Many postal workers have jumped to the defense of APWU president William Burrus as a result of my article, Mathematically Challenged: Burrus Proposal Doesn’t Add Up for USPS. But if many of these defenders are correct, they should be angry at Burrus for garbling the message and distracting people from the real issue.
Of the scores of comments submitted to this site and several postal-news sites, many stated that what the union president meant to say is that the U.S. Postal Service can sort un-presorted letters for 1 to 3 cents apiece (depending upon the commenter), while mailers get First Class presort discounts of up to 10.5 cents each. But that’s not even close to what Burrus actually said.
It’s also contrary to the Postal Service’s own data earlier this year estimating that the presorting of First Class letters saves it far more than 3 cents. But some of Burrus' defenders have raised legitimate questions regarding whether those cost estimates match current USPS practices.
One of the best what-he-really-meant-to-say defenses of Burrus came from “uncommonsense”, a commenter who acknowledged that Burrus’ challenge to Postmaster General Jack Potter is “a publicity stunt” with “no serious evaluation of costs/benefits”. (Rather damning praise, I’d say.) Here is uncommonsense’s valuable history lesson:
"In 1999 the OCR machines that the USPS was running had the ability to read about 20% of the letters ran through them. They had a throughput capacity of 30,000 letters per hour and required 2 trips through the machine to sort to the first breakdown and only allowed 94 different breakdowns. Most of the mail that ran through this machine had to have images of it sent to human keyers on terminals at one of 55 REC sites to provide the information to barcode the mail piece.
"Today, because of faster computers and more advanced software, the equipment that the USPS is running is able to read and apply barcodes to about 97% of the letters ran through it and sort the mail pieces to over 200 possible breakdowns, ALL on the first pass @ 40,000 letters per hour. An equivalent breakdown in 1999 would have required 3 passes through the OCR @ 30,000 pieces per hour and many human keyers. So in one hour with 2 operators and a keyer, the USPS can now process what used to take 4 hours 2-3 operators and many keyers. The new equipment is also much less expensive to maintain then the old MLOCR was.
"Now, 3% of letter images are sent to human keyers at one of 2 REC sites. Despite adding Flats and Parcel images to keyer duties, technology has allowed the USPS to eliminate 53 out of 55 REC sites.
Since USPS costs for bar coding and sorting letters has decreased so much since 1999 why have the work share discounts not also decreased?"
An anonymous commenter chimed in with this spot-on observation: “Presort mailers prepare the mail to the exacting specifications of the USPS Domestic Mail Manual in order to claim any worksharing discounts. If there is an issue with the mail handling once received - we are doing what the Postal Service told us to! If it needs to change, it's a Postal Service task.”
Another commenter added, “It's the silly Post Office rules that waste money. I have seen carrier-routed mail returned to the SCF in order to co-mingle it with other mail. Why can't the carrier just case it in? Think of the man-hours, and transportation costs that this takes. All of this is because management has the silly notion of having all the carrier's mail ready to deliver when they arrive in the morning.” (In defense of the Postal Service, using otherwise underutilized mail-sorting operations to do work that takes a burden off the delivery operations might actually make economic sense.)
The picture that emerges from these comments is that, while the size of presort discounts on letters might once have been justified, they are no longer consistent with the Postal Service’s costs. Put another way, the commenters are indicating that automation and excess mail-handling capacity have shrunk the cost difference between handling presorted and un-presorted letters.
I’m not saying they are correct. Some of their cost calculations are clearly wrong – for example, some included only salaries while ignoring benefits, facility costs, etc. But the arguments of “uncommonsense” and some of the other commenters have far more logic and plausibility than Burrus’ vague, ill-conceived proposal.
Burrus muddied the waters by proposing an obvious money loser for the Postal Service – remove First Class presort discounts that average 8.9 cents per letter and pay APWU members 10.4 cents instead to do the sorting. He tried to make his sloppy math more favorable to the Postal Service this week by throwing in a bonus – free sorting of parcels – along with his usual big-mailers-are-vermin bluster.
But the proposal is still too vague to be taken seriously. Among many flaws with the Burrus plan is that it would decrease the demand for First Class mail by raising prices. So with APWU members getting their 10.4 cents on fewer letters but still having to sort parcels for free, would they end up having to take a pay cut?
In an attempt to move the discussion away from character assassination and conspiracy theories, Dead Tree Edition offers these observations and ideas:
• Rather than trying to keep excess employees busy by incenting mailers to mail in a less efficient manner, which is in essence what Burrus is proposing, downsizing the workforce via meaningful early-retirement incentives would be more productive. (See What the Postal Service Left Out of the Early-Retirement Deal.) Presorting address data before a mailing occurs is inherently more efficient than sorting the actual mail pieces.
• Presorted letters are highly profitable for the Postal Service, as evidenced by its eagerness to offer the Summer Sale on Standard mail and the Fall Sale on First Class. USPS’ problem is not that it doesn’t charge enough for letters, it’s that it doesn’t have enough letters to charge for. Anything that would reduce the volume of letter mail, as would Burrus’ proposal, would be counterproductive for the Postal Service and its employees.
• Under current law, any significant reduction in First Class presort discounts would require decreasing the price of un-presorted letters (that is, the 44-cent First Class stamp). Otherwise, the inflation-based price cap on First Class would be violated.
• If indeed presort discounts on First Class letters are larger than justified, there might be a way to shrink them without hurting mailers or driving business away from the Postal Service – dropship discounts. Business mailers get 4.3 cents for dropshipping Standard letters to Sectional Center Facilities but nothing for First Class, even though dropshipping clearly saves the Postal Service money. Introduction of First Class dropship discounts (which would have to clear some legal barriers) could compensate mailers for the shrinkage of presort discounts and cause them to mail in ways that are more efficient for the Postal Service.
• For the record, I am not "speaking on behalf of the Far Right" (Burrus' description this week of those who defend business mailers) and have not made anti-union statements (just criticisms of a specific union official's proposals). If I were part of the Far Right, I never would have written articles like the recent one ridiculing Rush Limbaugh or have published the ghost-written piece, How sleepy is the giant?.
• Maybe “uncommonsense” should replace Burrus as the APWU’s spokesman.
Thursday, October 29, 2009
Wednesday, October 28, 2009
International Paper Drowns Its Sorrows in Black Liquor
With a name like "International Paper", you would think the company made its money from selling paper.
Nope. Once again in the 3rd Quarter, IP got far more money from Uncle Sam in the form of black-liquor credits than it made from selling actual products. The company booked $525 million in such credits during the quarter, versus $233 million in pre-tax earnings before special items, the company announced today.
The giant paper and packaging company has received $1.547 billion in black-liquor credits this year for producing and using more than 3 billion gallons of the energy-rich pulp byproduct. Again, that is far more than it earned from normal operations, which have been hampered by the recession. IP is on pace to surpass the $2 billion mark in black-liquor credits before the controversial program expires at the end of this year.
The credits grew out of highway legislation intended to encourage production of motor fuels that contain a mix of petroleum and plant-derived substances. IP learned late last year that, if it added a bit of diesel (at least 0.1% by volume) to the black liquor typically used to power kraft-pulp mills, the mixture could qualify for "alternative fuel mixture credits".
As word got out of the loophole IP was exploiting, at least 19 other publicly traded pulp and paper companies began jumping on the bandwagon. Public companies qualified for about $2.8 billion in black-liquor credits during the first half of this year, and hundreds of millions more no doubt went to private companies. (See Black Liquor Credits Top $3 Billion So Far .) IP is one of the first pulp producers to reveal details of its 3rd Quarter credits.
Having nearly three times more kraft-pulp capacity than any other company in the U.S., IP is the biggest beneficiary of the tax loophole. It is averaging an estimated $187 in black-liquor credits per ton of kraft-pulp capacity. Kraft pulp sells on the open market in the range of $650 to $800 ton, depending upon the grade.
IP executives put the kibbosh today on speculation about huge "Son of Black Liquor" credits, formally known as cellulosic ethanol tax credits, going to the company.
"We believe that pulp & paper producers do not qualify," a company presentation said. The IRS recently ruled that black liquor meets the definition of biofuel necessary to receive the credits, but the substance would also have to pass muster with the Environmental Protection Agency for the latter program. (See Will the EPA Stop 'Son of Black Liquor'?)
A good news/bad news joke is making the rounds of papermakers: The good news is that, at the next paper-industry convention, liquor will be half-priced because the bar is taking advantage of special government incentives. The bad news is that, to qualfiy for the program, bartenders will have to add a dash of diesel to the drinks.
Nope. Once again in the 3rd Quarter, IP got far more money from Uncle Sam in the form of black-liquor credits than it made from selling actual products. The company booked $525 million in such credits during the quarter, versus $233 million in pre-tax earnings before special items, the company announced today.
The giant paper and packaging company has received $1.547 billion in black-liquor credits this year for producing and using more than 3 billion gallons of the energy-rich pulp byproduct. Again, that is far more than it earned from normal operations, which have been hampered by the recession. IP is on pace to surpass the $2 billion mark in black-liquor credits before the controversial program expires at the end of this year.
The credits grew out of highway legislation intended to encourage production of motor fuels that contain a mix of petroleum and plant-derived substances. IP learned late last year that, if it added a bit of diesel (at least 0.1% by volume) to the black liquor typically used to power kraft-pulp mills, the mixture could qualify for "alternative fuel mixture credits".
As word got out of the loophole IP was exploiting, at least 19 other publicly traded pulp and paper companies began jumping on the bandwagon. Public companies qualified for about $2.8 billion in black-liquor credits during the first half of this year, and hundreds of millions more no doubt went to private companies. (See Black Liquor Credits Top $3 Billion So Far .) IP is one of the first pulp producers to reveal details of its 3rd Quarter credits.
Having nearly three times more kraft-pulp capacity than any other company in the U.S., IP is the biggest beneficiary of the tax loophole. It is averaging an estimated $187 in black-liquor credits per ton of kraft-pulp capacity. Kraft pulp sells on the open market in the range of $650 to $800 ton, depending upon the grade.
IP executives put the kibbosh today on speculation about huge "Son of Black Liquor" credits, formally known as cellulosic ethanol tax credits, going to the company.
"We believe that pulp & paper producers do not qualify," a company presentation said. The IRS recently ruled that black liquor meets the definition of biofuel necessary to receive the credits, but the substance would also have to pass muster with the Environmental Protection Agency for the latter program. (See Will the EPA Stop 'Son of Black Liquor'?)
A good news/bad news joke is making the rounds of papermakers: The good news is that, at the next paper-industry convention, liquor will be half-priced because the bar is taking advantage of special government incentives. The bad news is that, to qualfiy for the program, bartenders will have to add a dash of diesel to the drinks.
Tuesday, October 27, 2009
Coated Paper Market: Been Down So Long This Looks Like Up
North American coated paper mills were generally busier in September than August, but that ain’t saying much.
Despite various announcements of price increases on coated freesheet and high-brightness coated groundwood papers, the unanimous word from the trenches is that no prices are moving up except perhaps for some really low-ball spot business.
The best that can be said is that the market seems to have stablized this fall after months of plummeting prices. North American shipments of coated paper were up in September versus the previous month – 8% for coated freesheet and 5% for coated groundwood, according to the Pulp and Paper Products Council. But compared with September 2008, shipments declined 15% and 8%, respectively.
Actual consumption of coated papers in the U.S., was even less favorable, according to data from printers compiled by Idealliance. September consumption of coated was down more than 5% versus the previous month. Usage of coated freesheet was down a whopping 32% versus September 2008, while coated groundwood dropped “only” 23%.
Consumption of uncoated groundwood held its own versus August and was actually up versus the same month last year for the fifth month in a row, according to Idealliance.
To keep their coated machines busy amidst the declining demand for coated papers, several companies have recently begun making supercalendered and other uncoated-groundwood papers on machines that have coaters. (See, for example, The Rush to Make Uncoated Paper on Coated Machines and There's Little Clarity About Some SCA Papers.)
The new supply continues to place pressure on uncoated-groundwood prices, which seem to be continuing a downward drift.
Though coated-freesheet prices are at their lowest in more than two years, there was speculation a few months ago that they could crash even more. The black-liquor credits subsidizing U.S. kraft-pulp mills to the tune of about $200 per ton threatened to make freesheet papers a virtual byproduct of the kraft process, with the resulting glut continuing to drive paper prices until the credits expire at the end of this year. (See "Black Liquor" Credits Are Helping Paper Buyers.)
But the surprising recent strength of global pulp markets, which by some accounts are experiencing their strongest rebound in history, has provided an outlet for all that subsidized U.S. pulp. And the weakening U.S. dollar has discouraged imports of paper into the U.S. from overseas.
Coated prices seem unlikely to move much for the remainder of the year. And what about next year?
Some paper-company executives claim that prices “must” go up because the black-liquor credits that have kept them solvent will disappear.
But a need for higher prices does not translate into higher prices. (Exhibit A: rates for magazine advertising). And bankruptcy reorganizations of major players don’t necessarily stabilize prices (Exhibit B: the newsprint market this year). Prices won't move up significantly until demand recovers significantly, which seems unlikely in 2010, or more machines are closed.
Despite various announcements of price increases on coated freesheet and high-brightness coated groundwood papers, the unanimous word from the trenches is that no prices are moving up except perhaps for some really low-ball spot business.
The best that can be said is that the market seems to have stablized this fall after months of plummeting prices. North American shipments of coated paper were up in September versus the previous month – 8% for coated freesheet and 5% for coated groundwood, according to the Pulp and Paper Products Council. But compared with September 2008, shipments declined 15% and 8%, respectively.
Actual consumption of coated papers in the U.S., was even less favorable, according to data from printers compiled by Idealliance. September consumption of coated was down more than 5% versus the previous month. Usage of coated freesheet was down a whopping 32% versus September 2008, while coated groundwood dropped “only” 23%.
Consumption of uncoated groundwood held its own versus August and was actually up versus the same month last year for the fifth month in a row, according to Idealliance.
To keep their coated machines busy amidst the declining demand for coated papers, several companies have recently begun making supercalendered and other uncoated-groundwood papers on machines that have coaters. (See, for example, The Rush to Make Uncoated Paper on Coated Machines and There's Little Clarity About Some SCA Papers.)
The new supply continues to place pressure on uncoated-groundwood prices, which seem to be continuing a downward drift.
Though coated-freesheet prices are at their lowest in more than two years, there was speculation a few months ago that they could crash even more. The black-liquor credits subsidizing U.S. kraft-pulp mills to the tune of about $200 per ton threatened to make freesheet papers a virtual byproduct of the kraft process, with the resulting glut continuing to drive paper prices until the credits expire at the end of this year. (See "Black Liquor" Credits Are Helping Paper Buyers.)
But the surprising recent strength of global pulp markets, which by some accounts are experiencing their strongest rebound in history, has provided an outlet for all that subsidized U.S. pulp. And the weakening U.S. dollar has discouraged imports of paper into the U.S. from overseas.
Coated prices seem unlikely to move much for the remainder of the year. And what about next year?
Some paper-company executives claim that prices “must” go up because the black-liquor credits that have kept them solvent will disappear.
But a need for higher prices does not translate into higher prices. (Exhibit A: rates for magazine advertising). And bankruptcy reorganizations of major players don’t necessarily stabilize prices (Exhibit B: the newsprint market this year). Prices won't move up significantly until demand recovers significantly, which seems unlikely in 2010, or more machines are closed.
Saturday, October 24, 2009
What Nasty Chemicals Are Lurking in Your Paper?
Almost all discussions about the environmental friendliness of papers focus on the fiber, but perhaps we should pay more attention to the non-fiber ingredients.
The new controversy about cash-register receipts and the emergence of “biolatex” underscore the growing concern about the chemicals that papers contain.
ScienceNews revealed recently that many carbonless copy papers, which are typically used for cash-register and credit-card receipts, contain high levels of bisphenol-A (BPA). Research showing that the estrogen-mimicking chemical was leaching out of plastic bottles has led to calls for tighter regulation, but ScienceNews quotes a researcher who says the BPA exposure from carbonless copy papers is far greater.
Meanwhile, the folks at Better Paper, an environmental-advocacy organization, are touting the benefits of a new corn-derived biolatex known as EcoSphere as a replacement for traditional petroleum-derived latex in coated paper.
“Several major paper manufacturers are already testing EcoSphere® biolatex™ binder in their coating formulations,” writes Jeff van Leeuwen of EcoSynthetix, which manufactures the product, at Better Paper's blog. As far as I know, none of the paper makers have gone public with their use of EcoSphere.
The product has a lower carbon footprint, is friendlier to recycling operations, and costs less than traditional latex, the company claims. It’s also biodegradable.
Other chemicals that are frequently used in papers include various plastics, titanium dioxide, and calcium carbonates.
Calcium carbonates are a mixed bag environmentally. Some people have promoted rock-based papers (which are mostly limestone-derived calcium carbonates) as being green because they are "tree free". And precipitated calcium carbonate (PCC) is sometimes considered a “carbon sink” because it is produced by combining carbon-dioxide emissions with lime.
But limestone doesn’t exactly grow on trees; it has to be mined. And its transformation into lime for shipment to PCC plants doesn’t exactly sound like an environmentally sustainable enterprise.
Then there’s bleach, which is commonly used to brighten papers but is also really good at killing just about everything. That leads me to Stupid Question #1: When you use white toilet paper, are you putting bleach on your derriere?
And that leads me to Stupid Question #2: Why do we insist on having such white toilet paper – or, for that matter, TP that’s been dyed, decorated, or perfumed? Do you really want those chemicals, how shall we say, traveling to Uranus? Or dumped into the sewer system?
Please see the following articles for more information about the environmental implications of:
The new controversy about cash-register receipts and the emergence of “biolatex” underscore the growing concern about the chemicals that papers contain.
ScienceNews revealed recently that many carbonless copy papers, which are typically used for cash-register and credit-card receipts, contain high levels of bisphenol-A (BPA). Research showing that the estrogen-mimicking chemical was leaching out of plastic bottles has led to calls for tighter regulation, but ScienceNews quotes a researcher who says the BPA exposure from carbonless copy papers is far greater.
Meanwhile, the folks at Better Paper, an environmental-advocacy organization, are touting the benefits of a new corn-derived biolatex known as EcoSphere as a replacement for traditional petroleum-derived latex in coated paper.
“Several major paper manufacturers are already testing EcoSphere® biolatex™ binder in their coating formulations,” writes Jeff van Leeuwen of EcoSynthetix, which manufactures the product, at Better Paper's blog. As far as I know, none of the paper makers have gone public with their use of EcoSphere.
The product has a lower carbon footprint, is friendlier to recycling operations, and costs less than traditional latex, the company claims. It’s also biodegradable.
Other chemicals that are frequently used in papers include various plastics, titanium dioxide, and calcium carbonates.
Calcium carbonates are a mixed bag environmentally. Some people have promoted rock-based papers (which are mostly limestone-derived calcium carbonates) as being green because they are "tree free". And precipitated calcium carbonate (PCC) is sometimes considered a “carbon sink” because it is produced by combining carbon-dioxide emissions with lime.
But limestone doesn’t exactly grow on trees; it has to be mined. And its transformation into lime for shipment to PCC plants doesn’t exactly sound like an environmentally sustainable enterprise.
Then there’s bleach, which is commonly used to brighten papers but is also really good at killing just about everything. That leads me to Stupid Question #1: When you use white toilet paper, are you putting bleach on your derriere?
And that leads me to Stupid Question #2: Why do we insist on having such white toilet paper – or, for that matter, TP that’s been dyed, decorated, or perfumed? Do you really want those chemicals, how shall we say, traveling to Uranus? Or dumped into the sewer system?
Please see the following articles for more information about the environmental implications of:
- Toilet Paper: Marcal Challenges the Green-ness of Greenpeace
- Magazine Paper: Rethinking the "Green" Magazine Issue
- Harvesting Trees: Cutting some trees but saving the forest
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