years, a number of other established firms have also gone under, leaving local and state governments and many other material suppliers scrambling for downstream options.

We all know that electronics are playing a larger and larger role in society as a whole, so it seems as though the business of electronics recovery and processing should be a booming one. What’s causing companies to close?

The answer is multifaceted and evolving. Let’s dig into the factors.

A Shifting Stream One of the most significant elements underpinning change is the e-scrap landscape is alterations in the material at the heart of the system. In short, it’s become harder to squeeze profitability out of the end-of-life electronics stream.

For years, the revenue equation for electronics recyclers was centered squarely on printed circuit boards (or PCBs), which are central to any electronic device’s computing capabilities and typically contain precious metals. As device manufacturers have evolved their practices with an eye on cost-savings, however, the amount of gold, copper and other high-value metals in PCBs has declined. In many cases, a computer heading into the electronics stream today will have lower metals value than one that came to a recycler five or 10 years ago.

At the same time, the electronics recycling stream is more frequently being dominated by products like tablets and other lightweight, mobile-oriented products. As the consumer market has valued size and cloud capabilities over traditional computing power, plastics, lithium-ion batteries and other materials are becoming a bigger part of what e-scrap processors take in their doors.

For a quantification of this trend we can look to numbers from the legislated state e-scrap program in Washington state, which compiles and shares data on the material collected through its framework. In 2015, circuit boards accounted for 10 percent of the Washington collection stream by weight and plastics accounted for 14 percent. By 2017, circuit boards had dropped to 8 percent and plastics climbed to 20 percent.

Of course, the materials making up a larger component of devices could have value for recyclers -- there are entire recycling sectors dedicated to plastics recycling and batteries, after all. But isolating and finding markets for these items are far from straightforward. Many of the plastics used in electronics, for instance, are of special engineering grades, designed with additives especially for electronics applications. The markets for this type of recycled content are far more limited than what is seen for plastics like PET soda bottles or HDPE milk jugs that are in heavy demand by manufacturers in the U.S. and elsewhere.

The plastics situation for electronics processors has been exacerbated by the fact that China over the past year has begun severely limiting imports of recyclable materials. For many North American electronics recycling companies, China was the major outlet for plastics recovered from devices, and even then, e-scrap companies saw limited profitability. With China seemingly out of the picture, markets for recovered plastics have become a major e-scrap concern.

Ongoing Struggles with CRT Glass While the design of new products has caused electronics recycling headaches, so too has an old type of product that keeps showing up at facilities: cathode-ray tube (CRT) TVs and monitors. These bulky devices were effectively replaced by their flat-screen successors a decade ago, but recyclers continue to see CRTs come in as households slowly clean them out of basements, closets and other storage corners.

When new CRTs were still being made, the pounds of CRT glass (some of which contains lead) that came out of a recycled CRT could be moved into the market at a profit. But since the technology is now obsolete, recyclers have had to pay to move glass to smelting operations and limited other options.

State electronics recycling programs (where they exist) have helped to cushion the financial blow on recyclers by requiring equipment manufacturers to pay a portion of the cost of recycling CRTs and other “covered devices.” But complex economic issues, often related to the evolving stream detailed above, have meant that in some cases, the funding coming to e-scrap companies has been insufficient to cover costs.

At the same time, a handful of startups touting CRT recycling technology have entered the picture and begun buying CRT material at lower prices from recyclers. But for the most part, these hopeful CRT outlets have not worked out, with high-profile operations such as Closed Loop Refining and Recovery and New Life Glass themselves going out of business.

The good news is that eventually, the industry will work its way through the country’s CRT backlog. And stakeholders point to the fact that in some areas, the CRT stream is getting smaller. Looking at the Washington state data, we see CRT devices made up 50 percent of the collection stream by weight in 2014 and just 43 percent in 2017.

But it’s also true there is no indication that CRT glass is going to become any less costly for recyclers to handle, meaning it will continue to plague the sector.

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Lack of Legislation As mentioned earlier, some states have passed laws establishing systems of collecting and funding electronics recycling. Today, 25 states and Washington, D.C. have such legislation in place. However, the momentum pulling more tax dollars and policymaker support into the industry seems to have halted. Washington, D.C. passed its law in 2014. But no state has passed e-scrap legislation since Utah in 2011. The states that did get laws on the books did so in a flurry, with all 25 laws coming in a nine-year window. Though a handful of states, such as Massachusetts, have seen the introduction of legislation of late, the consensus among e-scrap policy experts is that those states that had the political will to pass e-scrap laws have done so already.

Nevertheless, there has been action in the legislative realm, with some states that had laws enacted recently passing additional legislation to update their systems. Such updates have been seen in recent years in Illinois, Maine, Minnesota and New Jersey.

In the case of Illinois, Minnesota and New Jersey, the revamp legislation came as a result of the existing systems not providing sufficient funding to cover all the material that was being brought to collection points. In essence, manufacturers were meeting their funding quotas partially through the year, meaning local governments, recyclers or other stakeholders were forced to pay unexpected costs or stop collecting certain types of material.

That’s an issue that has plagued many other states with legislated e-scrap programs that rely on producer funding, and the industry will be watching closely to see whether the recent fixes are able to bring stability to the states that passed those updates.

Opportunity Amid Uncertainty Despite the difficulties outlined above (and the resulting e-scrap bankruptcies), one can nonetheless look at the electronics recycling landscape and see an evolving sector marked by innovating companies that are growing.

While it’s true the consumer electronics stream is undergoing changes that are detrimental to recycling profitability, a number of companies have noted that by focusing on IT asset disposition (ITAD), they can circumnavigate that issue. ITAD-focused firms act as service providers to corporate entities and other institutions that deal with servers and other electronics that have far more inherent commodities value than the smartphones and “wearable” technology coming to define the consumer stream.

Furthermore, the growing concern among companies, governments and individuals around data security is emerging as an opportunity for electronics recycling players. Many sector companies have tried-and-tried systems in place for ensuring that hard drives and other assets in their custody are handled and processed securely, ensuring no data breach occurs. This is a service electronics recycling companies are able to market to customers who are increasingly willing to pay a premium for such peace of mind.

Finally, there is the simple notion of adaptability that sits at the heart of the recycling industry. Businesses built on profiting from end-of-life material know going in that they must respond to constant changes in “feedstock,” and while challenges are certainly affecting many e-scrap entities in significant ways, stakeholders are responding.

Instead of trying to live solely off of revenues from recovered precious metals, for instance, e-scrap firms are putting more resources into developing systems for repairing and remarketing the growing spectrum of electronic consumer devices. They’re also employing principles of “lean “ manufacturing and other efficiency protocols to make their recycling lines faster, safer and more cost-effective.

For reverse logistics professionals looking for e-scrap partners they can count on in the long term, the best advice is to find those processors that are actively responding to market shifts and view turbulence as more of an opportunity than a threat.

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Dan Leif
Dan Leif is the Managing Editor of E-Scrap News. Sign up for the quarterly print magazine as well the free weekly E-Scrap News e-newsletter. The magazine’s parent company, Resource Recycling, produces the annual E-Scrap Conference, set this year for Oct. 9-11 in New Orleans.