Publishers Focus

This issue contains the second in a two-part series entitled "Bold Moves in
Tough Times." The motivation behind this story is two-fold: 1. For more
than a year, the recycling and scrap industries have seen difficult, highly
volatile commodity markets. These have crimped the margins and operating efficiency of many processors. 2. The tragic events of 9/11—not to imply that anything in our market or individual companies can be compared to these horrific events—flooded the newswires with tragic news followed by a strong general economic downturn. The economic downturn brought the rest of the economy to a level the recycling market had been confronted with for some time.

Beat up by all the bad news, I felt strongly we had to share some good news as well. In my travels throughout the country and in phone visits with industry executives, I have heard many powerfully positive stories over the past year. In that time I’ve also seen companies make important strategic investments in their businesses to not only weather the down market, but also to supply them with a competitive advantage for the market rebound.

Conventional wisdom argues to slash expenses and staff, and then ride out the downturn to better times. Conventional wisdom can be wrong. Some of the most successful recycling companies have been consistent investors during down markets. Those who have played it safe often lose their leadership positions to more nimble competitors not afraid to spend money. In the recycling business, one of the realities, regardless of the commodity you process, is that if you can lower your cost per ton processed through higher productivity and/or lower operating costs, then your margins widen. This gives you the opportunity to be more competitive on the procurement side and better positions you to ride out low market pricing. A couple months ago I visited a processor who shared with me that a new baler they were installing would, conservatively, save their operation $50,000 per year in electrical costs. That’s real money, and only a small part of the overall savings.

Over the past year we’ve seen many processors invest in significant plant expansions, greenfield installations and acquisitions. These processors, thinking strategically, understand that the recycling business is a supplier of basic materials essential for a modern industrial economy. They understand that this need will not go away and that economic downturns, and the resultant lower volumes, represent a unique opportunity to expand with minimal disruption to operations. They also understand that controlling an increased volume of material will help them reduce that all-important cost-per-ton-processed.

While the industry’s doldrums have been painful, they also come after a number of years of rapid volume growth. During that period many operators simply could not slow their operations to evaluate efficiency. The current market downturn provides an opportunity to evaluate current operations to ensure maximum efficiency and recovery rates. As a result processors are also making investments to improve operations. Some of these are simple, such as new magnets, while some are highly complex, such as new automated sorting equipment.

Many positive things are taking place in the recycling industry. Businesses are on the move to ensure their long-term viability, and indeed the long-term health and vibrancy of this important industry. Bold moves, yes, but also good news for all of us, and for the industry.