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Paper profits take a dive

With Chinese demand (and prices) plunging, reclaimed cardboard normally exported by the ton stacks up in Southland warehouses

December 09, 2008|David Pierson | Pierson is a Times staff writer.

"It's obviously not ethical to break a contract or renegotiate while the boat is out on the water, but what are you going to do?" Yang said. "It's not worth fighting. You're just kind of stuck."

The California Integrated Waste Management Board is so concerned about the crisis that it has called a special meeting for Dec. 10 with officials and suppliers to discuss ways of easing the hardship and preventing businesses from closing.

One of the options being considered is waiving restrictions on how long suppliers can store waste material, so they can wait for competitive prices to return.

"A lot of our stakeholders are affected by this dramatic price drop-off," said Jon Myers, director of communications for the board. "It just happened so fast. Recycling has always been an up-and-down kind of market. We saw some big price increases the last couple of years, but we've never seen a big drop like this."

Young, the supplier whose scrap is piling up in warehouses, said his rates for used corrugated cardboard fell in mid-October to $40 a ton from $170 a ton -- not good when you consider $90 a ton is about where he breaks even.

"It was like D-Day for us," said Young, who founded Allan Co. in Baldwin Park in 1963 and has similar-sized foreign and domestic customer bases.

Rather than sell his material at a loss, Young has chosen to increase his warehouse space by 400,000 feet and hold on to the scrap until prices bounce back.

Hoping to allay the fears of his employees, Young recently fired off a companywide memo that began "The prices of our recovered materials have fallen off a cliff. . . . Our buying customers act as if they just went through an 8.0 earthquake."

He continued, "We have gone through the recessions of 2001, 1996, 1990, 1985, 1980 and 1975. We survived each and actually made a small profit."


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