Assessing Your Company's OCC Procurement: Are You Overspending?

For many North American mills, OCC is the primary driver of cash costs. In examining public investor presentations, it’s evident that management has a thorough understanding of the impact of OCC price movement on their bottom line. However, the reports we reviewed omitted one crucial detail: How does their OCC price compare to the market?

Figure 1 highlights how publicly traded paper companies in North America regularly present the impact of recycled fiber prices on the bottom line. WestRock, for example, reports that recycled fiber is the second largest input cost driver of earnings per share, behind wood fiber. However, as far as we can tell, no major companies disclose their average fiber price in comparison to the average market price. This deprives investors of crucial information regarding cost management effectiveness.

The Significance of Precise Benchmarking

In theory, it’s a straightforward process. Gain a clear understanding of the current market price, assess whether you are paying above or below the market price, and adapt your strategy accordingly. So why is it that we aren’t seeing many companies do just that?

To put it simply, inadequate benchmarking. Current, available prices do not work for benchmarking. We’ve heard:

• The current prices fail to mirror the fundamental shifts in the market’s dynamic.
• Existing benchmarks inadequately capture variations in geography, product quality or format.
• Current conditions do not enable reliable benchmarking for one’s own selling or buying activities.

If you think about it, it’s surprising, if not shocking. In today’s data-driven world, we fully understand the importance of benchmarking. In fact, investors are increasingly placing greater emphasis on it. Paper mill managers already use benchmarking to assess the performance of their teams whenever they can. Questions they assess include:

• What’s our safety incident rate compared to the industry? What is it by mill?
• What’s our OEE for our paper machines compared to the industry? By grade?
• How do our EBITDA margins compare to peers?
• What is our market share and has it grown?

Unlock the Key to Accurate Market Prices

OCC has been used to make paper for decades in the US. And until now, company leaders have had no way of truly understanding how effectively their buyers were managing the largest expense of their business.

In conversations with many different managers, we have found that they frequently refer to the management of “premiums,” but are oftentimes left wondering what the industry’s “premium” is.

The discussion around premiums is pervasive because traditional price benchmarks fail to accurately reflect the price. This leaves many in the dark about the true market price. But now, with the introduction of Recycled Fiber 360, customers can finally answer the main crucial question: How does our OCC price compare to the market?

Recycled Fiber 360 revolutionizes the way fiber buyers analyze their OCC purchases in the market. By providing accurate benchmarks based on real transactions, along with advanced analytical tools, this innovative platform empowers users to optimize their spend.

With easy-to-access views, buyers can effortlessly track their price compared to the market, both in terms of total spend and volume tranches for both contract and spot businesses. Leveraging mill-to-mill benchmarks, buyers can confidentially compare their average costs to other mills, enabling company managers to report their performance and uncover valuable strategies to optimize costs.

Determining if you are overspending on OCC has truly never been easier with Recycled Fiber 360. Discover the power of our transaction-based benchmark and take control of your OCC purchasing like never before.

To learn more about Recycled Fiber 360, download our eBook today.

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