April 10, 2019

SWANA WESTERN REGIONAL SYMPOSIUM

April 8-11, 2019

TRENDS IN MUNICIPAL RECYCLING CONTRACTS

2

CURRENT STATE OF THE RECYCLING MARKET

Consumers still want to recycle.

It falls to all of us to

educate and engage our

customers and partners

to recycle right while new

technology solutions are

developed and new

markets established.

2017 – China imports > 25% of the world’s recyclables,

including >50% of paper and plastics.

2018 – New China import policies ban materials and limit

contamination causing global impacts, including in

recycling programs in communities across the US.

2018 – Operation Blue Sky – China enforced material

bans and .5% contamination limit resulting in a global

oversupply and depressed commodity pricing.

2019 – OCC domestic average prices down 37% from

Q1 2018 – lowest prices since May 2009. Mixed paper

prices down 87% - lowest since 1994.

Markets are expected to be depressed throughout 2019.

Cities will be faced with difficult decisions. We are

urging customers to think long-term as new mills are

expected to come on line within the next year.

3

RECYCLING REALITIES

Recycling programs have a fundamental economic supply/demand problem. Demand has significantly declined, yet inelastic supply continues to flow in at high rates. How do service providers adapt and bring their customers along?

4

WHAT HAS NOT CHANGED – RECYCLING REMAINS A CORE VALUE

Average contamination

is >25%

Consumers and municipalities still want to recycle and do the right

thing by the environment .

State & local jurisdictions have recycling goals & mandates.

Doing the right thing must be reframed – not all materials can be

recycled.

WHAT TOOLS ARE AT OUR DISPOSAL

TO WEATHER THE DESTABILIZATION

OF THE RECYCLING INDUSTRY AND

HELP CUSTOMERS RECYCLE RIGHT?

5

CONTRACTS DEFINE BUSINESS RULES

Create Flexibility

Minimize Volatility

Share Risk and Reward

Strengthen Customer Relationships

Establish Equity and Fairness

CONTRACTS ARE STABLIZING FORCES IN OUR INDUSTRY.

Ma

teri

als

Materials specifications

What materials are acceptable based on available end markets

Pri

ce A

dju

stm

en

ts

Materials collection costs, processing costs - contamination adjustment

What ability exists to adjust price when contamination occurs

Be

ha

vio

r D

rive

rs

Contamination levers

Ability to influence consumers’ behavior and recover extra processing costs

Sh

are

d R

ew

ard

s

Reduce volatility and mitigate risk

Build in flexibility to remain nimble and agile

BEST PRACTICE CUSTOMER-FACING RECYCLING CONTRACT LANGUAGE

7

7

GUIDING PRINCIPLES

Be Transparent – Recycling is not free. A new economic model is needed that shares risks and rewards.

Education is key - Educate customers & key stakeholders early and often, while promoting key differentiators.

Leading the charge - RFP responses & contract language must reflect current best practices.

EDUCATE. EDUCATE. EDUCATE. Recycle Often. Recycle Right.®

9

CREATING SHARED VALUE AND DIFFERENTIATION

WM is a committed partner, creating shared

value & long-term solutions for our customers.

WM is the among the first companies to invest in

a national, comprehensive, turn-key

education program available to everyone.

WM provides security, stability & peace of mind.

We pledge to do the right thing, the right way,

every day for our customers.

WM is committed to single-stream

recycling & improving its sustainability

for customers.

Waste Management

• Minimal changes to acceptable materials lists – we will recycle what customers are willing to pay for

• Remain committed to recycling and the environment

• Significant investment in education, enforcement measures, and technology to change behavior and preserve recycling as a core offering

• Investments in single-stream technology at our MRFs and additional labor to process cleaner material more efficiently

• Significant focus to change contract language and pricing to reflect current markets and move to a shared risk model, where all parties are protected, and share in both risk and reward

10

RESILIENCY and OPTIMISM

We continue to move materials to sustainable end-markets – not landfilling recyclables despite higher movement and processing costs.

Every day we engage and educate customers to recycle right and keep recycling in their communities. It’s working – we see a slow but consistent downward trend in contamination.

We remain committed to supporting and growing the recycling industry

• Infrastructure - WM invested $110M in 2018 in facilities, recycling collection vehicles, and collection carts.

• Optical Sorters – We are investing in optical sorters to sort and extract more plastics.

• Robotics – We continue to explore all technologies, including robotics, to ensure the future growth of the recycling industry

• MRF of the Future - We are building a technologically advanced MRF in Chicago that will deploy the latest recycling technology.

The US paper industry is investing in its infrastructure, adding much needed capacity in the next 1-2 years.

Waste Management is committed to keeping recycling economically and environmentally sustainable for decades to come.

THANK YOU QUESTIONS?