Paper

Uncertainty over geopolitical issues may be the issue du jour, but most paperstock dealers feel that old corrugated containers (OCC) should show some solid improvements moving into the spring.

Strong orders from offshore have helped fuel demand, with the spread in prices between OCC for domestic mills and offshore mills at about $30 per ton. The spread is resulting in more dealers taking a harder look at moving material offshore for the better prices.

Domestically, the paper industry is showing only tepid improvements. There have been some bright spots, although overall the market appears to be somewhat listless. Newsprint producers continue to slash production levels, while many paperboard companies have been taking downtime to remove excess capacity.

While March is still uncertain, more paperstock dealers are of the opinion that prices should start to climb by perhaps the second half of March and into April and further. The overall consensus seems to be that while domestic mills are trying to hold OCC prices at their present level, the shortage of supply and strong demand for the material offshore could force prices up sharply by this spring.

While there is a modest positive tone in the marketplace, the overall forest products industry continues to see difficulties. The recently announced production and capacity figures by the American Forest and Paper Association show that production declined last year for the second straight year. To add further bleakness in the market, the association forecasts further declines this year with only modest improvements over the next several years.

There is expected to be continued rationalization of production lines throughout North America as paper and paperboard companies continued to try to balance supply and demand.

While the overall trend is flat, there could be a decent rebound in a host of grades. Higher grades could see the benefit of better pulp prices. This could firm up markets for pulp substitutes, which had seen prices erode through a good portion of last year.

The battle continues between offshore buyers, who have been raising prices for a number of bulk grades, and domestic mill buyers, who are trying to hold their prices at their present level.

While price spreads between offshore and domestic sides are widening, the tone for many paper stock dealers seems to be that domestic mills will have to start raising prices if they hope to keep a steady flow of material coming through their doors.

The weather problems, especially on the East Coast, could further suppress supplies moving forward.

While the battleground seems to be March, when prices for domestic mills could increase, some vendors now feel that prices could move up sharply as supplies continue to remain tight, and mills attempt to buy more material from a diminished supply universe.

Waste Management Inc., Houston, has re-organized part of its recycling division, forming the Recycle America Alliance. The newly formed company has affiliated its business with one of the largest privately owned paper recycling companies in the U.S., The Peltz Group, headquartered in Milwaukee, Wis.

The goal of Recycle America Alliance is to optimize the capacity and improve the profitability of the company’s recycling business by combining assets and operations with a number of other key domestic recycling processors and marketers, Waste Management states in a news release.

The Recycle America Alliance will be a majority owned and consolidated subsidiary of Waste Management Inc. "We see this alliance as a great opportunity for Waste Management and other premier recycling processors and marketers to join together to improve efficiencies at their facilities and strengthen their marketing efforts," says A. Maurice Myers, chairman, president and CEO of Waste Management.

"We anticipate welcoming other important recycling processors into the alliance during the coming months, and we are very pleased to have The Peltz Group—a company with a long history of integrity and value—as an initial partner."

Recycle America’s Steve Ragiel says, "By combining operations, including both facilities and personnel, we believe we will be able to increase capacity utilization, in part by rationalizing our facilities. The recycling industry is still very fragmented in the U.S., and processing capacity far exceeds demand. This alliance reinforces Waste Management’s commitment to leadership and innovation in the recycling business, and it is expected to assist us in providing the best and most comprehensive recycling services to our customers," he continues. "We believe that rationalizing costs and increasing capacity utilization directly leads to an increase in the sustainability of recycling in the U.S. and Canada."

Harry Pelz, president and partner and partner of Peltz Group, says, "We are excited to be the first partner in the new Recycle America Alliance and take advantage of the opportunities that lay before us. Waste Management has an outstanding team of people in place, and is a company with a proven track record of success. These are two strong teams coming together, and we look forward to working with them on this venture."

Under the agreement, Waste Management will combine the majority of its recycling processing assets with The Peltz Group’s assets to form a new company that will provide recycling, materials brokerage services, container processing and trading, creating a service that allows customers to stabilize the price of their commodities. According to Sarah Voss-Simpson, WMI presently has 190 material recovery facilities (MRFs) in the U.S. and Canada that will be a part of the new alliance.

Under the alliance set-up, Waste Management will own 90 percent of the newly formed alliance; The Peltz Group will own the remaining interest. The company will operate as a consolidated subsidiary of Waste Management and will be directed by a management team made up of former officers and managers of both companies.

Recycle America Alliance will have approximately 3,300 employees; will handle more than 8 million tons of commodities per year; will operate 80 recycling plants and provide marketing responsibility for more than 190 locations in the U.S. and Canada. In addition, RAA will operate seven container processing facilities, one plastics recycling facility, and four electronics recycling facilities.

The Peltz Group currently operates the A-1 Recycling Center in Milwaukee, Wis.; The Peltz Group plant in Menomonee Falls, Wis.; the Madison Recycling Center in Madison, Wis.; the Paper Valley Recycling Center in Menasha, Wis.; the Janesville Recycling Center in Janesville, Wis.; The Peltz Group plant in Superior, Wis.; and The Peltz Group plant in Cleveland, Ohio.