July/August 1992
Led by veteran executive Ray Petermeyer, E-Z Recycling plans to expand its role as a leading scrap paper recycler in the Pacific Northwest.
By Kent Kiser
Kent Kiser is associate editor of Scrap Processing and Recycling.
Ray H. Petermeyer entered the scrap paper recycling business in 1947, humbly starting out at 22 as a weighmaster—"the formal name for a scale person," he jests. As the saying goes, he's come a long way in 45 years, now serving as vice president and general manager of E-Z Recycling, a Portland, Ore.-based recycler of old corrugated containers (OCC), old newspapers (ONP), mixed paper, and some high grades.
Since its inception in 1980, the company's volume has reportedly increased 10 percent a year, bringing its annual processing total to approximately 31,000 tons and its yearly revenues to $5 million. And with ambitious expansion plans in the works, the firm is perched on the brink of much larger success.
The Power of Parallel Partnership
E-Z Recycling was founded by Fred Meyer Inc., a Portland-area supermarket chain that sought to recycle OCC from its stores. The operation opened shop in the Swan Island Industrial Park , northeast of downtown Portland —where it remains—and Petermeyer was hired to manage the operation. He came to the job well-qualified, having worked 30 years for Independent Paper Stock (now Smurfit Recycling) as a plant manager and regional buyer, predominantly in the Pacific Northwest, as well as serving three years with Northwest Paper Fibers (now Weyerhaeuser Paper Co.) as a plant manager in Portland.
In 1982, Fred Meyer sold E-Z Recycling to Willamette Industries Inc. (Portland, Ore.), a wood and paper products company, which then sold the assets back to E-Z Recycling. E-Z Recycling's ties to both firms remain strong: Fred Meyer continues to be the company's largest supplier, providing approximately 40 percent of its infeed, while Willamette Industries is its sole consumer of OCC.
E-Z Recycling has an even closer business relationship with Far West Fibers Inc. (Beaverton, Ore.), another Willamette supplier that also specializes in bulk grades of scrap paper, processing approximately 40,000 tons a year and bringing in more than $5 million in annual revenues. The two firms are "parallel companies," says John G. Drew, who serves as president of both operations, in that they share a bank account, market material together (combined, the companies are the largest recyclers of OCC in the Portland area), and help expand each other's business. At the same time, they are "as independent as two companies can be," Drew says. "We do the same thing, but we do it differently."
In their unique business arrangement, Drew and Petermeyer have clearly defined roles: Drew focuses on managing Far West Fibers and serves as the statistician, administrator, and public/government liaison for both companies, while Petermeyer manages E-Z Recycling and serves as the scrap paper expert and representative on trade associations for the firms. Last year, Petermeyer was elected secretary of the PSI Chapter of the Institute of Scrap Recycling Industries (ISRI) (Washington, D.C.); previously, he was on the executive board and "on all the committees" of the PSI group within the National Association of Recycling Industries, an ReMA predecessor organization. "To me it's exciting to talk with people in the paper industry who operate in other locales," he says. Petermeyer is also a member of the Association of Oregon Recyclers and the Lion's Club, and he serves on the hazardous materials committee of the Association of Oregon Industries.
Petermeyer notes that Drew and he are low-key executives, "on-the-spot managers, making the decisions that need to be made. We try to keep it that way, and the customers seem to appreciate that." Petermeyer, in particular, is the antithesis of a stuffy, desk-bound executive, varying his tasks from paperwork to hands-on work. "I enjoy the flexibility of being able to buy, or sell, or refine the production process," he explains. "There's always something challenging." At other times, he can be found zipping around the plant in a forklift, moving bales with the best of them, or climbing behind the wheel of a consumer's tractor trailer to move it from the loading dock.
In addition, Petermeyer believes in having a personal touch in his business, getting to know many of his public customers by name. Mrs. Saunders, for instance, is an 80-year-old woman who comes in two or three times a day to drop off material. When she's ill, her family calls Petermeyer to let him know where she is and how she's doing. On more than one occasion, E-Z Recycling has sent flowers to such customers to wish them well, following up with a phone call to see how they're doing. "I guess that makes a difference to them," Petermeyer says. "They feel like we're family."
Enjoying a Market Mecca
E-Z Recycling's plant is positioned between Union Pacific railroad tracks and the Willamette River , which connects with the Columbia River en route to the Pacific Ocean. Despite the company's access to ports—and, thus, overseas markets—it sells almost exclusively to domestic paper mills. Why? Because, Drew explains, the Pacific Northwest is blessed with plentiful markets for scrap paper. While Oregon, for example, has only 1 percent of the nation's population and, therefore, only about 1 percent of the potential scrap paper supply, its local mills consume 5 percent of the nation's scrap paper, he says. This plethora of demand definitely has its advantages, Petermeyer notes: "We've got three mills within 45 miles that use ONP, so we haven't experienced a situation where there's no market for ONP or where we must charge $50 a ton to bring it in, bale it, and haul it to the landfill. That makes our market much different than the East Coast market."
E-Z Recycling is also fortunate to be located close to its suppliers and consumers. It draws most of its material from sources within a 20-mile radius, and most of its consuming mills are within 60 miles. "I think we're better off than most anywhere else in the nation, mainly because of our proximity to the mills," Petermeyer says. In addition to selling OCC to Willamette Industries, E-Z Recycling markets No. 8 deinking ONP to Weyerhaeuser (Portland Quality Sort Center), Smurfit Recycling (Oregon City, and Newberg, Ore.), North Pacific Paper Corp. (Longview, Wash.), and Daishowa America Co. Ltd. (Port Angeles, Wash.). The company sells No. 6 boardmill ONP to Keyes Fibre Co. (Wenatchee, Wash.), while mixed paper is shipped exclusively to Georgia Pacific Corp. (Toledo, Ore.).
This doesn't mean that E-Z Recycling never exports its scrap paper. "Occasionally," Petermeyer says, "if the domestic mills aren't interested, we'll export material," mainly to Pacific Rim countries such as Japan, Korea, Taiwan, and Indonesia. At other times, Drew explains, E-Z Recycling and Far West will export paper to help the mills balance their needs and honor their commitments to other suppliers.
In addition to the Pacific Northwest 's favorable market situation, E-Z Recycling has also benefited from the region's burgeoning growth, Drew says. "We've been hurt in the sense that the economy has slowed down, so there's less material from our existing accounts," he explains. "But we've been helped because the Pacific Northwest is a growing area, so although we get less material from our existing accounts, we have more accounts." Since the company mainly handles consumer-related paper products like OCC and ONP, he notes, its supply base grows as the population grows.
These factors have helped E-Z Recycling weather the recent economic recession. "We're not losing money," Drew says, "we're either breaking even or making a small profit in most of our operations." Petermeyer adds, "Compared with some of the recessions I've been through, this isn't that bad," noting that one benefit of tight times is that he must scrutinize his operations and identify areas for improvement.
Looking ahead, Petermeyer and Drew are bullish on the future of paper recycling, although they hesitate to guess when the current recession will truly disappear. On a global basis, Petermeyer sees growth in demand for secondary fiber from China, Indonesia, and the former Soviet republics, predicting that "by 2000 there'll definitely be a fiber shortage." In addition, Drew notes, timber resources will become less and less available in the coming decades, which will create a need for substituting more secondary fiber.
Navigating Through the Problems
Despite Portland 's many advantages, it has some disadvantages. As an inland port, for instance, Portland is "not as popular" as other oceanfront ports on the West Coast, Drew notes, and its scrap freight rates run $5 to $7 a ton higher than those for other ports. As a result, when E-Z Recycling is shipping overseas, it sometimes hauls material on land by container to the Port of Tacoma to gain access to more ships and better rates. Balancing these negatives, Drew asserts, are the facts that the Port of Portland is well-equipped and has the potential for future expansion.
Another problem is government involvement in the recycling business, which can be more pronounced on the West Coast, the nation's environmental vanguard. "State and municipal governments want to get in on the recycling act because it's a hot item," Petermeyer observes. "They all say we're not doing enough, that we've got to do more, but they don't offer any new markets. There are some coming, but it takes time." Curbside collection programs, he notes, often skew the industry's supply-and-demand equation and can draw material away from private recyclers. E-Z Recycling, for instance, has seen the effect of Portland 's curbside program on the volume of ONP it collects at its public drop-off containers in shopping center parking lots. The containers used to fill up once a week, but now they fill up only every three weeks. "These programs are changing the flow of material," Petermeyer notes.
The darkest cloud on the horizon, however, are flow-control proposals, which Drew says could be a "death knell" for private paper recyclers. "We would no longer be in control of our destinies," he states. "Now we are—we get to go out and compete every day. We get to knock on doors, pound the pavement, go after an account—and protect our other accounts while we do it. At least we now have the opportunity of winning the situation."
Drew does see a bright spot in the dark cloud of government involvement, however. As more recycled-content laws are passed and as governments establish higher and higher recycling goals, mills will have to expand their deinking capacity and scrap-paper pulping. "Many mills have contacted us to say, `We're looking into replacing some wood chips and virgin fiber with secondary fiber,'" Drew says. "Every mill, if it's not already expanding, will be looking into secondary fiber, so this is wonderful news for us."
The Keys to Success
Companies don't succeed in this business by chance. Part of E-Z Recycling's success can be seen in its eight employees—an administrative assistant, a part-time brokerage assistant, and six plant employees—including Petermeyer's 26-year-old son, John, who has worked in the plant for three years. Many of these employees have been with the firm since its inception and have achieved an excellent safety record, suffering only two lost-time accidents in 12 years. One employee says E-Z Recycling keeps its employees by paying better-than-average wages and offering profit sharing, solid benefits, and seasonal bonuses. In addition, employees are encouraged to keep their work interesting by rotating positions throughout the day, taking turns operating the forklifts, front-end loader, and baler, as well as cleaning up and managing the warehouse floor.
The foundation for E-Z Recycling's success, however, seems to be Petermeyer's commitment to service. "Everybody can pay the same price, so service is really all you've got to offer," he points out. This service mentality has helped him maintain long-term business relationships with many of his consumers and suppliers. "A number of my clients have followed me from job to job throughout the years," he says. "I guess they trust me."
In the paper recycling business, as in any commodity-based industry, quality is also a critical issue, and E-Z Recycling is fastidious about its product. "Quality is an absolute must if you're going to maintain your position with the paper mills," Drew says. While much of the firm's scrap is source separated and, thus, basically clean, it ensures quality by keeping all paper dry and under cover, constantly examining incoming loads for contaminants, and sorting high grades by hand to guarantee purity.
Equally critical to E-Z Recycling's success has been its ability to work with its mill consumers to create new markets for material, particularly mixed scrap paper. The company's mixed paper (which Drew calls "a drug on the market everywhere else in the country") encompasses a smorgasbord of paper items such as cereal boxes, magazines, egg cartons, and miscellaneous OCC and ONP. Only about 10 mills in the country reportedly purchase mixed paper as a feedstock, using it to produce kraft bags and medium and corrugated linerboard.
Two years ago, Georgia Pacific approached Petermeyer and Drew, asking them to provide mixed paper to its Toledo, Ore., mill so it could develop standards for using the material. The two executives agreed and have since worked in "very close harmony" with the mill, Drew says, to refine and increase its use of such paper, now pegged at 2,000 tons a month. And when Petermeyer wanted to expand his supply sources of mixed paper in late 1991, he knew just the group to call: the U.S. Postal Service's local headquarters, which was landfilling all of its undeliverable mail. Now, E-Z Recycling handles approximately 80 tons of mixed paper from the Postal Service every month. The material is currently only a break-even proposition for the company—as Drew says, "Mixed paper has not arrived for the mass of mill consumers"—but the firm's executives see the effort as an investment in the future, for the time when there could be a profitable market for the material.
Expanding Into the Future
E-Z Recycling's biggest investment in the future, however, will be in a new plant. "We built our current plant to contain 1,000 tons a month," Petermeyer explains, "and we're already up to 2,600 tons a month. We have nowhere to grow, so we're looking to relocate the whole operation."
In contrast to the firm's current 1-acre, 35,000-square-foot facility, its new plant will occupy 10 acres and have 65,000 square feet of building space. The multi-million-dollar operation will also include a modern, high-capacity baling system and other new equipment. "E-Z Recycling is going to be the flagship of our company," Drew asserts. "It already has great employees and will soon have state-of-the-art machinery, the best location, and the best possibility for growth."
The new facility is a necessary business move for the company, Petermeyer says: "If we don't build the new plant now, we'll be dead competitively." E-Z Recycling's current space has indeed worked against it at times. Its limited covered area has prevented it from spreading out its No. 6 boardmill ONP to upgrade it to No. 8 deinking ONP. Also, the constant influx of OCC prevents it from stopping operations to clean the baler for processing high grades.
While E-Z Recycling will continue to focus on scrap paper from commercial sources, its new facility will also feature public drop-off containers for residential scrap paper, as well as non-paper recyclables such as glass containers, steel and aluminum cans, and plastic bottles and jugs, all of which are currently collected at the Far West plant. Like Far West, E-Z Recycling will not market the material; instead it will allow other recycling companies to site collection bins at its plant and maintain the areas—at a cost of $30,000 a year, Drew says. Its payback lies in receiving all the public's scrap paper. This move toward being a more diverse, full-service operation—basically a material recovery facility—not only jibes with E-Z Recycling's motto, "We Make Recycling E-Z," but is also a practical way of doing business, Petermeyer says. "You're almost forced to do these things nowadays if you want to be competitive."
And at 67—when most executives would be winding down, if not bowing out—Petermeyer plans to be the one ushering E-Z Recycling into its new incarnation. "Everybody keeps asking me when I'm going to retire, and I keep saying, `I don't think I ever will,'" he remarks. "If you enjoy what you're doing, why go home and sit in a rocking chair?" •
Led by veteran executive Ray Petermeyer, E-Z Recycling plans to expand its role as a leading scrap paper recycler in the Pacific Northwest.