Editor's Letter - Buyers and Sellers Beware

During one point in the 1980s comedy film Airplane, a flustered character states, "I guess the foot’s on the other hand now," when trying to note that the tables have just turned in a given situation.

For business owners and managers throughout the world, and particularly in the recycling markets, the mangled metaphor might be as appropriate of a way as any to describe what has occurred in the past six months.

The world has gone from one of easy credit on flexible terms to a tight, guarded lending and supply chain situation. The lending industry has been berated for, throughout much of this decade, adopting an attitude seemingly focused on building the largest possible loan portfolio with little regard for whether some of the loans could actually be paid back.

Unfortunately, many recyclers have also had to re-examine the credit terms they had adopted during the boom years. As collections agents are prone to say, "A sale is a gift until the money is collected," and too much unintentional gift giving has caused financial pain within the recycling industry.

As far as tables having turned, the often tense relationship between buyers and sellers of recyclable material has moved from a seller’s market to a buyer’s market. Many recyclers have long complained that when this happens, too many buyers take unfair advantage of their bargaining power.

Buyers of scrap materials, like those in any other business, adjust their business practices based on market conditions. To what extent adhering to stricter levels of quality control is a reasonable response and to what extent it becomes a method of maliciously squeezing a supplier can only be judged on a case-by-case basis.

It seems logical to conclude, however, that operations personnel at recycling plants will face a new kind of pressure now that "the foot is on the other hand."

Whereas scrap yards, MRFs and other recycling plants had become accustomed to scrambling to set record-high production volumes each month, the pace of activity at most sites has slowed significantly.

Partially replacing the tons-per-hour scramble, however, may be a need to produce shipments of such high quality that bales and truckloads will stand up to the scrutiny of newly finicky raw materials procurement managers.

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Recycling company executives and operations managers may well benefit from comparing notes to see how new investments and other quality improvements can be made when monthly income likely has fallen from the peaks of 2007 and early 2008.

Buyers of scrap materials have, by many accounts, focused on being very aware of quality standards. That being the case, sellers also will have to beware of what they are shipping.