FutureMark Relying on Long-Term Contracts

Papermaker says it is sourcing half of its recovered fiber through its long-term buying program.

July 1, 2013
Recycling Today Staff

FutureMark Paper Group says a program to grow the amount of recovered fiber it consumes through long-term contracts means more than 50 percent of its recovered fiber needs are now met through multi-year purchase agreements with stable costs.

In an announcement on the program, FutureMark says Waste Management is the latest firm with which it has signed a long-term purchase agreement.

According to a news release issued by FutureMark, long-term, cost-stabilized purchase agreements for recovered fiber provide it with supply assurance and cost predictability and insulate the company from volatile paper stock prices, which in the past have fluctuated by more than 300 percent over a two-year stretch.

The company says the agreements, collectively worth more than $20 million per year, help it manage its costs for buying recovered fiber, which is the company’s single largest operational expense.

FutureMark has signed 10 long-term agreements for buying the recovered paper it needs to make paper. Each agreement lasts for two or three years and establishes a stable cost, regardless of how dramatically recovered paper markets rise or fall over the life of the agreement.

“These types of agreements are highly unusual—maybe even unheard of—in recovered paper markets, but we believe they’re going to be instrumental in ensuring the long-term health of U.S. recycled paper companies,” says Steve Silver, president and CEO of FutureMark Paper Group, Westport, Conn. “Until FutureMark pioneered these long-term waste paper sourcing agreements for our two manufacturing facilities, no recycled paper company could gain this level of supply assurance or cost predictability. These agreements are an insurance policy against the extreme volatility of globalized waste paper markets—for both us and our suppliers.”

Says Don Majka, vice president of sales and marketing for Waste Management, “We’re very pleased with the agreements we have reached with FutureMark, as it provides a stable outlet for our clients’ recovered fiber, as well as a predictable revenue stream for our company. Beyond protecting our business against market fluctuations, it also frees our team from the typical monthly negotiations and administration. It’s a win-win all around.”

Volatile scrap paper costs—and the financial uncertainty that comes with it—can make budgeting and planning difficult. They played a role in the bankruptcy of Manistique Papers in 2011. Manistique Papers was subsequently purchased from bankruptcy and integrated into FutureMark Paper Group in 2012.

Stabilizing the Manistique facility’s recovered paper costs was a strategic priority for FutureMark to ensure the mill’s long-term health. FutureMark has negotiated several multi-year, cost-stabilized recovered paper purchase agreements for its Manistique production center.

“These long-term sourcing agreements will insulate us from inevitable swings in the waste paper market,” says Jon Johnson, executive vice president and general manager, FutureMark Manistique. “By locking down a predictable cost for our waste paper through these agreements, we gain far greater accuracy in forecasting our operating costs. Knowing what our costs will be six months or two years from now is critical for business planning and for ensuring the continued financial strength of our business.”

According to FutureMark, the Manistique mill fulfills more than 40 percent of its recovered paper needs though cost-stabilized long-term agreements. FutureMark’s coated paper mill in Alsip, Ill. secures about 60 percent of its annual recovered paper needs through similar agreements.