Freefalling Recycled Paper Prices

Friday, January 16th, 2009

What a difference a few months make. The commodity price decline experienced during the second half of 2008 is well known. Oil prices are probably the most widely reported since each of us can easily translate $147 per barrel equals $4 gasoline while $38 per barrel six months later equals $1.35 gasoline. Copper, aluminum prices are at three year lows.

SOP prices have collapsed as well. What?

Sorted Office Paper is the most common grade of bulk, baled, shredded paper purchased by mills to be recycled into post consumer paper products. The September price of $235 per ton has fallen to $120 per ton.

Why is that important? Two reasons:

1.) its impact on the document destruction business economics, and
2.) how recycled paper prices affect the “green” movement

The document destruction industry relies upon “back end” revenue generated by the bulk sale of shredded paper. Companies charge their customers to pickup and shred confidential documents, and in a very competitive market, pricing and margins are influenced by an expectation of the price mills will pay for the shredded paper.

1300 pound bales of shredded paper ready for recycling

Margins will be squeezed, since contracts for service typically do not provide for adjustments based upon SOP prices. Companies prefer not to disclose that they get revenue coming and going. Sneaky? No. Transparent? Now it is.

More disturbing, is how recycling programs may be affected.

How many people would be willing to pay an additional service fee for their “free” curbside paper recycling usage? Will companies who jumped on the green bandwagon and began scrap paper recycling programs because recyclers would pay them $50-$100 a ton for non-confidential scrap paper drop their initiatives once those recyclers begin to charge for hauling it away?

Even more grim is the prospect that we are close to a price level where it is more economical to landfill paper than recycle it, and how will that affect corporate decisions when the bottom line conflicts with the desire to do the right thing for the environment?

What do you think? Will higher costs trump environmental impact? How sustainable is the sustainable movement when faced with this economic shift? I’d love to hear your comments.

Tags: document destruction, environment, green movement, landfill, paper recycling
Posted in Business | 7 Comments »