Sonoco Implementing Tube & Core Scrap Return Subscription Service

Rhea-AI Summary

On June 10, 2020, Sonoco (NYSE: SON) announced a subscription service for tube and core scrap returns, effective July 1, 2020, in response to fluctuations in material values and rising processing costs. This voluntary service will incur a $95 fee for new shipments when the value of old corrugated containers (OCC) drops below $90 per ton, but it will be free once OCC exceeds this threshold. The company highlighted the necessity of managing costs amid OCC volatility, stating their commitment to sustainable practices and delivering value to customers.

Positive

• Introduction of a subscription service for scrap returns to manage costs effectively.
• Service fee implementation is tied to OCC values, demonstrating a proactive approach to market fluctuations.

Negative

• Introduction of a $95 fee could deter customers from returning scrap, impacting long-term relationships.
• Dependence on OCC prices adds uncertainty to the financial model of the scrap return program.

HARTSVILLE, S.C., June 10, 2020 (GLOBE NEWSWIRE) -- Sonoco (NYSE: SON), one of the largest global diversified packaging companies, today announced its Tube & Core North America division will implement a tube and core scrap return subscription service, effective July 1, 2020.

The subscription service is voluntary and will only be in effect if a customer chooses to return scrap tubes and cores to a Sonoco supplying facility. For many years, Sonoco offered this service at no cost to customers, however fluctuations in the value of the returned materials, along with the rising costs of labor, freight and other processing costs, required leadership to review this valuable offering.

“Due to the recent experience with OCC volatility, Sonoco discovered that the value of our OCC bales was well below the processing costs associated with it,” said Mike Thompson, Director - Sales & Marketing, Tubes and Cores – US/ Canada. “Sonoco, along with many other recyclers, has determined the necessity to set a protocol to manage costs with such a volatile commodity moving forward.”

When OCC is at or above $90 per ton, Sonoco will continue to offer a core scrap return program with no fees. However, when OCC values drop below $90/ton (RISI’s – Southeast Region – High), a fee of $95 will be added to each invoice for new tube and core shipments. At the point when OCC again increases over the threshold of $90 per ton, the service fee will be removed.

About Sonoco
Founded in 1899, Sonoco (NYSE: SON) is a global provider of a variety of consumer packaging, industrial products, protective packaging and displays and packaging supply chain services. With annualized net sales of approximately $5.4 billion, the Company has 23,000 employees working in approximately 300 operations in 36 countries, serving some of the world’s best known brands in some 85 nations. Sonoco is committed to creating sustainable products, services and programs for our customers, employees and communities that support our corporate purpose of Better Packaging. Better Life. The Company ranked first in the Packaging sector on Fortune’s World’s Most Admired Companies for 2020 as well as Barron’s 100 Most Sustainable Companies. For more information, visit www.sonoco.com.

Contact: Roger Schrum
+843-339-6018

FAQ

What is the new service Sonoco is offering for scrap returns?

Sonoco is implementing a tube and core scrap return subscription service that incurs a fee when OCC values fall below $90 per ton.

When will the scrap return service fee be waived?

The fee will be waived when the value of old corrugated containers (OCC) rises above $90 per ton.

Why is Sonoco implementing a fee for scrap returns?

The fee is implemented due to fluctuations in material values and increased processing costs that impact profitability.

What is the fee amount for scrap returns when OCC is below $90?

The fee amount for scrap returns will be $95 per invoice for new tube and core shipments when OCC is below $90 per ton.

When will the new scrap service take effect?

The new scrap return subscription service will take effect on July 1, 2020.