PROFILE: Vitale Notes Market Volatility

WORLD WASTES STAFF

WW: What significant changes are facing the recycling industry today?

JV: Significant industry changes involve new technologies intended to make recycling more cost efficient.

For example, we have started using scales on our trucks in order to accurately track the waste generated from our buildings. By using the information, we intend to ensure that we are providing competitive prices and delivering long term stability in pricing and service quality.

WW: What commodities are collected by your company?

JV: The primary commodity collected by Vibro is mixed office paper. Since the market for office paper is very cyclical, we are now exploring new ways to manage and to control this market's ups and downs.

Some smaller recycling companies try to capture a larger market share by offering drastically discounted prices. These companies hope for an up-turn in the paper market.

However, another option is to use a vertical integration strategy, which involves developing a partnership with a paper mill. We believe this strategy will provide customers with long-term pricing stability.

WW: How does the volatility of the recyclables market affect your business?

JV: The volatility of the recyclables market has had a profound effect not only on local recycling firms but also on national waste companies. Certain grades of paper experienced price swings of more than 1,000 percent during 1995, across the board.

As I previously mentioned, we think the way to control market volatility is to become a vertically integrated company. This is important because recycling companies sell recyclables as a commodity and can earn profits when market conditions are favorable.

Another way we attempt to offset the paper market's volatility is to tie our contracts with our customer to the price of the commodity.

WW: What are the other aspects of solid waste managed by Vibro?

JV: We have several non-recyclable garbage routes throughout the New York metropolitan area. In general, the non-recyclables are easier to manage because overall costs are constant. These routes are made up of our food and beverage establishments, which are individually responsible for keeping recyclables separate from trash prior to collection. They separate corrugated cardboard, metal cans, glass bottles and jars, plastic bottles and jugs and aluminum foil products.

WW:How do you see the N.Y. waste business developing in the next five years?

JV: During the course of the next five years, I believe we will continue to see recycling companies develop innovative strategies to control the volatility in the commodities market.

The recycling companies that can best adapt to these price fluctuations will prosper while those companies who offer drastically discounted prices based only on the anticipation of upswings in the paper markets will fall by the way-side.

In the non-recyclables market, I think we will continue to see the expansion of the national public companies in the New York market, primarily through acquisitions.