Paper Recycling Conference: Rising Again

The Big Easy offers plenty of distractions for visitors, but attendees of the Paper Recycling Conference & Trade Show in New Orleans found plenty to keep their minds on business at the annual event.

The show, organized by Recycling Today publisher GIE Media Inc., Cleveland, and co-sponsored by the Paper Stock Institute (PSI) Chapter of the Institute of Scrap Recycling Industries Inc. (ISRI), Washington, was held June 23-25 at the Hyatt Regency in New Orleans.

Nearly 400 attendees traveled to New Orleans to hear from speakers at several lively sessions, as well as to shop for products and services offered by 40 exhibitors from companies serving the paper recycling industry.

In addition to sessions covering a variety of topics of interest to paper recyclers and their mill customers, the conference offered several networking and social opportunities. Among these was a golf outing at Eastover Country Club that was won by current PSI president Marty Davis of Midland Davis Group, Moline, Ill.

Exhibitors also hosted a beer festival in the Exhibit Hall on Monday evening that allowed attendees to sample from a variety of regional, domestic and international beers.

The fact that he was in the Big Easy was not lost on Steve Young of Allan Co., Baldwin Park, Calif., who was one of the keynote speakers at the 2002 conference.

Young told attendees that the title of his speech was "The Big Easy," in reference to the "free and easy money" that fueled the fraud and accounting irregularities that both overheated the economy and then caused it to grind to a halt.

The president of the large-tonnage recycling company did not hide his disdain for executives who burned through the money of investors in the accounting scandals that have rocked corporate America. "We need to send the [convicted executives] of these firms to jail, and not for six-to-12 months. We need to turn them upside down and shake their pockets clean before we send them to jail," Young stated.

Young made a prediction on Monday that turned out to be eerily accurate: "For a great many of our corporations today, the proper forms of disclosure do not exist. Watch out for more bond downgrades. These are signals that their businesses cannot support the debt load they are carrying." The next day, officers of telecommunications company WorldCom disclosed $3.8 billion in accounting inaccuracies from the previous five quarters.

Concurring with fellow keynote speaker Dr. James Burke of SP Newsprint, Atlanta, Young portrayed the difficulties experienced by the paper industry the past couple of years. "The Internet is stealing classified ads from the newspaper industry," he remarked. "The low prices of newsprint have made many mills non-cash flow positive."

Domestic producers of the corrugated and kraft grades have also suffered in the past two years, although "we believe this market will improve," says Young. "The picture going forward is bright, as domestic business will stabilize and improve."

What has kept recyclers busy even through the domestic doldrums has been the booming Chinese market, according to Young. China’s per person consumption of paper products is on pace to more than triple from 1990 to 2005. In a nation of more than 1 billion people, that signifies an incredible increase in the forest products industry, he noted.

To meet the demand, new Chinese mills are being built, many of them consuming secondary fibers. China’s recovered fiber imports surged from 900,000 tons in 1995 to 8 million tons.

Recyclers could still face a sluggish pricing market if U.S. mills continue to struggle, or if the collection of scrap paper in East Asia begins to increase to meet demand, Young warned. "But I think we’re looking at a bright market for recovered fiber, and the demand from China helps make a marketplace that is not saturated with fiber."

Domestically, Young told attendees he does not see the trend toward single-stream processing being reversed, and in fact is hopeful that a national container recycling act can be introduced that will result in a national system to ensure that more containers are recycled.

In the meantime, "the profit streams of single-stream residential commodities cannot be ignored," says Young. Allan Co. was among the first companies to adopt single-stream processing, and the company has been able to do so while staying in the black.

Dr. James Burke, CEO of SP Newsprint, Atlanta, did not mince words concerning the state of the publishing, printing and paper industries. "The print-on-paper publishing business is in a long-term decline in the U.S.," Burke stated.

Burke presented statistics to support his claim, including a leap in the number of U.S. paper mill closings each year since 1997. While in the early 1990s just two to five paper mills closed each year, since then the closings have come at a staggering pace: 12 in 1997, 16 in 1998, seven in 1999, 16 in 2000 and 21 mills in 2001.

In many industry segments, the mill capacity is not being replaced. "There’s been only one newsprint machine built in the U.S. in the last 10 years," Burke stated. He also noted that since 1980, the number of newsprint mills in the U.S. has declined from 79 to 55.

Despite the paper industry’s ailments, recovered fiber continues to be a sought after commodity, both by remaining mills in the U.S. and by the expanding number of mills overseas. In a 20-year span, U.S. newsprint mills have more than tripled their annual consumption of scrap paper—from 1.5 million tons in 1980 to 6.5 million tons in 2000. "This required hundreds of millions of dollars of capital investments," Burke remarked of the changeover in production from virgin to secondary commodities.

But Burke warned recyclers not to take their end market for granted. He said that of the three main drivers of the shift from virgin pulp to recycled paper, two of them might have been based on "bogus reasons." Burke said the landfill shortage as a motivator turned out to be an unwarranted scare, and that a feared shortage of wood chips has also never developed.

Burke also said the recycling industry’s shift to a single-stream collection and processing presents a threat to the future. "Glass is not only not recyclable, it is a terrible contaminant," he stated. "It is also the most serious safety hazard we have." He also said that environmental regulators are concerned about the presence of polymer "floaters" in the effluent streams of paper mills that are pulping scrap paper contaminated with plastic. "If we can’t get a clean product, we’ll have to adjust our mills to use more wood."

The future of independent paper brokers was the topic of discussion of another session. To some, the future is a question of adaptation and changing direction in the face of consolidation.

Jerry Rose, a senior associate with Moore & Associates working out of Stamford, Conn., moderated the session and began by stating that he believes the solid waste handlers and independent packer/brokers will continue to grow to dominate the market in the future. The mill companies and the independent brokers, on the other hand, may decline in prominence. The strength of personal relationships may no longer be enough, Rose warned in regard to the future status of independent brokers.

Ethan Hershman, CEO of Canusa-Hershman Recycling Corp., Branford, Conn., said he expects independent packing plants to decline as the industry further consolidates. "It’s hard to run a plant efficiently when it’s producing less than 3,000 to 5,000 tons per month."

 Hershman added that his independent brokerage company gives independent packers as much support as possible, which includes financing their equipment purchases and working capital, providing timely payment for material and developing partnerships. 

Arnie Peltz, co-owner of the Peltz Group, Milwaukee, said that the Peltz Group divided its executive management of the brokerage business, providing a focus for each individual of the executive team, which Peltz noted as the most effective change the company has implemented in the last two years.

 Peltz also noted five advantages that help the company to maintain its customer base: leveraging and negotiating tonnage; acting as a consolidator of volume and information; reducing transaction costs; management of credit and risk; and accessing global markets.

 Edward Tucciarone Jr., vice president of eastern sales for the recycling division of Smurfit-Stone Container Corp., St. Louis, said that most integrated recycling companies sell mill direct, eliminating the need for brokers.

 The advantages of an integrated company such as Smurfit-Stone, Tucciarone said, are extensive sales account representation, marketing expertise, a one-stop-shopping approach and an equipment placement program in which Smurfit-Stone provides needed equipment in exchange for scrap paper.

Tucciarone also said that the failure of the dot-coms within the industry has helped to cement the historical relationship between brokers and customers.

Attendees of the New Orleans show heard from speakers on several additional topics, including single-stream processing, plant safety, equipment maintenance considerations and diversifying operations beyond standard paper recycling.

With exhibitors and attendees already expressing eagerness to make plans for next year’s event, GIE Media announced next year’s show dates and location.

The 2003 Paper Recycling Conference & Trade Show will take place in downtown Chicago at the Hyatt Regency Chicago from June 22 to June 24.