Brisk Scrap Trade With Asia : Wastepaper Recycling Goes International
During World War II, the Japanese were accused of taking American scrap metal they bought before Pearl Harbor and shooting it back at us in the form of high explosives.
In the great trade war of the 1980s, the Japanese are again buying scrap. Only this time it is wastepaper, and they are shooting it back at us in the form of containers for televisions, video-cassette recorders and the like.
Call it the era of global recycling. As fast as Americans unpack cartons of new Japanese--and now Korean and Taiwanese--electronic products, the empties are bundled up and shipped back to Asia where they are made into new boxes to transport more products to the United States.
Just as America turned its scrap metal into ammunition for its own guns after 1940, the vast portion of this country’s wastepaper that is recycled today goes for domestic consumption. Yet an increasing amount of trash is being exported.
Record Demand
Foreign demand for American scrap paper and the prices offered for it are setting records.
Wastepaper is by far the leading export carried by container ships leaving ports in the New York area. Indeed, it is the only such commodity for which demand grew between 1980 and 1985.
Exports of old corrugated cartons reached their second-highest level in a decade during February when 140,914 tons were shipped overseas, according to the National Assn. of Recycling Industries. (The peak of 143,000 was achieved in January, 1986.) And the American Paper Institute projects that exports for the first half of 1987 will be 20% higher than a year earlier.
About one-quarter of the $40 billion in paper products manufactured annually in this country comes from recycled paper. The sale of wastepaper for recycling is a $1-billion-a-year business. Last year total wastepaper exports amounted to 3.7 million tons with a value of $411 million. That compares to 400,000 tons in 1970.
More than half of this goes to Asia. The largest importer of U.S. paper trash is Taiwan, which hauled off 891,700 tons of it last year. South Korea was a close second, followed at a distance by Mexico and Japan.
Timber Scarcity
The scarcity of timber in Japan is so severe that the government pursues a vigorous paper recycling policy. Trash collectors pass out free rolls of recycled toilet paper as an incentive to householders to separate and hand over their paper garbage.
To complement its own recycling, Japan last year imported an additional 300,000 tons of paper trash from America, much of which is transformed into cartons for exported products.
The decline of the dollar has increased demand from abroad and that in turn has caused the price to more than double.
The Bureau of Labor Statistics reports that the average annual price of wastepaper has risen by 142% since 1985.
There are more than 40 categories and grades of wastepaper. Corrugated boxes are the primary material, accounting for 45% of exports. Other categories of recycled paper include newsprint, mixed paper and high-grade white paper, like computer printouts.
The paper is sorted, bailed and shipped in containers to plants where it is turned into pulp and recycled into paper and liner board, the stuff of which cartons are made.
Grocery and appliance stores are the most important sources of used corrugated boxes. About 75% of the waste is collected by dealers with prices set by contract.
The rest of the market deals in spot prices. In addition to Boy Scouts and other volunteers, an army of collectors, known in the trade as scavengers, feeds the wastepaper business.
According to the Fiber Market News of Cleveland, the price per net ton paid collectors of used corrugated boxes by graders and packers ranges from $15 to $20 in New York to $35 to $40 in Chicago.
The price paid by mills to dealers ranges from $40 to $45 per ton in major eastern ports to $100 to $105 in California, according to Official Board Markets. Exporters pay a premium of about $10 per ton. Last year the top price in California was in the $80 to $90 range.
Prices there peaked at $115 two months ago. “They have started to decline, but $105 a short ton (2,000 pounds) is still a high price. The weaker dollar has finally had its effect; business is receding slightly in Far East markets,” said Fred A. Sharring, editor of Official Board Markets in Chicago, a publication that tracks trash prices.
The wastepaper market is cyclical, often generating huge swings in the space of three to six months. The price of the commodity is affected by inventories, weather in Asia, Asian economies and especially the price of virgin pulp. After a huge dip two years ago, the paper market was on a steady climb through the first quarter of this year.
High foreign demand affects segments of the paper industry differently. On the one hand, U.S. paper mills, represented by the American Paper Institute, want to be certain that exports don’t result in shortages. On the other, the trash dealers, represented by the National Assn. of Recycling Industries, don’t want a paper glut that would drive down their prices.
Dealers like Tom Leyden of Baltimore are content. He said a year ago he was getting $20 per ton for old corrugated paper. Now, he takes it to the pier and receives $110 a ton when it is delivered in Asia.
Domestic Market
The effect of exports on the domestic market for recycled paper is harder to gauge. Basil Snider, president of Garden State Paper Co. in Richmond, N.J., said the higher costs of recycling old newsprint are hurting his business because he cannot pass those costs on to customers and remain competitive with Canadian paper manufacturers using virgin pulp.
Michael Roseberry, chief financial officer of Jefferson Smurfit Corp. of Alton, Ill., the largest wastepaper processor in the country, said foreign demand was having a “significant” effect, costing the company millions of dollars more.
“There is no question that there is a margin squeeze,” said Mark Diverio, an analyst with Merrill Lynch & Co. He said Jefferson and other large mills manufacturing recycled paper want to raise prices. Nevertheless, for most of them, wastepaper represents a small part of their business, so their earnings have not been adversely affected.
