Chicago Board Of Trade Adds Recyclables

Adrienne Redd

The project is a collaborative ef-fort of the CBOT, the National Re-cycling Coalition's (NRC) Recycling Advisory Council, the U.S. Environ-mental Protection Agency, the Clean Washington Center and the New York State Office of Recycling Market Development. The Recyclables Exchange is an electronic bulletin board that prospective buyers and sellers can access with a modem to learn current prices. "Prices will be easier and more cost-effective to find," according to Patrick Videll, financial economist for the CBOT and assistant project manager of the Recyclables Exchange.

"A year ago people were basically trying to pay others to take their materials. I've heard horror stories of municipalities collecting materials and then having to landfill them. Anytime a municipality can make money or save money, that's a benefit to the taxpayer," said Vi-dell. This project is the first national, electronic, centralized commodities exchange for recyclables of which he is aware, he said.

The NRC has high hopes for the project. "We started [this system] in 1992 when the markets were not good and at that time we were concerned about quality standards and helping local governments understand the values of these materials," said NRC's Edgar Miller. "Since then, we have seen a significant increase in the amount recycled. [Also,] people on the demand side have been expressing concerns about not being able to get enough [of the secondary material]."

The NRC also believes the program will provide greater access to buyers and sellers, Miller continued. "If I can list my materials on the exchange and expose them to twice as many buyers as I can call, then I should be able to get a good price." The Recyclables Exchange also will include a system for testing material quality and an arbitration process for disputes.

Although the exchange is not intended just for major players in the recycling community, many directors of municipal programs do not anticipate that the project will affect them immediately. In Allen-town, Pa., Coordinator Sue Man-cino commented that the project will have little direct effect on the economics of her city's recycling program, because its commingled recyclables are marketed by a local hauler.

Another recycling coordinator, Jane Meeks of Reading, Pa., echoed this sentiment. "At this point, there will be no direct economic impact on our program because we are committed until January 1999 in a three-year contract," she said.

Reading sells materials collected at their drop-off centers to Cougle's Recycling Inc. (CRI). "Already, we have many, many markets available by fax, modem and pamphlet. But [the CBOT Recyclables Ex-change] will be on a daily or constant basis and will give us a better idea of what's going on ... if people put the true prices," said Bob Cougle of CRI. One problem for brokers, according to Cougle, will be impressing upon sellers that the costs of sorting, separating, baling and transportation still must be covered.

Cougle's point is well taken. For years, directors of municipal recycling programs have gauged prices by calling several buyers, who may or may not have been completely forthcoming. With the CBOT system, public disclosure of transaction prices will become the norm. Buyers and sellers can use these reference prices to set terms for any transaction, not just those conducted through the CBOT system.

Simplified price discovery will al-low buyers and sellers to verify they are getting fair market value. Clearer price information also may help reconcile interregional price differences for parties shipping materials to distant markets. In addition, by tying price information to quality standards, processors will be able to assess the financial implications of upgrading the material quality based on market demand.

Whether the Recyclables Ex-change will instantly smooth out wild spikes and valleys in pricing remains to be seen. Corrugated cardboard, for example, was priced at $240 per ton six months ago and now is predicted to drop to $20. "A big part of it is still just emotion," said Cougle. "I don't think it matters what's on the big board in the stock market. Does anybody really know the rhyme or reason as to why [prices go] up and down?"

Although his city will probably opt against subscribing, Tom Mar-shall, Bethlehem, Pa.'s recycling coordinator, appreciates the value of the Recyclables Exchange. "How-ever, I started reading the fine print which said that it cost $1,000 per year to subscribe plus $200 to $300 in phone bills. I don't think the city would want to invest the money in that." Of course, markets are an increasingly important is-sue, he said. "I get the Fiber Market News and the Official Board Markets so we have a better handle on what we should be getting paid."

Overall, the Recyclables Ex-change is a good idea, Marshall said. "It will allow people to have more input into the market so it is not dictated by a handful of mills. Also, brokers, who are the middle men, will be able to find out what is going on and have some input, and that will be good for the cities."