Volatility in recyclables markets is nothing new for most haulers, but many were caught off guard by how sharply the overseas and domestic markets have plunged over the past several weeks.
Rich Abramowitz, public affairs manager for Houston-based Waste Management Recycle America (WMRA), says the industry saw similar drops in recyclables markets in the early and mid-90s. Recycle America sells its recyclables domestically and to overseas markets such as China, India and South America.
Abramowitz says companies expect pricing drops, but don't know exactly when they will show up. "Drops usually occur over a two- to three-month period," he says. "This time it was two to three weeks, which is clearly a lot faster than in the past." He adds that WMRA is currently looking at ways to adjust its business model to account for the current economic situation.
Bill Moore, president of Atlanta-based Moore & Associates, a paper recycling consulting firm, says the drop was somewhat predictable. That's because of factors such as the market becoming overheated and rising too high; significant over capacity in China, which is widely considered one of the most vital foreign markets, as well as a post-Olympic slowdown in manufacturing and construction; and a slowing U.S. economy. The downturn of demand for recyclables in China significantly softened demand for raw materials, including recycled paper that is commonly used to make packaging for shipping goods.
The unexpected factor that caused the unusually quick plunge, Moore asserts, is the current credit crisis.
As of press time for this story, Moore's firm did not have its fourth-quarter figures. He did say, however, that he expects a steep decline for the entire paper market and for fourth-quarter prices to be "way down."
According to Official Board Markets, a trade publication that reports monthly market prices, the national average for the price of old corrugated containers (OCC), the largest group in the paper market, dramatically fell from $124 per ton in December 2007 to $30 per ton in December 2008.
Moore, whose firm measures prices on a quarterly basis, says the price of OCC has been steadily dropping since first-quarter 2008, when it peaked at $135 per ton. The price fell to $130 per ton in the second quarter, and again to $123 per ton in the third quarter. However, prices for old newspaper (ONP), the second-largest group in the market, actually increased during the first three quarters of this year. The first-quarter price of $129 per ton rose to $132 per ton in the second quarter and again to $159 per ton in the third quarter. Despite the gains, Moore says he expects prices for ONP to show a significant drop in the fourth quarter.
According to Moore's firm, the price for OCC matches the all-time quarterly low between 1989 and 1993 when the price fell as far as $30 per ton. For ONP, the price fell as far as $20 per ton in 1990. Moore says he doesn't expect the upcoming figures for the fourth quarter to get quite that low.
Scrap steel prices are another indicator of where the paper markets are headed, says Chaz Miller, state programs director for the Washington-based National Solid Wastes Management Association. The collapse of the steel market in September can be attributed to many of the same factors that caused paper to drop weeks later.
The price of No. 1 heavy melt scrap, one of the largest categories of steel scrap, fell from $329 per ton in January 2008 to $119 per ton in December 2008, according to the Washington-based Institute of Scrap Recycling Industries.
In terms of the recycling markets rebounding, Moore says the U.S. economy remains a major factor, despite developments in foreign markets, and he expects the markets to remain relatively low for at least the next six months.