The U.S. economy has tumbled down a steep ravine, and its current footing is uncertain. Commodity prices have plummeted in recent months from unprecedented highs, with everything from crude oil to recovered fiber taking a hit. Even gold, which usually offers some degree of certainty in uncertain economic times, has softened.
The United States, European Union and China have all introduced bailout packages to try to stimulate their economies, though whether these measures have yet to succeed is open for debate. The federal government has come to the aid of AIG, Fannie Mae and Freddie Mac already, and now General Motors is looking for financial assistance in an effort to avoid a bankruptcy filing. Certainly, these are unprecedented economic times in the United States and around the world. If anyone doubted the concept of the global economy, this is proof it does indeed exist.
What also may appear unprecedented to many new entrants to the information destruction field are the plummeting prices for recovered fiber and the difficulty they may be encountering in moving material that until only recently has been an additional profit center for many businesses.
Industry veterans and those whose careers began in the paper recycling industry know that Newton’s Law of Gravity applies to commodity markets as well as to airborne objects: What goes up must come down. And down the commodity markets have come, with a speed that likely gave many paper brokers whiplash. Even industry veterans say they are surprised at how quickly prices for various secondary commodities have plummeted. (For one paper recycling industry veteran’s take on market conditions, be sure to read this issue’s cover story, "Maintaining Focus," on Page 10. Our commodity report on Page 6 also offers the reactions of other paper recycling and document destruction professionals.)
So, what are document destruction companies to do in light of the current condition of the economy? SDB columnist Ray Barry argues on Page 7 that the information destruction industry is largely recession resistant, and it looks like his theory will be tested. Companies certainly still need the services industry professionals offer and the savings that outsourcing typically provides. But the road ahead could be full of seismic shifts for those companies that based their pricing on their back-end revenues, while those who avoided commoditizing the pricing of their services may be on slightly more stable ground.
The viability of many information destruction companies may hinge on how long recovered paper markets are in the doldrums, which at this point is a prognostication most industry professionals would prefer to avoid.
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