Paper shredding services generate increased supply of SOP

Scrap paper traders cite the emergence of document destruction for changing the market for recovered office paper. Information security laws have caused businesses to use shredding services, resulting in the recovery of more office paper that traditionally would have been landfilled.

Increased generation of shredded office paper in March saturated the market, pushing sorted office paper (SOP) prices down. Buyers for mills that consume SOP across the U.S. and Canada reported drops of $10 a ton for SOP in March, citing high generation that is likely to keep the market sloppy at least through April. Several buyers said the use of shredding services is changing the dynamics of the market.

"Things are happening a lot faster due to the document destroyers," said a buyer in the Midwestern U.S. "What usually happens in March is now happening earlier-in January and February. People do their annual file purges and with the document destroyers, the fiber is going through the pipeline a lot faster than it used to."

The buyer also cited a changing pricing structure with the trend toward document destruction.

"Traditionally when office pack prices were under $100 a ton the traditional scrap paper plants would charge (clients) to pick up their material," he said. "Once it got around $100 they didn't have to. But the document destroyers are charging for their service regardless of the (scrap paper) price and the paper is becoming a byproduct of that service."

SOP this year is showing a pattern unlike a year ago. Last year, prices shot upward in February, relaxed in April, then began to increase to four-year high levels by August. Since peaking at a national average of $140 a ton (mill price) in August, prices have seen a slow, steady decline, according to surveys by The Paper Stock Report.

The average national price in March was $105 per ton, down from $121 per ton at the beginning of the year.

"What seemed to happen is that mills all were smart and stocked up real well during the holidays, and in January everybody was in good shape," said a buyer in the Southeast. "January started with a bang, then you had your seasonal file purges. The HIPAA (Health Insurance Portability and Accountability Act) laws caused people to shred even more paper than usual and put a lot of paper on the market."

Overall, however, many traders say it is too early to tell what the long-term impact of increased document destruction will be on the SOP market. While unanimous in their acknowledgement that the trend will divert a lot of tonnage from the landfills and into the fiber supply line, the full impact may depend on quality issues.

So far, traders generally report no major quality concerns. However, some fiber experts have questioned the long-term impact of shorter and shorter fibers, especially from high-security shredding and pulverization.

"Time will tell if the shredding is going to result in a good quality office pack," said a buyer for a mill in the Southeast. "So far we have not seen any big problems with fiber. The only problems have been people that don't separate well enough and you end up with shredded plastic in the paper. But that comes down to the trust in your suppliers to get you quality paper."

Another Southeastern buyer agreed.

"There are some contamination issues with some of the shredding operations," he said. "Some of them are not sorting enough. But what happens if there is too much plastic in there you downgrade it to mixed paper and sell it off to somebody who can use it."

About the Author. Ken McEntee is editor and publisher of The Paper Stock Report, a twice-monthly report on the market for recovered scrap paper. Information about The Paper Stock Report can be found at Paper Recycling Online, at www.recycle.cc, or call 440-238-6603.

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