Sale of Paper Fibre from the Grey Box Program
The Strategic Policies and Priorities Committee recommends the adoption of the
recommendations of the Budget Committee contained in the following communication
(December10,1998) from the City Clerk:
Recommendation:
The Budget Committee on December 8, 1998 recommended to the Strategic Policies and
Priorities Committee and Council the adoption of the recommendation of the Works and
Utilities Committee with respect to the subject matter.
Background:
The Budget Committee had before it a transmittal letter (December 2, 1998) from the City
Clerk forwarding the recommendation of the Works and Utilities Committee to adopt the
report (November 19, 1998) from the General Manager, Solid Waste Management Services,
respecting the sale of paper fibre from the grey box program.
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(Transmittal letter dated December 2, 1998, addressed to the
Budget Committee from the City Clerk)
Recommendation:
The Works and Utilities Committee on December 2, 1998, recommended to the Budget
Committee the adoption of the report dated November 19, 1998, from the General Manager,
Solid Waste Management Services, respecting the sale of paper fibre from the grey box
program.
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(Report dated November 19, 1998, addressed to the
Works and Utilities Committee from the
General Manager, Solid Waste Management Services)
Purpose:
To seek authority to enter into agreements with Canada Fibres Ltd. and Donohue Recycling
Inc. for the purchase of mixed paper fibre from Toronto's grey box program.
Funding Sources, Financial Implications and Impact Statement:
Although the recommended paper fibre bids are very attractive under current market
conditions, the impact on revenue is expected to be significant. We are currently receiving a
price of approximately $84.00 per tonne which is expected to continue until May 15, 1999,
when our current contract with Donohue Recycling expires. The existing price is a result of
floor prices that we were able to secure when negotiating our current contract, at a time when
market demand for fibre was extremely high and market prices were in excess of $200.00 per
tonne. Based on current market prices, the recommended bids provide a blended price of
approximately $39.00 per tonne. The exact impact on revenue will be contingent on market
conditions; however, it is projected that fibre revenue from Toronto's grey box program will
be $1 million to $2 million lower in 1999 compared to the 1998 budget estimate.
Recommendation:
That authority be granted to enter into agreements with Donohue Recycling Inc. and Canada
Fibres Ltd. for the purchase of mixed paper fibre from Toronto's grey box program during the
period May15, 1999 to April 30, 2003, in accordance with the prices stated in this report and
terms and conditions satisfactory to the Commissioner of Works and Emergency Services.
Council Reference/Background/History:
Approximately 79,000 tonnes of mixed paper fibre are currently collected annually through
Toronto's grey box program. Mixed paper fibre includes waste newspaper, old corrugated
containers including pizza boxes, magazines, catalogues, telephone books, boxboard, writing
and computer paper, junk mail, envelopes, gift wrap, cards, books and paper egg cartons, rolls
and bags. This fibre is currently sold to Donohue Recycling, under contract until May 15,
1999. Approximately 20,000 tonnes of fibre collected annually from the North York
Community Council area are marketed separately to Metro Waste Paper Inc. under a contract
that expires in April 2003.
Discussion and Justification:
In order to secure a market for our grey box fibre after our current contract with Donohue
Recycling expires, a Request for Quotations (RFQ) was issued through the Purchasing and
Materials Management Division of the Finance Department on October 23, 1998.
Bidders were provided with the option of bidding on the entire quantity (estimated to be in the
range of 75,000 - 90,000 tonnes annually) and/or a portion of the quantity based on: (a) fibre
that would be delivered directly to the bidder's facility by collection vehicles from the
communities of Toronto and East York (45 percent of total), and (b) fibre received at our
transfer stations from the communities of Scarborough, Etobicoke and York and then
delivered in bulk by transfer trailers to the bidder's facility (55 percent of total). The term
identified in the tender was approximately four years, May 15, 1999 to April 30, 2003, to
coincide with the North York/Metro Waste Paper fibre contract which expires on April 30,
2003.
The premise of the RFQ was that Toronto would receive market price for its fibre, which
would be determined monthly based on a pre-defined formula that is tied to the Official Board
Markets (OBM) Yellow Sheet, a U.S. industry publication that tracks market prices monthly
for various grades of sorted paper and is currently used to determine market prices in our
contracts with Donohue Recycling and Metro Waste Paper. The formula also takes into
account conversion to Canadian dollars. Since this market price is for sorted paper, whereas
the fibre received is unsorted, mixed paper, as collected from the street, bidders were asked to
submit a processing cost. We also asked bidders to identify a per tonne premium, if any, that
they would be willing to pay.
The RFQ closed on November 12, 1998, and we received four bids. Please see Attachment (1)
for a summary of the bids.
The bids were evaluated based on the per tonne processing cost and premium submitted by the
bidders. Since the monthly market price for sorted paper is fixed monthly according to a
pre-defined formula, and therefore the same for all bidders, the only pricing variables were the
processing cost and premium. Evaluation of the quotations also included Toronto's cost of
transporting the fibre to the bidder's facility.
Based on our evaluation, we recommend acceptance of the highest bids which are from
Donohue Recycling for the quantity delivered directly to the bidder's facility (processing cost
of $35.00 per tonne and a premium of $25.00 per tonne), and from Canada Fibres for the
quantity delivered in bulk by transfer trailers (processing cost of $39.00 per tonne and a
premium of $33.00 per tonne). When transportation costs were taken into account these
companies were still the highest bidders.
The price Toronto will receive for its fibre will fluctuate each month according to market
conditions and will be based on the following formula:
Price=A-B+C
Where Price=the monthly per tonne price paid to Toronto. This price can never fall below
zero.
A=the monthly per tonne market price for sorted paper which fluctuates monthly according
to a pre-defined formula that is tied to the OBM Yellow Sheet and takes into account
conversion to Canadian dollars.
B=the per tonne processing cost submitted by the bidders, which is set for the duration of the
contract.
C=the per tonne premium offered by the bidders, which is set for the duration of the contract.
Assuming October 1998 market conditions, the prices Toronto would receive for its unsorted
fibre after May 15, 1999, would be:
Donohue RecyclingCanada Fibres
Price=A-B+CPrice=A-B+C
=$47.00 - $35.00 + $25.00=$47.00 - $39.00 + $33.00
=$37.00 per tonne=$41.00 per tonne
These prices would be very attractive for unsorted, mixed paper as collected from the street at
a time when market demand and prices for waste paper are low. It should also be noted that if
market prices for waste paper are, in fact, higher after May 15, 1999, than they are now, the
prices paid to Toronto will increase accordingly.
As illustrated in the table below, Toronto and the North York Community Council area have
been realizing higher than market prices for its fibre since May 1995, when the pricing and
floor prices in our current contracts came into effect. This trend will continue beyond May 15,
1999, if the aforementioned tenders are accepted.
FIBRE REVENUE
Price Per TonneNov./98After May 15/99
May -Jan. -May 15/99Estimate based on current
Dec./9519961997Oct./98Estimatemarket conditions
Toronto$210.00$89.00$95.00$90.00$84.00$39.00
North York
Community$209.00$121.00$66.00$68.00$65.00$29.00
Estimated
Market Price for
Unsorted Fibre$134.00$0$5.00$13.00$12.00$11.00
Conclusions:
Acceptance of the bids from Donohue Recycling and Canada Fibres will ensure that Toronto
receives market price plus a significant premium for its grey box fibre until April 30, 2003. It
is therefore recommended that we enter into agreements with Donohue Recycling and Canada
Fibres in accordance with the prices offered.
Contact Name:
Tim Michael, Manager - Waste Diversion, Solid Waste Management Services, Metro Hall,
Phone: (416) 392-8506; Fax: (416) 392-4754, E-mail:
Tim_Michael@metrodesk.metrotor.on.ca.
