The Brown Sheet ™    - Midwest Edition ©

consumer grades of recycled fiber &

corrugated marketing news for the generator

published the 1^st & 3^rd weekend of each month

1^st Edition of the Month, February 3, 2008

Volume 27, February 3, 2008

Midwest Market News Update for the Waste Generator

Mill buyers are getting to the point where they are not overly enthusiastic about coming to work in the mornings, because each day there is some new factor to fit into the buying equation. In 1994-95 when corrugated in the Midwest went from $25 to $230 back to $25 in an 18 month span I was on the generating side. At that time I only dealt with 2 mills and did not know that many people from the industry. So I have no idea how mill buyers bought back then when they got nervous the Mill would have to shut down because of no raw product. That same hint of panic is in the air today and I think it has a lot to do with the Editorial Cartoon I have printed below, with the permission of Gary Varvel from the Indianapolis Star; it is self descriptive and does not need any comment from the undersigned.

When the 18 months were over in the first quarter of 1996 and the wild swing had run its course generators received a very unpleasant punishment, the next 18 months they operated at or under the cost of production. Many generators as well as buyers had hoped the market would level off on its way down in the $75 range because recycling operations had expanded during the good times and needed that higher price to pay for all the new equipment they had purchased. Well we all know what happened; the free fall didn’t stop until the Domestic Mills put a floor in for the market to keep the recyclers from completely going out of business. There literally were more tons of material available than the domestic mills could use in the foreseeable future. Overseas buyers were no where to be found for the first few months after the crash as they too were licking their wounds. So domestic mills fell back to their routine of $25 to $35 and helped clear out warehouses of the generators who worked with them as the price rocketed over $200. So that is your bias editorial history lesson for those of you who did not participate in the market 13 years ago – be careful what you wish for. It truly was a sellers market for 12 months as the price flew through $200/ton, the following 6 months were not so fun on the way down – let’s call that the Mill Buyers Revenge Market. The only way you could move loads you did not have on contract were by begging and discounting. The adage of what goes up must come down and usually twice as fast was proved to be un unconditionally correct. 1994-1995 was when the first Chinese Buying Frenzy grabbed the US Fiber Market and over exaggerated what was thought to be a tremendously short supply. There was a short supply with the new Mills coming online in China when China sent its first buy order over to the States.  But if the market would have been a little calmer and realized China did not need the whole order filled next week or next month market forces could have evened out their needs and steadily raised recyclers prices by 2 or 3 times to a new plateau.

Now to the Current Situation, February 2008

For February you cannot get a firm price commitment that you can believe from a Mill. So after a half dozen calls last week I decided what the subscribers were reporting was more fact than I was going to receive from talking to a Mill. Most Mills are calling the market no change except in the Southwest and the West where they are loading containers steadily and the domestic market is higher there to compete with container prices. What the buyers and other publications are calling no change in the East, Midwest, Southeast and South reflects the unposted prices they started paying in Mid-January to keep their customers away from overseas brokers. So actually all 6 regions that The Brown Sheet covers are up at least $10 per ton for Corrugated, DLK, Mix and SOP. The SOP market is actually using less material but the price is still climbing in all regions because of lower generation. 

The Brown Sheet is trying to establish what the true prices really are and as our subscriber list grows so will our reporting of more fact than Mill Fiction. Domestically we know from the past that producers of fiber will pay what they have to in order to keep enough inventories on hand so it does not threaten a shut down. As a generator you might not like this next statement because for most of you its time to let the good times roll to the generators side for a change. But spikes caused by exporting to China in the past have caught up with the market and it has usually meant gearing up recycling programs which pumped more products on the market, but maybe this time it will be different. This time we have economies in India and China who are becoming affluent and purchasing consumer goods for themselves instead of just being an offshore manufacturer for the US, so their economies are flourishing while ours could be receding.

So this month The Brown Sheet is posting higher prices that are being reported by generators. In most cases our price postings will not be the same as what Brokers or Mill put out so you might have a little up hill battle to convince them your material is worth $10 more.  Because of our early stand on posting higher prices, the mid-month call is going to be extremely interesting. We probably will be guessing in the dark if we should advise you to be aggressive in your marketing’s for the balance of the month or continue as instructed keeping a little nest egg for the next month. Some big changes will have to start happening to settle down the US economy and I just don’t see a calm tranquil feeling that everything will be alright emerge in two weeks.

As a Generator it was fun on the way up back in the mid-nineties. On the way down it was not nearly as enjoyable because the only way you could move material off your dock was offering to sell it $20 or more under the posted price, otherwise the mills were full. So look at the chart below and see how fast it came down, in actuality it was a little bit faster than what the chart shows. So the fiber we are producing today is being propped up by Los Angeles loading out containers at a price of $200 per ton. The Northwest markets are still under priced because of a backup of material waiting for shipping containers. When the Northwest finally gets its shipping containers that most likely will curtail the current price hikes for the immediate future because I have a feeling the material is on hand in a nearby warehouse waiting for that $200 ton export figure. What everyone will be watching if the exporters start running low will they go higher or cap their buying. Personally I think they have enough inventories on hand that we may see them back away at purchasing anything over $225 per ton via LA. History will show that the overseas markets learned their lesson 13 years ago and now it is just continuous buying and clean up the market when there is a glut that fills their China warehouses with baled corrugated. There is a large enough discount between the Lower West Coast and the Upper West Coast that shippers can actually start affording to pay the premium prices being asked to be at the top of the list for the new Game show they are test marketing in Seattle called “Who gets a container today”?

That’s it, if you have any questions about the posted prices below and how they were determined send the undersigned an email.

Disclaimer - There's always got to be a Disclaimer ahead of my Signature

The updates provided are a forecast of potentially what is ahead and should be thought out by the reader and no marketing decisions should be based solely on what is printed in the twice monthly Subscription Editions. Every recycler in the Nation has their own marketing strategy and should not rely on this publication or others to predict what future pricing will be. The Brown Sheet only offers opinions of what we would do if we had material to market. I wish you all Good Luck in your marketing's and hope you receive top dollar. The publisher has 28 years in the recycling field and relies on the contacts he has made over the years to help write The Brown Sheet.

Brook Edwards, aka RecycleGuy™

The Brown Sheet© a subscription newsletter service from RecycleGuy, LLC

How to read the pricing below

Mills have structured their buying through agencies (brokers) or regional offices. These buyers earn income from buying material from generators. The regional buyers coordinate timing with the mill to receive material, work out special circumstances that might arise and guarantee the material that the generator is producing and shipping will meet mill specifications when received. In the chart below you will see a price range. Whether you are on the low or high side depends on the amount of material you supply along with consistent heavy weights of 21+ tons per load your pricing should fall within the range.

Most factories, food processors and distribution centers that bale cardboard have no idea that there is a range because brokers do not let it out and many mills will not discuss pricing with small operations in order to protect their buying network. The only time this information becomes somewhat known is when a new buyer enters the picture asking for your tons. To explain this in great detail would take several pages. As you watch markets in the next few months The Brown Sheet will continue to give you guidance on how to improve your pricing. Below the BOLD represents an average of the End Users and Buyers in that area posted price. The price to the right of that would be a common premium paid to recyclers with some type of contractual arrangement.

Subscription Service:

Individuals can help structure pricing trends by uniting and sharing information for buyers and price setters to see. Starting in 2008 the Brown Sheet will be published twice monthly and will contain the following grades:  OCC, DLK, ONP 8, MIXED & SOP. The first publication of the month will be the first full weekend when domestic mills release their price for the month. The second newsletter will be the 3rd full weekend of the month trying to give subscribers enough information that they can hold or sale as the month draws to an end. The second publication is the hard one and when all subscribers need to report their current status so we can have a hand in what the pricing will be instead of always being told after the first Saturday of the month.

The publisher hopes you decide that the small monthly fee is worth gaining knowledge about marketing what was once trash. Over the next few months we will continue to educate you and your staff and provide articles about how to recycle easier and how to choose buyers that you can count on. We will also work with you on other recyclables as you start auditing your trash. For many businesses you can no longer live by the theory of "out of sight, out of mind - now you have to be Green."

serving the generator

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The Brown Sheet© is a service of RecycleGuy, LLC

aka RecycleGuy ™