Wastepaper Chase Heating Up to Feed Asian Demand.

Wastepaper may not be the most glamorous commodity, but it's big business.

Last year, 2 million tons of the stuff was shipped from L.A.-area ports -- making it the No. 1 local export to Asia in terms of sheer volume. And that total is growing -- driven by increasing demand from paper mills in recovering Asian economies.

"(Wastepaper) exports to Asia peaked in 1995, and have suffered because of the economic crisis there," said Ken McEntee, editor and publisher of The Paper Stock Report in Cleveland. "But now they're back on track, and we're expecting this to be another big year."

In years past, wastepaper exports have provided relief for ocean liners that otherwise would have carried empty containers back to Asia because of the huge U.S. trade deficit.

Even though rates for carrying wastepaper have traditionally been among the lowest in the shipping trade, it was still better than heading back empty. However, as U.S. exports to Asia bottomed out, ocean carriers have been raising their rates for wastepaper and other west-bound commodities.

Whereas last year it cost exporters less than $200 to send a 40-foot container of wastepaper from L.A./Long Beach to Asia, rates are now up to around $500. In addition, as of May 1, shippers will have to pay another $80 per container, as carriers implement a surcharge to compensate for their increased fuel costs.

"Rates have basically been rock bottom, so we can't really complain that prices are going up," said one shipper. "We are a little worried, because once you've been spoiled, you don't like to see any increases."

Along with higher shipping costs, exporters also point to increasing demand chasing limited supply as a factor that has caused wastepaper prices to go up.

For example, West Coast prices for "old corrugated" stock rose as high as $170 a ton at the end of March after hovering around $100 last year. (Wastepaper prices vary depending on supply and demand as well as the grade of paper and region where it's acquired.)

That increase was good news for the numerous wastepaper traders that operate out of the L.A. region, who buy material from waste management firms and recycling centers to ship overseas.

"China is a very fast-growing market," said Randy Kim, marketing manager with America Chung Nam Inc. in Pomona, the area's largest wastepaper exporter. "We also have clients in Korea, Taiwan and Indonesia."

In Asia, wastepaper is mixed with wood pulp and used for making everything from packing materials to copy paper for domestic markets as well as export back to the U.S.

While America Chung Nam and other wastepaper export firms are hardly household names, they rank among the top U.S. exporters in terms of volume, among the likes of DuPont Co., and Philip Morris Cos.

In 1999, America Chung Nam shipped 86,100 containers of wastepaper overseas, according to a list of the largest U.S. exporters published by the Journal of Commerce.

That made it the second-largest U.S. container exporter, after DuPont, in volume. Other local wastepaper shippers that ranked high on that list included Linden Trading Co., Summit Pulp and Paper in Compton, and Wellwish Trading Corp. in Los Angeles.

Needless to say, in dollar terms local wastepaper exports are a drop in the bucket. Last year, the value of those shipments out of Long Beach and Los Angeles was just $168 million, a tiny fraction of the $958.5 billion in total U.S. exports.

Yet competition for the business is intense. The L.A.-based companies that dominate the international wastepaper trade are smallish, private businesses that prefer to keep a very low profile.

In addition, according to McEntee, many of the local, small operators are essentially agents for the overseas mills, and their job is to find and buy wastepaper at the best prices for the mills in Asia.

"All business deals in this industry are done on the basis of relationships," said one local shipper. "You have to have relationships with buyers in Asia and sellers in the U.S. And that's why it's a very closed and secretive business, because people don't want others to know what they're buying and selling where."