Spring thaw: hot prices help Northeast recyclers spring out of winter's deep freeze.

There was a big snowball fight in the Northeast this winter ... and recycling operations took some heavy hits. The winter of 2003-04 will he remembered as one where Mother Nature beat tip on New England and the Mid-Atlantic region. Recyclers know wintertime is normally a slow time at best. but with the amount of snow, ice and generally hideous weather the region suffered from Thanksgiving to late February, material movement was put in the deep freeze.

"Equipment was not available and the piers were closed." says Greg Bianco, CEO of Metropolitan Paper Recycling Inc., Brooklyn. N.Y. The company moves 25 containers of material pet day, about 90 percent of it to the export market. "When you're in Brooklyn and the piers close, you don't have room to stove the material. We got hacked up," Bianco says.

"January and February were very slow due to the horrible weather," says another New York City area recycler. The snow slowed material movement in to and out of the yard. Throughout the first two months, Mother Nature did not let up. While it might not have seemed like killer weather to someone in Minnesota or Wyoming, it was extreme weather for the region.

WINTER TURMOIL. For much of the winter, the roads were a mess. The railroad lines in the region suffered tram deep snow and ice, broken tracks and frozen switches. Docks did not function.

"This was nothing new to us," says Bianco. "We're used to this happening every winter. It was lust that this winter was worse than most. You adjust. You move on."

One thing that helped keep business afloat was the strong overseas demand. Despite the ports being closed, Metropolitan did not lose any business. The buyers understood the problem was an Act of God, wanted the material badly and were willing to adjust.

In addition to nailing overseas shipments, the problems affected recycling collection routes, "We certainly had a much more difficult time this winter picking up material at store locations," agrees Chuck Stone of Recycled Fibers, Newark, N.J. "In many cases, we were unable to get to the material or to the docks," he explains.

February historically is a low-generation month. At Recycled Fibers it typically goes into the books as the slowest month. Add in the poor weather, and that certainly was the case in 2004.

The upside, Stone says, was a higher price. He says he feels the price increase was because of the weather, coupled with higher export demand.

While everyone was cold, not everyone saw operations come to a standstill.

"Guys to the north seemed to get nailed more than we did," says George Glenn, president of East Coast Recycling Associates, Millville, N.J. The company faced bitter cold more than deep snow.

East Coast Recycling handles a lot of industrial vinyl and vinyl siding. "When the builders stiffer, so do we," Glenn says. "We were not getting the volume we got the past two years when the winters were milder."

"We had the frigid weather, but we didn't get the snow," agrees Joe Balzano, production supervisor at Camden Iron & Metal Inc., Camden, N.J. They had 20 days in a row when the temperature did not go above freezing.

While areas to the north were plowing out drifts, they were still able to move material and take advantage of temporary price bulges. "It had a good effect on our market," Balzano says.

Victor Horton, executive director of the Maine Resource Recovery Association (MRRA), Bangor, notes that municipal collection had tapered off quite a bit in light of the blizzards.

"I blame it on the cold," he says. Maine is used to hard winters, but its residents suffered along with everyone else this year. "Grandma just doesn't want to go to the recycling center," he continues. "People don't want to put material out by the roadside to have the plow hit it."

Trucking always is an issue in Maine. Some towns are Fairly isolated and shipping is a challenge. "But we've added tonnage and the numbers are still growing," Horton says.

Horton says some grades of cardboard and newspaper actually are in short supply. "This time of year, we always blame a slowdown in generation on the weather, but there may be other factors."

Newspapers, hurt by the economic slowdown, are thinner these days. It may not seem like a lot, but four or eight fewer pages a day add up to many tons of recyclable material when multiplied by a paper's circulation during a month's worth of issues.

Not everyone was as severely affected by the weather. In Pittsburgh, this past winter's ferrous market has been more of an exciting bobsled ride than the weather--only instead of racing downhill, the market took off.

It looks like a rocket ship, says Alia Goldstein of AMG Resources, Pittsburgh. "The prices have gone through the roof."

Indeed, the steel industry has seen prices for all manner of products hit unheard levels. New production of cold steel scrap is fairly fixed. "You could pay a million dollars a pound, but they're not going to produce any more stampings," Goldstein says. Obsolete scrap can be teased out by higher prices, but the market has been on fire so long that there is nothing left hiding out. "In a lower market, people have no ambition to sell," he says. "Today the market is at such a level that everything is gone. It's not that higher prices can bring out any more scrap."

Most of the scrap AMG Resources handles stays in the domestic market. How long can it last?

"Everyone's order books look pretty good with the steel mills," Goldstein says. He notes that the steel market, overall, is much more healthy than it has been for some time.

On the scrap paper side, "The weather hit us a little on material coming in, but not dramatically," says Tim Hays of United Paper Stock Co., Pawtucket, R.I. Most of its material comes from industrial sources and commercial generators, so they are not reliant on the smaller producer.

By the end of February, things were back to normal, and Hays says they were seeing reasonably healthy generation of fiber. United Paper ships a fair amount of material offshore and sees good demand in Asia. "The Pacific Rim is growing," Hays says.

Like everyone else, Mainers have seen the effect of the strong surge of interest from Asian buyers. "If they decide to buy, everyone scrambles for material. If they don't, markets drop," Horton notes. Recently, Asia has been buying--both paper and metals.

MRRA has excellent records for the past 10 years and Horton says the current price on paper is almost twice as high as it has been at anytime in the past decade. "And it's not just paper--plastics and metals are up, too."

As the weather broke, inflow picked up. Problems for the exporters diminished. Unless recyclers have direct access to the waterfront, they still had to move material by truck or train to the docks. The lousy weather slowed down anything going to the docks for overseas shipment.

As spring rolled in, recyclers found themselves back to more traditional market choices, deciding whether to move material into the international market or keep it domestic based on market conditions. In New York, many operators found domestic pricing more attractive than the export market.

MUNICIPAL MARKETS. Despite the boom in steel, one segment that seems to be slowing down a bit is the municipal market, Goldstein says. He credits the cutback to the general tightening of city budgets across the board.

Maine's Horton says the state has not seen the slippage that other areas have noted. MRRA oversees programs in 200 towns. MRRA has seen only one town--of 900 people--cut its recycling program. "But we turned around and picked up a town of 4,000," he says.

Ironically, the higher price for cardboard might actually result in operations like Horton's seeing less material than more. In early March, cardboard was fetching more than $80 per ton in Maine--and that can encourage some haulers to bypass the municipality's recycling program and haul the material directly to a private sector buyer. Nationwide, the price was $139 per ton at the buyer's dock.

That kind of price can cause strange things to happen to delivery schedules. "When a hauler says production is down, it's hard to say whether the town is not generating as much material or whether he is [being deceptive]," Horton says.

LOOKING AHEAD. While nobody is predicting any huge variance from normal, there are a number of factors that could change the market. China could hiccup, freight rates could continue to increase ... or, they could go down. Prospective sales on mill order books could go up ... or they could go down. Most recyclers are anything but speculators and are used to dealing with a market dictated by supply and demand.

Those market forces, especially the offshore demand, are hurting Glenn. "Until Asia slows down on consumption, we're losing millions of pounds of material overseas," he says. That is tough when an operation invests in equipment to process a certain daily tonnage and then falls far short.

"It's a volatile market. It's tough for a processor," Glenn says. While he sees the increasing gas prices as a positive (plastic prices should soon follow), he is struggling with maintaining a feed-stream.

Glenn says PET recyclers have a similar problem: a shortage of raw material. "The Asians are buying up everything," he says.

One shredder operator who manages the nonferrous portion of the shredder stream says he expects to buy and sell similar tonnage compared to last year. "I don't see any reason why we will be buying any more or any less," he says.

Steel is another story. The steel market has gone bonkers. In two month's time, the price of finished steel went from $350 per ton to upwards of $475 for some forms. Scrap prices soared to help meet mill demand. "The market is at a level now that people are willing to scrap their own vehicles," Balzano quips.

He says they are getting calls from the coal mining regions where obsolete material has been laying around for five or six years. But he knows those supplies won't last for too long.

"There is significant demand for material. Steel makers are passing along a good amount of the increased prices," Balzano says. That's the good news.

Longer-term, ferrous scrap prices seem unlikely to sustain the growth they have seen. Tempering the overall picture is some reluctance on the part of those buying for the export market. "Steel mills are gaining inventory and they will back off," Balzano says. Still, he is enjoying the flurry while it lasts.

There was a good run-up in the price of OCC and newsprint, too, thanks mainly to the export market. With weather and schedules back to normal, Bianco says the market is trying to settle on a number.

"I think we will have a good summer," Bianco says. He says he expects the market to agree on a figure somewhere around the $105-per-ton level.

All along the Eastern seaboard, the material recyclers see mostly current scrap coming into their facilities.

Unlike the Midwest or regions of the South, where space is available for stockpiling, land in the Northeast is just too expensive to set aside a couple of acres to stockpile material in hopes of an up-tick in the price.

"We are cautiously optimistic that the economy is starting to show some signs of growth," says United Paper's Hays. "The signals are mixed and uneven," he adds.

"I'm certainly hoping 2004 will be better for everyone," Hays continues. "The paper and packaging markets have suffered, and I hope 2004 is a lot better for everyone."

Stone's crystal ball shows things going well in the paper market, at least in the end of the summer. "Things look pretty steady for the foreseeable near future," he says.

Goldstein knows the steel market eventually has to level off. "It can't last this way forever," he says. "Every time it goes up again, it boggles the imagination even more.

He sees a number of things that could change the market's outlook: "The value of the dollar, the Chinese [economy], the alignment of the stars," he quips. "Any one of those factors could cause it to fall out of bed."

It is a small complaint, but the boom in steel prices has sent the price of baling wire through the roof. Wire is needed to bale all manner of products--paper, plastics and more. As the price of metal rose, baling wire became more expensive. Therefore the cost of doing business scooted up.

The good news is there is business to be done and the baling wire is needed to ship goods to domestic and overseas buyers.

For the moment, then, the Northeast is enjoying the thaw both the thaw in the weather and the somewhat warmer prices at the dock.

DUO FORMS NY BROKERAGE

Stuart D. Lurie, formerly of Wilmington Paper, and William T. Schlenger, formerly of Harmon Associates, have formed Worldwide Fibers LLC, Syosset, N.Y., to buy and sell secondary fiber in the U.S. and international markets.

Combining 45 years of experience in the industry, their new company will focus on providing services to converting facilities; developing new international customers for current suppliers; and providing procurement services for the purchase of secondary fiber for international companies looking to access the North American market, as well as U.S. companies looking to outsource this process.

At Wilmington Paper, Lurie was responsible for setting up a Recycling Management Program that focused on improving efficiencies of movement and segregation of fiber in folding carton and converting facilities. Schlenger spent 19 years at Harmon Associates, the recycling division of Georgia-Pacific, where he was part of the management team overseeing scrap paper procurement.

Schlenger says, "By joining forces, we can generate programs to improve efficiencies and enhance revenue at converting facilities [and] get their materials directly to end users in the U.S. and overseas."

Lurie adds, "The skill sets we bring together are perfectly matched--we combine a program that provides long-term, high-quality supply matched with an export program that ensures long-term relationships with consuming mills worldwide."