Dealer News

The paper recycling industry seems to be on a perpetual roller coaster. The past year has created tremendous volatility in the market, with continued consolidation shrinking the pool of paper recycling operations.
   As the year drew to an end there were a host of acquisitions which have pushed a handful of waste management firms to the top of the processing pile.
   These most recent moves have created a new landscape for the paper recycling industry.
   Along with the acquisition of many longtime independent paper stock operation, the merger of Jefferson Smurfit Corp. and Stone Container resulted in the eliminating of their joint marketing company, Paper Recycling International. Most of the offices and the personnel from PRI were absorbed by either Smurfit-Stone or Waste Management.
   Several other companies made significant changes to solidify their operations. KTI continued to be on the top of the watch list as the company continued to diversify itself from strictly a processor of paper and waste to energy operation to include exporting, consuming, manufacturing, not only with recovered fiber, but also plastics and rubber.
   Moving into 1999 this trend could continue as the company continues to look to diversify itself to many avenues in the waste management industries.
   Other mergers and acquisitions continued to crop up, with a number of regional operations growing their operations. Several paper stock dealers found that during slow times it makes good sense to increase their coverage for when markets do start to improve.
   Still other longtime packers have sought out ways to make their operations more valuable to possible takeover companies such as the myriad waste management concerns growing through acquisitions. . .
   Domestic consumption is the driving force for the U.S. paper stock industry. However, exports, especially to the Pacific Rim, have been the best barometer of the marketplace.
   Over the past several years, however, exports of recovered fiber have fallen down. Over the past several years it has been the economic problems in Korea, Japan and Indonesia which have curtailed production. However, the second half of this decade appears to be when the European paper stock industry became a much bigger player in the market.
   Moving into 1999, there are wide differences of opinion about where markets are headed. Several exporters feel that many Asian mills have been out of the market for too long, and will likely come back into the market, especially for OCC. With some indications that the Korean economy is showing signs of turning around, there could be a much stronger pickup in some of the office grades and ledgers. Additionally, newly created newsprint conglomerates in Korea could allow for better running schedules and greater demand for ONP. . .
   Most grades of recovered fiber seemed to start off the year with a bang, only to wither away toward the end of the year. No grade showed greater disappointment than old corrugated. Coming into 1998 expectations were strong. The domestic economy was rolling along. The economic problems in the Pacific Rim, while difficult, were thought to be at their nadir. There was strong expectations that OCC would start to show some promise.
   Board producers were expected to push through price increases, which would drive OCC prices.
   This scenario, however, did not hold. The problems in Asia continued from bad to worse. While there have been some preliminary signs that markets are starting to work their way out in some Asian countries, markets are expected to still struggle for the next several quarters.
   A positive note is that despite problems with OCC on the export side, recent indications show that offshore prices for OCC have been moving up. Exporters, however, are reserving judgement on whether this is only a glitch or part of a long-overdue push by Asian mills.
   One theory offered by more than one broker is that some Asian buyers are looking to fill up on OCC before multiple container rate increases take place. Once the increases pass, however, demand will dry up again.
   The mood appears to be more upbeat. While most feel that prices will be somewhat stagnant over the first several months of this year on the domestic side, late February and into the spring there may be some strengthening in OCC. . .
   The hardest hit portion of the paper recycling industry appears to be the pulp substitutes. Hard white cuttings and shavings, SBS and other direct entry pulp substitutes have had problems practically through the whole year.
   The grades have suffered most acutely due to the continued problems with the pulp market. Prices have been soft through the whole year, and there still does not appear to be much in the way of positive news that could help boost prices for any of the high end grades.
   A number of pulp mills in Norscan countries (North American and Scandinavian) have taken downtime in an attempt to bring more of a balance between supply and demand as a way of strengthening prices. However, Asian and South American mills continue to run newer pulping operations which is working to keep an imbalance.
   It is likely there will be attempts early this year to push through a price increase for market pulp. There still is uncertainty whether the increase will take hold. . .
   Old news appears to be in slightly better shape than OCC. Despite some slides in prices lately, the grade seems to have withstood pressures to knock the price down. A promising indicator is the ability of the grade to hold up while OCC had posted sharp declines.
   Further, North American newsprint markets have been battered by the increase in shipments of finished newsprint from Korea into the United States. This has worked to cut into North American production figures.
   Similar to other paper and board grades, newsprint producers have been trying to push through price increases. Even with a strike at Abitibi-Consolidated mills in eastern Canada North American newsprint producers have been unable to push through a sustained price increase.
   Although the grade recently has been slipping, there has been an increase in interest by a number of Korean mills. Movement has been steady, which has allowed some vendors to keep collecting material. Moving into the winter, there will be a decline in the generation of ONP. If any inclement weather hits, there could be a sharp uptick in price and demand, especially from offshore mill buyers. . .
   Office grades have held up much better than most other grades. Moving into January, prices have been slipping slightly, although movement still is steady. There hasn't been much in the way of any backup in material, which has helped keep the flow of material at a good clip. Sorted white ledger has benefited from improved offshore orders, while office pack has been moving to a number of sites. . .
   KTI, Inc. announced that the Bankruptcy Court for the District of Delaware approved a plan of reorganization for a Ford Heights, Ill. waste-to-energy facility that will permit KTI to build a recycling campus on the 38-acre site.
   The campus will be operated by KTI as part of a joint venture with the former bondholders of the Ford Heights facility. The site has an existing 20-megawatt waste-to-energy facility constructed at a cost of approximately $110 million. Due to amendments in the Illinois Retail Rate Act, which repealed certain rate incentives to the facility, the facility was closed during start-up testing. The owners sought protection under Federal bankruptcy laws.
   In exchange for its 50 percent ownership interest, KTI will invest up to $17 million over two years. The bondholders, who will own the remaining 50 percent, are converting $80 million in bonds and other claims into equity. The restructuring will result in the transformation of the current facility into an environmental recycling campus that will encompass many of KTI’s environmental business activities, including waste-to-energy, paper recycling, processing of post-consumer and post-industrial plastics, tire recycling and possible manufacturing of finished goods from recycled products. . .
   The Institute of Scrap Recycling Industries expressed disappointment with the decision by President Clinton that, along with signing the Executive Order 13101 managing federal governments purchase goods with recycled content, stipulated the use of post-consumer paper.
   Robin Wiener, executive director of ISRI, noted that “ISRI is disappointed that the Executive Order, in mandating the use of post-consumer recycled content paper, failed to recognize that there should be no distinction between post-consumer and pre-consumer feedstock.”
   She continued, adding: “In trying to protect our natural resources, reduce energy consumption, and limit pollution, there is no difference between recyclable materials that has been used by a consumer or is the result of a manufacturing process. If our nation’s goal is to increase the amount of material being recycled, the establishment of a pre-consumer/post-consumer distinction is meaningless.” . .
   The Paper Stock Industries Chapter of ISRI announced its 1999 PSI Scholarship Program. The program awards four $1,000 college scholarships to an employee, or a son, daughter or spouse of an individual who has been employed for at least one year by a member firm of ISRI's PSI chapter.
   To receive a 1999 scholarship application, please contact Kimberley Harris at ISRI, (202) 662-8535. . .
   The Donco group of companies now has a web site. Donco consists of Donco Paper Supply; Ramblin Corp.; Ohio Pulp Mills; and Poly Recyclers. The address is www.doncopaper.com. . .