January/February 1989
Faced with the oversupply and
market instability that can result from state mandatory source separation
programs, and with softening export markets, ReMA Paper Stock Institute
delegates met in Florida in November to examine the issues.
By
Robert J. Garino
Robert
J. Garino is director of commodities for the Institute of Scrap Recycling
Industries, Washington, D.C.
More
than 200 industry members and guests of the Institute of Scrap Recycling
Industries' (ISRI) Paper Stock Institute (PSI) gathered in Boca Raton,
Florida, November 9-13, 1988, to discuss and dissect domestic and
international business trends, technical information, and paper stock
specifications, as well as to share their personal views and concerns
about the waste paper industry. On hand were several expert speakers who
discussed a wide variety of topics, ranging from what's new in European
sorting conveyor systems to the latest state-by-state recycling
initiatives.
Concern
Over Paper Stock Markets
While
there was some disagreement among packers, brokers, and paper mills
concerning the near-term direction for paper stock markets, virtually all
attendees expressed grave reservations about the longer-term effects of
state-initiated mandatory source separation programs. Those handling bulk
grades--old newspapers (ONP) and old corrugated containers (OCC) in
particular--stated that they are already feeling negative effects in
certain areas of the United States.
In
short, supplies of bulk grades are quickly overwhelming demand, according
to the majority of executives interviewed. "It's a no-win situation
for both the packers and the mills," noted one large paper stock
consumer. "If prices for bulk furnish [raw material] truly reflect
supply and demand over time, packers may not survive," he predicted.
"Mills, therefore, must recognize and nurture the interdependence
between supplier and consumer for survival over the long haul." As
expressed by many attendees of the conference, new or expanded end-use
markets for waste paper are absolutely essential.
State
Collection Programs
The
role of recycling in managing solid waste was addressed by Janice Walls,
ISRI director of state government programs, and by Steven L. Levetan,
legislative affairs director for ReMA's Southeastern Chapter.
Walls
reviewed several major 1988 legislation initiatives affecting paper
interests, and forecast that the current trend of comprehensive solid
waste/recycling laws, such as those recently passed in Pennsylvania,
Maryland, and Florida,
may provide the model for other states in the coming year. States
currently without solid waste laws may be forced to provide some type of
solid waste plan, stated Walls, if the federal Resource Conservation and
Recovery Act is reauthorized next year. One of the major proposals under
discussion by the federal Environmental Protection Agency is a national
recycling policy with a 20- or 25-percent recycling goal, she said.
Regarding
future legislative trends, Walls anticipates more solid waste and
recycling legislation and fewer "bottle bills" and
antilitter-type proposals. Paper will continue to be one of the first
items looked at by state legislative and regulatory officials as they
address their solid waste and landfill problems. Walls said a very
positive development is that many states are expected to continue
considering public-sector procurement policies, many aimed specifically at
paper products.
Levetan
detailed specifics of Florida's new solid waste law, SB 1192, highlighting
key provisions that affect the recycling industry. He stated that the
terms "recyclable material" and "recycling" must be
better defined to differentiate between solid waste and materials that
could be recycled. He also noted a provision stating that all materials
that are separated from solid waste and held for recycling, whether
separated at the point of generation or after collection, are now exempted
from government flow control. The bill further states that there is a
sales tax exemption (refund) for machinery and equipment
"integral" to recycling that is purchased after July 1, 1988.
Levetan believes this should increase taxpayers' consumption of
Florida-source recyclable materials.
The
newsprint waste disposal fee (known as the editorial tax), certainly an
original proposal in a state solid waste bill, was also explained by
Levetan. The fee allows a credit for the use of recycled newsprint. The
credit--initially 10 cents per ton of newsprint consumed--is collected
quarterly from producers or publishers based on the total weight of
newsprint consumed by their publications. Like Walls, Levetan predicted
that other states will be looking to Florida's comprehensive legislation
as they develop their own solid waste proposals.
Paper
Stock Specifications Keep Pace
The
PSI Standards and Practices Committee met to discuss additions and
deletions to ReMA's Scrap Specifications Circular 1988. The committee was cochaired by Steve Vento, Durbin Paper Stock Co.,
Inc., Miami, and John Gold, North Shore Recycled Fibers Corp., Salem,
Massachusetts. The committee recommended introducing several new paper
stock specifications and deleting several others. Six new specialty grades
were introduced at the meeting.
Subcommittees
were appointed to update definitions of existing specifications. The
subcommittees will work toward reconciling differences in language,
incorporating these changes in a revised paper stock circular, and
publishing the updated circular in early 1990.
Lessons
From Europe, Canada
Cochairmen
Stanley Litman, Dal-Tex Waste Material Co., Dallas, and Louis Monteleone,
V. Monteleone & Co., Inc., Bronx, New York, opened the Production
Committee meeting and introduced three guest speakers: Gary Musselwhite,
Harris Press and Shear Division of Amhoist, St. Paul, Minnesota; Erik Van
Dyk, Van Dyk Baler Corp., New York City; and John Russell, The American
Baler Co., Bellevue, Ohio. Musselwhite's presentation focused on baler
safety. Van Dyk and Russell provided an overview of the effects of
mandatory collections in Europe and Canada.
Van
Dyk discussed paper recycling rates in the European Economic Community He
said the recycling rate in the Netherlands is about 65 percent, compared
with a U.S. rate of 25 percent. He took a closer look at West Germany,
where so-called mandatory recycling started in the mid-1980s. According to
Van Dyk, within two years of the program's start, oversupply in the lower
grades forced prices lower, causing a restructuring of the entire market.
As a result of not taking full consideration of a "market first"
approach, he said, the West German experience resulted in fewer (but
larger) waste paper processors, increased cost cutting by processors,
especially in energy, and more upgrading of processing equipment. He
suggested that packers in the U.S. may have to respond similarly.
Russell
noted the economic effects of mandatory source separation in Canada. He
said that, while such legislation benefited certain equipment
manufacturers, the market was threatened by oversupplies of low grades of
waste paper.
Shifts
in Export Markets
At
PSI's Foreign Trade Committee meeting, cochairmen Bob Maynard, Allan Co.,
Baldwin Park, California, and Joe Merante, Recycled Fibers of New Jersey,
Inc., Newark, New Jersey, discussed export markets for paper stock.
Meeting
participants observed that the Pacific Rim countries lowered their demand
for waste paper in the third quarter of 1988, but were uncertain about why
the Asian paper and paperboard markets had softened. Participants noted
that Japan's exit from the waste paper market was affecting all paper
stock grades. Weakness was also attributed to the Hong Kong, Chinese, and
Philippine markets.
Also
discussed was the South American paper industry, which had shown signs of
rebounding following a prolonged bout of high inflation coupled with waste
paper tariffs. Although South America is a "hard-sell" market
for U.S. exporters, most recent 1988 indicators pointed to a pickup in the
second and third quarters of 1988. However, as one exporter remarked,
relatively high freight rates were a limiting factor.
The
easing of the European market as 1988 wound down also was noted. France
was especially strong over the summer months, while the Mediterranean
countries were termed very steady. European mills reported that finished
inventories were up and, consequently, the need for additional furnish had
diminished. In addition, noted one exporter, lower Asian demand was
affecting the European market as well, resulting in softer prices all
around. Container service to Europe was described as a bit of a problem
but, generally, service to Europe was felt to be adequate.
While
the export markets were not termed bullish for packers or brokers,
committee members thought that the problem was too much supply, not too
little demand. The overall fiber market for 1989 was described as positive
and, thus, future worldwide demand was expected to soak up the surplus
that was apparent by the fourth quarter of 1988.
A
"Common Thread"
ISRI
President Richard E. Abrams told PSI members at the general session that
the association speaks for the entire recycling industry and values its
paper stock members. ReMA is a common focal point to share ideas and
concerns, he said, and is "where we as members transform those ideas
into programs, services, and action." He reviewed many of the current
programs and information services available to all ReMA members. He
referred to the Washington, D.C., office as a "one-stop consulting
service" and urged PSI members to utilize the expertise of the ISRI
staff.
Abrams recognized PSI's concerns about mandatory source separation as a "common thread uniting all ReMA members. The only way to effect moderation [of such legislation] is as a uniform group," he said. He reinforced the importance of ReMA's chapter system and called for greater involvement by paper processors and brokers at the local level. Abrams emphasized that "involvement of the full membership spells the difference between success and failure for all of us in the business of recycling."