Trending Content

Mid America Paper Recycling

By AICC Staff

January 24, 2022

width=425

At Mid America Paper Recycling, we have employed continuous improvement practices for many years as part of an ongoing effort to improve our brokerage services. We’re constantly evaluating and improving them to benefit our clients by proactively presenting a clear pathway for fiber recycling. Because we question everything, we often come across opportunities our partners may have never considered before.

We are constantly engaging with carton and corrugated manufacturers, equipment suppliers and paper mills, discussing their approaches to waste management and seeking new ways to help everyone. After hearing a few box plants tell us they were happy with their current approach and they were not experiencing any ‘pain’ related to trim waste handling, we wanted to learn why they were so pleased.

In a number of cases, it was because a local waste hauler had installed baling equipment in their plant to remove their waste at no cost. They were simply happy to have this material gone. We continued to dig and discovered that while it did cost them nothing to have this equipment on their floor, they were missing out on a substantial new revenue source—the monetization of this waste.

In one example, a carton manufacturer was missing out on a quarter-million-dollar annual opportunity to re-sell their waste themselves, which was effectively going into the pocket of their waste hauler each year for the free equipment. We believed we could help this customer buy his equipment and pay him at the same time for his scrap. So we worked with him to develop a cash flow statement with the cost of the equipment, its amortization over a five-year period, and then factor in an average DLK premium using historical data.

This plant generates 120 tons of trim waste per month. If the average premium is $100, then that is $12,000 per month or $144,000 per year. All that was needed to capture this opportunity for themselves was a $500,000 investment to replace the current equipment. Assuming an eight percent interest rate on this equipment and a five-year loan period, the company would pay $608,000 over five years and amortize the capital over the same five years. But each month they would also be generating revenues above and beyond the equipment costs by selling their waste paper through our brokerage to paper mills who want it most.

Where it gets better is after the equipment is fully paid for and amortized, the $122,000 annual cost to pay for the equipment disappears and now creates an annual revenue stream of $220,000 or more for this plant.

These numbers are based on a very conservative DLK Yellow Sheet value of $140 per ton and a five-year useful life on equipment we know lasts much longer than five years. Currently this same material is valued at $210 per ton by the DLK Yellow Sheet and we’ve seen plants with 20-plus-year-old equipment still functioning perfectly. In our experience, balers can last 20+ years with normal maintenance.

width=531

So, why doesn’t everyone handle their waste this way? It’s often because there is no pain associated with the current way it is being handled in many plants. And ‘pain’ gets management focus. That is, until management learns that they could be forgoing a significant long-term revenue stream with their current waste handling practices.

What would you do with an extra $220,000 each year? All it takes is our simple online waste audit to start seeing your waste not as an operating expense, but as a valuable product that can drive revenue gains for years to come.

width=137

Paul Pirkle

President

ppirkle@midamericapaper.com

630-730-9055