Paper Recycling Supplement--World View

HEAVYWEIGHT CLASS. Marc Forman (pictured at top), vice president and chief operations officer of Harmon Associates, is able to talk about annual tonnage handled by the subsidiary in millions rather than thousands.

"In 2005, we anticipate that we’ll invoice about 5.6 million tons of scrap paper, with about 5 million tons of that coming from North America and the rest [from] overseas," says Forman.

Much (roughly 60 percent) of that tonnage is being purchased to furnish Georgia-Pacific mills that make products ranging from tissues and towels to corrugated packaging. "Where we specialize is in the de-inking grades," notes Forman. "GP is the largest user of de-ink fiber in the world. When you combine what Harmon buys for GP with the de-ink tons Harmon buys for all its other customers, we are by far the largest seller in the world of these grades."

But as a way of serving both recyclers from whom it buys product and the mill customers to whom it sells product, Harmon trades in "the entire spectrum of scrap paper grades," says Forman, saying this involves "well over 100 grades of paper." The company also trades some types of plastic scrap.

Linking sellers and generators of scrap paper with buyers is the primary activity of Harmon Associates. "For the most part, we are about as close to a pure trading company in our industry that you can find," notes Forman.

But the company does have physical operations under the name Ecosource in plants operated in tandem with GP mills in Green Bay, Wis., and Muskogee, Okla.

Additionally, Harmon helps oversee the placement and maintenance of some 350 balers located at generation sites it serves. "As a part of how we secure tons, we have a very active equipment program," says Forman. "We’ll work with an account to supply a baler in exchange for the fiber," he notes, remarking that those balers can range in size from small vertical models to high-volume horizontal balers.

The tonnage traded by Harmon Associates comes both from generating sites (printing plants, converters, supermarkets, distribution centers) as well as from paperstock dealers and other recyclers who arrange for Harmon to act as their trading agent to the consuming mill side. "Any place scrap paper is found, we’re actively trying to buy that paper," says Forman.

"It’s a traditional model where, because of our need for fiber, we basically have an entrée into just about any paper dealer in the U.S.," he continues. "Our strongest relationships are with the paper packers, I think because we have a solid value proposition for them."

ROLLING ON. Part of the value proposition Forman refers to comes in the critical areas of transportation and logistics. It is an operational aspect where the resources of Georgia-Pacific provide an advantage.

Robert Burns, senior manager of communications with GP, notes that the company "is among the top five dry van freight buyers in the U.S." GP’s considerable transportation buying power also extends to rail shipping and intermodal container transportation.

GP’s size allows Harmon to tap into solid fleet arrangements with some of the largest trucking shippers serving North America, such as J.B. Hunt Transport Inc. and Schneider National Inc., and to provide timely and reliable service to both paper recyclers and consuming mills.

Additionally, when scrap paper is bound for GP mills, the company can almost ensure that trucks will leave those mills with finished paper as a backhaul. "For example, when we take a load of OCC into one of our containerboard mills, we can bring out finished product," says Burns. "Just about every one of our trucks into a GP mill is part of a backhaul arrangement," he adds.

"Being part of GP sets Harmon apart; we’re able to tap into the corporate strength in logistics and technology," says Forman. "The transportation services we provide are valuable. Packers want to turn their inventory, and we supply a steady home and a steady transportation line at all times," he continues. "Our position within Georgia-Pacific gives us a tremendous company behind us, both financially and physically, to support operations."

In addition to transportation, the other critical part of the equation is the consuming demand of GP’s paper mills. "We offer homes in all markets," says Forman. "We can take that position because we have large mills behind us that use 10,000 tons per day of secondary fiber."

Forman also is quick to add, though, that the people of Harmon Associates are critical to the company’s performance. "What sets us apart as much as anything is the quality of our fiber traders," he remarks. "They are by far the most skilled and experienced fiber traders in the world, and they are renowned for their integrity and they are what makes the world go around here."

Of the company’s 140 employees, about 305 are full-time traders, says Forman, with other employees performing administrative, managerial and sales support roles.

REACHING OUT. Harmon Associates was founded in the mid-1960s as an independent trading company, but was purchased by Wisconsin-based Fort Howard Paper Co. in 1980.

Harmon functioned as Fort Howard’s procurement arm for 17 years, until the merger of Fort Howard into James River further broadened the company’s scope in 1997.

Just three years later, the re-named Fort James Corp. was itself acquired by Atlanta-based Georgia-Pacific, with the result that Harmon Associates again broadened its scope by folding existing GP trading operations into its operations.

Since its integration into Georgia-Pacific, many of the growth opportunities pursued by Harmon Associates have involved overseas activity.

In 2002, Harmon formed a joint venture with ICM in Mexico to increase its presence in the Mexican market. The next year, Harmon assumed responsibility for purchasing fiber for GP mills in Western Europe, a responsibility that is now largely carried out by Harmon’s office in Seven Oaks, U.K.

And just last year, Harmon Associates announced the formation of a partnership with China-based Paccess to provide fiber trading and management operations in China. Paccess, a paper and packaging industry firm in existence for more than 20 years in China, manages and distributes secondary fiber under the Water Lily brand name. According to Forman, this partnership now operates four trading offices in China.

While Harmon will always pursue opportunities in North America, the company’s leadership team recognizes the growth potential in other markets. "Much of the potential growth is overseas," says Forman. "We have geared the company in the last several years to take part in the growth in China, Mexico, Europe and India, as well," he says. "Our growth strategy is to think globally and grow strategically."

Georgia-Pacific President of Recycled Fiber and Bleached Pulp and Paper Simon Davies says the China venture is particularly critical. "Our goal is to provide the rapidly growing Chinese market with high-quality secondary fiber, assured supply, financial tools and logistical services, managed by a professional local sales team," he said when the joint venture announcement was made. "We will work closely with the paper industry leaders in China to establish strategic relationships that are based on a shared commitment to reducing the cost and complexity of the secondary fiber supply chain."

Forman foresees a demand imbalance that will see scrap paper continuing to flow into China for another 15 years or more. It is a flow that will have to come from throughout the world.

"There is a lot of talk about Japan being able to furnish China, but that nation is already recovering 70 percent of its paper," says Forman. "I’m not sure how much it can grow as a supplier. Chinese mills are going to need U.S. fiber."

Of the long-term, he says, "In China, you have the emergence of a middle class, which provides a huge potential for more paper generation, and through the proper recycling infrastructure investments, that nation will become very disciplined in its recovery methods."

PLANS AND IDEAS. Growing strategically places few limits on how Harmon Associates will proceed as the century’s first decade continues.