Shakespeare’s Juliet posed the question, “What’s in a name?” While she argues that a name means little compared with the essence of the object or person it stands for, I counter that in some instances, a name can offer valuable clues about the thing it represents. This is best illustrated by scientific terms, such as homo habilis, or “handy man,” which describes modern man’s ancestor who was first known to use tools. But it also can apply to business conferences, as in the case of our annual Paper Recycling Conference & Trade Show. In this case, the event’s name no longer accurately reflected its essence, which created an issue in promoting the event.
If you were among the individuals who attended the 2013 Paper Recycling Conference & Trade Show in Chicago this October, you already know that the Recycling Today Media Group, the event organizer and publisher of this magazine, has announced a name change for the 2014 event. For those of you who did not attend the conference, the event has been rechristened as Paper & Plastics Recycling Conference.
2014 will be the 15th anniversary of the conference, which has evolved in step with the recycling industry itself. This evolution has rendered the conference’s original name incomplete, as it was neither entirely reflective of the event’s coverage nor the scope of many of our attendees’ operations. In truth, for years the event has featured sessions on plastics and electronics recycling as well as wider issues of concern to recycling company operators, such as finance.
We took our cue for the name change from another event we have been successfully hosting in the Middle East for a couple of years now, Paper & Plastics Recycling Conference Middle East.
We’ve also decided to co-locate a plastics recycling conference with our European paper recycling conference, which we’ve hosted since 2004. We’ve been integrating plastics recycling coverage into our European event for the last two years but thought it was time to introduce a plastics recycling conference in this market.
Since their inceptions, each of these Recycling Today Media Group events has helped to connect and inform those individuals who collect, process, trade and consume these materials worldwide.
To those of you who have attended the Paper Recycling Conference & Trade Show in the past, thank you for your support. We trust we’ll continue to see you at the event because we focus on providing in-depth programming, an exhibit hall full of suppliers that provide products and services that are essential to the industry and a number of networking opportunities that help you to get business done. For those of you who haven’t yet attended the conference, we hope you’ll reconsider now that the event’s name more fully encompasses the breadth of programming it offers and more of the range of materials your operations likely are handling.
As you can see, names are not always as inconsequential as Juliet suggests.
As of mid-November 2013, the year has passed without any drastic “the bottom has dropped out” commodity pricing collapses that can cause a calendar year to go down in infamy among recyclers.
That being said, on the buy side, scrap flows and material generation remained disappointing for many recyclers in 2013. On the sell side, meanwhile, China’s Operation Green Fence caused considerable work and cash flow issues for exporters.
Nonferrous traders experienced Green Fence issues in 2013, with mixed container loads and certain grades coming under scrutiny by Chinese customs authorities starting in February 2013. As well, stainless steel markets have remained depressed, casting at least one company in that segment into financial trouble.
The ferrous scrap sector, which conducts a smaller percentage of its overall trade with China, was less affected by Green Fence. The main concern for ferrous processors and traders has been ongoing lackluster generation of materials and Turkey’s occasional disappearances as an overseas buyer in 2013.
Traders of plastic scrap and recovered fiber (as well as mixed metals) began hearing about Operation Green Fence in February. The rest of the year has largely involved figuring out how to minimize negative impacts and adjust to the inspection and rejection policies adopted through the cooperative efforts of the Chinese government agencies that crafted Green Fence.
More Action Welcome
Ferrous scrap recyclers in North America can be thankful they have been less affected by Green Fence than recyclers in other sectors, but that doesn’t mean 2013 has been without challenges.
Scrap recyclers continue to bemoan a lack of generated scrap to feed installed processing equipment, with many shredding plant operators in particular finding it difficult to procure enough feedstock to keep plants running five days per week. Don Zulanch of Cohen Brothers Inc., Middletown, Ohio, says the first few months of 2013 were “very slow—very,” but by May some improvement could be seen.
Plastic Exports Encouter a Fence
Plastics recyclers who gathered for the RePlas 2013 this fall in Hangzhou, China, took part in an conference that its host described as the first such convention in the “post-Green Fence era.”
The effects of Operation Green Fence and reactions to it from plastics recyclers dominated much of the programming at the RePlas 2013 autumn event, which was Nov. 6-8.
“The mission to recycle makes plastic recycling quite an honorable industry,” said Jason Wang, secretary general and executive vice president of the China Scrap Plastics Association (CSPA), in remarks at the start of the event’s program.
Yet Wang and subsequent speakers also acknowledged that plastic recycling and the importing of plastic scrap into China had an undeniable image problem.
Current CSPA Executive President Dr. Steve Wong, who also is president of Hong Kong-based Fukutomi Co. Ltd., said too many media reports “refer to our industry as ‘foreign garbage.’ We need to coordinate better with the media and share with them our process and to promote it.”
Later in the event, presenter Tan Xian from the antismuggling division of China Customs reported that plastics recyclers have had a major presence in enforcement actions taken by his agency. In 2013, 62 percent of the imported material by volume deemed to be solid waste was represented as plastic scrap on customs forms. As well, 76 percent of incidences involving the unauthorized use of an import license by a recycler were by recyclers claiming to be in the plastics business.
One window into the lack of ferrous scrap flows in the U.S. can be seen in export figures, as America’s ability to supply the rest of the world with ferrous scrap (or need to supply the rest of the world) fell by 23 percent in the first seven months of 2013 compared with the same time span in 2012.
From January to July 2012, the U.S. exported 6.01 million tons of ferrous scrap. That figure dropped to 4.63 million tons in the first seven months of 2013, however, according to the U. S. Geological Survey.
The decline in the export market coexisted with flat domestic steel mill melting schedules in 2013, resulting in slumping scrap prices. Steel mill purchase transaction figures in the U.S. collected and averaged out by Pittsburgh-based Management Science Associates (MSA) for its Raw Material Data Aggregation Service (RMDAS) spell out this declining price scenario.
Between April and October 2013, average prices for No. 2 shredded scrap in the U.S. ranged between $392 and $360 per ton, though the trend in the most recent six-month span is discouraging. That high figure of $392 per ton occurred in April, while the low mark of $360 occurred in the October buying period.
November pricing has brought about a rebound, reportedly spurred in part by increased purchase orders from Turkey. Although last winter proved to be a difficult one for the scrap market, Zulanch—who lived through those reduced scrap flows—is looking forward to 2014 with renewed optimism. “A lot of dealers are optimistic going into 2014; the market looks very firm,” he states.
Even with the challenges in 2013, Zulanch is quick to point out that in the ferrous sector the year cannot be counted as a dreadful one that will long be remembered negatively. “It was not a bad year and it was not great either,” says Zulanch, also calling 2013 “much better” than 2012. “We sold more, often at better prices with better margins, so all in all we are OK with 2013 but looking for bigger and better in 2014.”
The Green Monster
As the ferrous market scrambled for adequate supplies and waited to see if export markets would improve, recyclers of most other materials had their 2013 turned upside down by Operation Green Fence.
Many recyclers learned of Green Fence in February 2013 when their containers were being held up at ports in China either because of questions about their shipments or because of the huge backups caused by the heightened inspection routines.
Shippers of nonferrous scrap, paper and plastic began encountering questions and rejections from Chinese government agencies operating at port locations. In many port cities, if a shipper sent in 20 containers of scrap materials and just one of them had a documentation or contamination issue, all 20 containers were held up at the port.
Presentations by representatives of Chinese government agencies initially focused on public health and safety issues, pointing to loads contaminated with brackish water, mold, pests and live ammunition. Ferreting out nonsorted waste shipments has remained a goal, though another Green Fence aspect has involved tax evasion.
In a presentation at the 2013 China National Resources Recycling Association (CRRA) International Recycling Conference & Exhibition in September, Chen Zejun of the China Customs office in Guangzhou said the scrutiny provided by Green Fence had cut down on “false reports” used by importers as a tax evasion method.
Chen said collecting appropriate taxes and import duties was one of four goals that China Customs, the Chinese Ministry of Environmental Protection and the Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) had as it developed and introduced Green Fence.
Chen told attendees, “There is a lot to be recycled, but it has to exceed certain standards. You cannot dump nonrecyclable or nontreated waste on other countries.”
She said Operation Green Fence was designed to address four problems:
- Importing low-value waste;
- False reports on import documents pertaining to the product enclosed or to the value of the scrap product in the container;
- Selling or lending import certificates; and
- Reselling of imported scrap to nonimport certificate holders.
For recyclers in North America, the immediate headaches involved financial losses because of rejected shipments, the logjam at Chinese ports and the creation of material stockpiles when grades like mixed plastics were withheld from shipment
By the time of the 2013 Paper Recycling Conference & Trade Show, organized by Recycling Today Media Group in partnership with the Paper Stock Industries (PSI) chapter of the Institute of Scrap Recycling Industries Inc. (ISRI), in Chicago in mid-October, recyclers of mixed postconsumer materials claimed to have invested in automated or manual sorting of materials and to have slowed down their sorting lines in an attempt to improve quality.
In a session at the conference, Johnny Newsome of packaging products maker Sonoco Products Co., Hartsville, S.C., whose company also manages 28 recycling plants, remarked, “We’ve added sorters, and we’ve slowed our lines down, and the quality is better as a result.” While some of these measures were designed as a response to China’s Operation Green Fence, Newsome said, “I think U.S. mills will benefit also.”
Ryan Anderson of paper mill company SCA Americas, Menasha, Wis., also pointed to the potential long-term benefits of Operation Green Fence’s ability to cause recyclers to strive for cleaner shipments. “I think we’re to the point where [quality improvement] has started to happen,” Anderson told delegates. “Green Fence has made it easier to go back to the suppliers and hold their feet to the fire.”
During the urbanization and industrialization of China of the past 15 years, nonferrous metals prices have achieved a reputation for volatility. Thus, by some measures 2013 can be viewed as having less drama than has existed in some previous years.
However, several factors contributed to cause stress for nonferrous recyclers in 2013: Copper pricing experienced its typical ups and downs throughout the year; Green Fence made its presence known in the container export shipping sector; and the continued slump in stainless steel markets claimed a potential casualty.
Copper prices started the year with some forward momentum, with the January London Metal Exchange (LME) cash settlement price averaging more than $8,000 per metric ton, gaining on the December 2012 figure of $7,960.
The momentum lasted through February before embarking on a decline in March that saw average copper prices fall in four of the next five months, reaching a level of less than $6,900 per metric ton in July. Late summer and autumn brought a slight rebound, with August and September cash buyer transactions averaging more than $7,160 per metric ton.
Measured by turmoil, lost opportunities and financial losses, Operation Green Fence seemed to hit the plastic scrap sector the hardest, followed by recovered fiber shippers. However, nonferrous recyclers were not immune from the impacts.
Even if shippers did not experience rejected shipments of their own, the containers they shipped from ports in Guangzhou in the south of China to Qingdao in the north were often snarled in logjams in 2013 that added expensive drayage and other charges to transactions.
CCIC (China Certification and Inspection Group), AQSIQ and China Customs inspectors also scrutinized nonferrous scrap shipments. Among the things inspectors have been looking for are mismatched documents submitted by importers trying to pay lower duties; items in wire and cable shipments that appear to be obsolete electronics; and pieces of printed circuit board in zorba and other mixed metal shipments.
The long-term slump in the stainless steel scrap sector has put the future of decades-old stainless steel recycler Keywell LLC in jeopardy. The company began closing down a facility in New York in September, and news began circulating shortly thereafter of its difficult financial situation.
The Chicago-based company also filed for bankruptcy protection in September, at the same time it might have agreed to be sold to a competitor. According to a Reuters report, Mark Lozier, Keywell president and CEO, has agreed to sell the firm to U.S.-based Cronimet Holdings Inc., though that transaction has not been finalized.
According to an article in the Wall Street Journal, in court filings Lozier cites slumping nickel prices and slow sales for Keywell’s woes. The company says it had sold only $142 million worth of scrap metal—or roughly 73,000 tons—in the first eight months of 2013, well below its typical level of activity. In its filings, Keywell also cites delays by some big stainless steel customers in taking delivery of metal even after it had already been loaded into rail cars.
As 2013 draws to a close, many recyclers in North America may be thankful they have made it through a rough year while remaining skeptical as to whether 2014 will be markedly better.
The author is the editor of Recycling Today and can be contacted at email@example.com.
For much of the 21st century, the copper and brass scrap business has been a great sector in which to work. Buyers in China could not get enough red metal scrap to satisfy the nation’s burgeoning copper production plants, and sellers in the U.S. were happy to supply what they could.
The fourth quarter of 2008 proved to be an obvious exception, but traders who survived the turmoil of renegotiated and cancelled shipments began to work their way back up from that trough throughout most of 2009 and 2010.
Since early 2011, however, the value of copper and copper scrap has been on the decline, as measured by Comex and London Metal Exchange (LME) contract pricing.
In 2013, the thriving trade of red metal scrap moving from the U.S. to China has slowed by 9 percent compared with the year before, based on figures for the first half of the year collected by U.S. government agencies.
As recycling company owners and managers prepare budgets and forecasts for 2014, among the larger questions they will try to answer is whether copper’s slowdown will continue along the same arc or whether a new year brings with it possibilities of a rebound.
The production of copper and brass in the United States in 2013 is on track for another disappointing year of slow recovery from the subprime mortgage crisis of 2007 and 2008.
Production at brass mills in the United States has, depending on one’s point of view, either held steady or stagnated from 2011 to 2013. Brass mills make up the largest domestic consuming market for copper-bearing scrap in the U.S.
Figures collected and published by the U.S. Geological Survey (USGS), Reston, Va., show American brass mills as having shipped 951,000 metric tons of product in 2011 and 953,000 metric tons in 2012.
In the first six months of 2013, brass mills in the U.S. shipped 479,000 metric tons of semifinished or finished products, putting the sector on pace to produce 958,000 metric tons for the year.
The USGS estimates that domestic brass mills consumed some 615,000 tons of copper-bearing scrap in 2012 and in 2011, a total that is likely to be matched in 2013. This level of demand is stable but down significantly from the peak figure of 896,000 metric tons in 2000 or even the 710,000 metric tons consumed in 2007.
Between 2000 and 2007, scrap dealers had a growing offshore market in China that absorbed much of that tonnage. In recent years, however, the muted demand from brass mills is matched by a lack of generated red metal scrap.
Rik Kohn of brass ingot maker Federal Metal Co., Bedford, Ohio, says 2013 has been characterized by “soft demand [for ingots] and limited scrap availability, so we have been squeezed on both ends.”
Kohn and other buyers for Federal Metal are confronted with the additional task of seeking lead-free copper scrap to create ingots that will ultimately serve the plumbing sector. (See sidebar “Unleaded, Please” below.)
For ingot makers or brass mills to be able to consume more red metal scrap, the U.S. construction industry will have to enjoy the type of strong rebound that continues to be evasive.
Metals industry analyst Edward Meir of INTL FC Stone, Stamford, Conn., says that while the housing sector has enjoyed a modest comeback, even this slight rebound may not be able to withstand the Federal Reserve backing away from its bond buying activities.
The nonferrous secondary ingot industry in North America in the past 50 years has declined from more than 100 such companies to fewer than a dozen that are operating today.
Producers of brass and bronze ingots that ultimately become plumbing products have been taking part in a shift away from leaded alloys to unleaded ones.
Federal Metal Co., Bedford, Ohio, has been producing and marketing lead-free ingots since 1993, well ahead of government mandates to curtail the use of lead in this application.
According to the company’s Rik Kohn, 2014 is the year when lead-free ingots will no longer be an option but instead will be the only product allowed for use in plumbing applications.
In 2013, this has increasingly meant that red metal scrap that contains lead has to be avoided by these purchasers at the same time that they scramble to seek out lead-free scrap sources.
“Recently, the price of leaded scrap has dropped,” says Kohn in late October. “The Chinese have not been aggressive, and there are more such units on the market than there is demand. A part of the reason is the dramatic switch to lead-free for the potable water industry to comply with the 2011 law,” referring to the Reduction of Lead in Drinking Water Act, which takes effect Jan. 4, 2014.
That law states that if a pipe, fixture or other component of the potable water system touches water, it has to be 99.75 percent lead free.
For an ingot maker like Federal Metal that serves the potable water industry, it has made 2013 a challenging year to buy scrap. “Clean, lead-free scrap is very tight,” Kohn comments. “It has been all year.”
With just a couple of months to go before the deadline, Kohn says makers of products and alloys that serve the potable water sector are still determining which specific chemistries they will use. Some producers, he says, are using bismuth alloys, others silicon alloys and yet others are “experimenting with sulfur alloys . . . everyone has an opinion.”
If or when the industry settles on a standard, Kohn says, this may result in “more scrap in the stream” as buyers become more certain about what they need to procure.
“Once the tightening [in U.S. Federal Reserve bond buying] starts in earnest, some sectors will suffer more than others,” says Meir. “Housing could be one casualty, since already it is seeing some signs of cooling in the wake of rising rates,” he continues.
Without the revival of a newly robust construction sector, it seems unlikely that domestic copper and brass producers will see increased orders or that a greater volume of red metal scrap will flow into U.S. scrap facilities.
A nonferrous scrap broker and exporter based in Southern California describes 2013 as a year of thinner profit margins. He says his company’s volumes will hold steady at best as opposed to experiencing any increase.
China’s Operation Green Fence has affected the health of his business by making some grades, such as zorba fines and mixed motors, harder to market, he says. The bigger consistent drain on profits, however, has been the increased drayage costs and slower payments resulting from the clogs and backups at Chinese ports as inspectors from China Customs and other agencies scrutinize each shipment and bill of lading.
Whether it was the degree of difficulty of dealing with Green Fence, a cooling down of China’s metal production industry or a combination of the two, U.S.-based scrap processors and brokers will send less red metal scrap to China in 2013 than they did in 2012.
Throughout the 21st century, China has been the hot destination for red metal scrap. China’s copper and brass production has soared as its economy has grown, its population has urbanized and its utility and transportation infrastructure has rapidly expanded.
Since 2000, buyers representing Chinese copper and brass producers have combed the United States seeking red metal scrap, generally offering prices and payment conditions that made China the destination of choice.
The first half of 2013 marked a rare retreat from this trade pattern. According to the USGS, copper-bearing scrap shipments from the U.S. to China totaled 405,000 metric tons in the first six months of 2013. That total is down 9 percent from the 447,000 metric tons shipped in the first half of 2012.
When forecasting global copper production, demand, pricing or scrap consumption, China has put itself into position to be considered first.
As 2013 draws to a close, several things occurring in China likely will affect both global production figures and pricing for copper in 2014, says Meir. “What concerns us most going into 2014 is that we do not think the markets have fully discounted a further slowing in the Chinese economy, perhaps because recent statistics have turned more positive,” he says.
In November, China’s Central Committee will be making crucial decisions regarding the extent of economic reforms it wishes to introduce in 2014. “If the government achieves even a modest amount of what it intends to do, we think the impact on metals demand will be noticeable,” says Meir.
“Consolidating, merging or even closing excess or unwanted capacity in such sectors as steel and aluminum, along with a host of other industries, will, by definition, mean reduced demand for raw materials, energy and labor,” he continues. “Writing off bad loans should have the same effect. In addition, the economy still has to get through a real estate bubble in one piece.”
In Meir’s estimation, the state subsidization of large banks and state-owned metal producers will have to be scaled back at some point, which will cause short-term pain before it can provide long-term benefits.
More so than the copper or brass industry, the steel industry has historically been heavily subsidized by all levels of government in China, creating steel producers will balance sheets that would not withstand a more open market.
“The Chinese city of Tangshan illustrates the debt binge run amok,” says Meir, referring to a city of 7.5 million people located about 100 miles from Beijing. “The city has 156 steel blast furnaces compared to a total of just 32 in the United States, Canada and Mexico combined,” says Meir.
“The government plans to cut 60 million tons of steel capacity in Tangshan by 2017 (mainly for environmental reasons), and we suspect that these will be the kinds of retrenchments (and loan write-offs) that will be unfolding over much of China in 2014,” Meir says. He adds that this is “not exactly a resounding endorsement for higher growth or stronger metal demand.”
The copper and brass industries in China are not believed to be suffering from the same extent of overcapacity as the country’s steel industry, but government statements have consistently advocated for shutting down mills and smelters thought to be outdated or heavy polluters.
Settling on a Number
As of late October, the cash settlement price of copper on the LME had fallen more than 8 percent from where it stood Jan. 1, 2013.
The World Bank forecasts that copper’s price will average out at $7,100 per metric ton ($3.22 per pound) in 2013. The organization sees copper’s value falling only slightly in both 2014 and 2015, with forecasts of $7,050 per metric ton ($3.20 per pound) in 2014 and $7,000 ($3.17 per pound) in 2015.
Meir of INTL FC Stone sees a slightly higher average price of $7,200 per metric ton ($3.37 per pound) in 2014 and also sees volatility as part of the picture along the way. His forecast calls for copper to at some time in 2014 be worth as much as $8,250 per metric ton ($3.74 per pound) on the LME and for it also to sink down to $6,300 per metric ton ($2.86 per pound) at its lowest point.
“Just like , 2014 will be another range-bound affair, made all the more so by the fact that the Chinese growth juggernaut will likely show even more signs of slowing, while producers are, as of now, still moving too slowly to take excess capacity off the markets,” Meir says.
“We suspect that should our 2014 lows be reached, producers will initiate cutbacks across a number of metal complexes with more urgency, potentially setting the stage up for a rather respectable move higher going into 2015 and 2016,” he predicts.
The author is editor of Recycling Today and can be contacted at firstname.lastname@example.org.
Editor’s Note: The following article includes edited excerpts from the Mill Buyers session at the 2013 Paper Recycling Conference & Trade Show, which was organized by the Recycling Today Media Group, publisher of Recycling Today, in partnership with the Paper Stock Industries (PSI) chapter of the Institute of Scrap Recycling industries Inc. (ISRI). The event was Oct. 16-18 in Chicago.
As one might expect in a year when China launched Operation Green Fence and single-stream recycling programs continue to expand throughout the U.S., accepting a greater range of material from the communities they serve, quality concerns remain foremost on recovered fiber buyers’ minds. Some of these buyers joined Bill Moore, paper recycling industry consultant and president of Atlanta-based Moore & Associates, to field questions from attendees of the 2013 Paper Recycling Conference & Trade Show in Chicago this fall. The panelists (pictured seated above from left) were:
- Johnny Newsome, director of trade sales and mill supply, Sonoco Recycling, Hartsville, S.C.;
- John Lucini, director of operations, West, SP Fiber Technologies Northwest, Newberg, Ore.;
- Ryan Anderson, Midwest regional buyer, SCA Tissue, Menasha, Wis.; and
- Peg Wander, fiber procurement manager, Liberty Paper, Becker, Minn.
Newsome has been with Sonoco’s recycling division for 23 years and handles mill supply, trade sales and national accounts. Sonoco operates 11 mills in North America producing 1.1 million tons of paperboard and some containerboard annually. It also operates 95 converting plants.
Lucini, who has been in the paper recycling industry since 1974, described SP Fiber Technologies as a diversified supplier of newsprint and packaging products that was created in 2012 when it purchased the assets of SP Newsprint. The company operates two mills—in Dublin, Ga., and Newberg, Ore.—and 13 recycling facilities in six states.
One of SP Technology’s Dublin paper machines has been converted to produce packaging grades. It has an annual output of 280,000 tons of lightweight liner, bag paper and medium, Lucini said. The company produces a total of 220,000 tons of newsprint per year, with production divided among the Dublin mill, which uses 100 percent recycled furnish, and the Newberg mill, which uses 50 percent recycled ONP (old newspapers) and OMG (old magazines) and 50 percent wood chips. He added that the Dublin mill consumes 1,000 tons per year of OCC (old corrugated containers) and ONP, while the Newberg mill uses 650 to 700 tons per year of ONP and 600 tons of OMG.
SCA’s Anderson has 17 years of recycling industry experience. He purchases fiber for the company’s Menasha mill as well as for three of SCA’s Mexico mills.
SCA is a global hygiene products company with $15 billion in sales globally. Its Midwest mills consume 335,000 tons of recycled paper per year, including printers’ mix, SOP (sorted office paper), heavy print, poly window, light groundwood and fly leaf shavings as well as OCC, mixed paper and some DLK (double-lined kraft).
Wander has been with Liberty for eight years, though she has worked in the wider recycling industry for 22 years.
The company’s 100-percent-recycled linerboard mill consumes approximately 250,000 tons of recovered fiber annually, 90 percent of which is OCC.
Wander said Liberty was looking beyond traditional sources of recovered fiber, working in the C&D area to recover OCC as well as with dirty MRFs (material recovery facilities).
Among the questions panelists and Moore fielded from the audience included:
Q: What is an acceptable percentage of contaminants in a bale and which should we work the hardest to keep out?
Peg Wander (PW): … We really need the long fiber material. For us, a contaminant can be short fiber boxboard material or newsprint. We will tolerate up to 5 percent.
For us, prohibitives are absolutely containers, cans, glass—nothing that is obviously not going to go into the box linerboard manufacturing process. It is a complete reject for us.
When we go in and do bale audits … we find that we have customers who are pretty much on that 5 percent line; some have moved into the 7 percent range. When we start getting to 10, we have to start having a conversation, if you will.
Ryan Anderson (RA): From the white side, what we are looking at is a little bit different. As far as a list of what is most detrimental to us, it is brown fibers, glues and then probably red ink.
John Lucini (JL): Our dilemma is that we see a lot of brown fiber in our incoming material. We are trying to make a newsprint sheet that needs to be brighter and brighter all the time to meet the demands of our customers, especially in our recycle mill, which has to compete with sheets that are 100-percent-virgin fiber. And that brown fiber does not go away. It pulps up, it gets into our sheet, it hurts the brightness. We throw chemicals at it. It creates a cost issue, but it also creates a marketing issue for our group to be able to be competitive in the marketplace.
The prohibitive materials: We can’t make paper out of plastic, tin, wood, garden hoses, Christmas tree lights—you name it, it’s in there.
We have become more aggressive in measuring [the material that] arrives at our mills. I know the stuff has been poor quality, but some of the results that we have seen have been very surprising.
We have looked at Newberg, where we have an option for fiber, and we’re maximizing our wood supply as an alternative to secondary fiber. It has allowed us to become a little more selective over the suppliers we work with.
Johnny Newsome (JN): At Sonoco, about 70 percent of what we consume is OCC and the remaining is mixed paper.
Prohibitives are definitely the nonfiber [material], wax-coated board or heavy wet strength. … There are more prohibitives now than ever. Pricing is higher. So, basically, you’re buying material that you are going to screen out of your machine and then throw away. It has increased cost, our shrinkage is higher than it was years ago. Prohibitives load up your cleaning system. They comprise your machine speed.
The glass is an abrasive in the cleaning system, and it wears out your screens. We had screens that used to last a year that will last just a few months now, and they are several thousands of dollars—$30,000, $50,000, a $100,000—to replace.
Bill Moore (BM): Does the future hold sorting at the mill to get the needed ONP quality?
JL: … Frankly, given the competitive nature of our business, that is an expensive step. I guess if I take the mill view, they want to buy something they can make paper out of and not have to deal with sorting in a mill environment with some of the labor costs … that are involved.
Q: Do you think we will be able to enforce bale specifications more strongly going forward and clean up that supply?
RA: I think we are at a point where that has started to happen. The Green Fence has obviously made it easier to go back to suppliers and try to hold their feet to the fire. In a lot of cases, I think there are, in my opinion, design flaws in the systems themselves that are making it more difficult. I do see that a lot of these companies are trying to clean it up, but it is still a situation where the quality coming in is not up to standards. I think there is still quite a bit of room to go.
JN: We’ve added sorters on our lines. We’ve slowed our lines down. The quality is better coming out of MRFs now as a result of Green Fence, in my opinion. And I think our U.S.-based paper makers will benefit from it.
Q: Johnny says he considers wet strength material a prohibitive in OCC. Is it an outthrow in mixed paper?
JN: It depends on the system. We have a continuous pulping system. Our system cannot beat up the wet strength, and it just goes out the side of the machine just like plastic. Other batch pulping systems some mills use can run wet strength without much of an issue. And it has good fiber in a lot of cases. Your buyers just have to know what they are buying. There are certain markets for it.
PW: I would agree. … If it is important to you that it gets 100 percent recycled, you maybe want to be able to find the mill that is going to be able to batch it and handle it that way.
BM: There is at least one and there are probably a few dedicated wet strength repulping systems. They primarily do industrial scrap from converting of beverage container packaging and other high wet strength. … You can process it. It’s a time, heat and chemicals issue. Some folks are really set up for that, and some folks are totally not set up for that, as Johnny said.
Q: As printers and packaging companies use more inks and coatings, what are the mills seeing as challenges in handling those coatings and inks that weren’t around five or 10 years ago?
RA: From the tissue side, we have made a lot of investments. … Where we were five years ago, we could not handle what is coming through the door today. At least up in Menasha, we have invested over $50 million in the last five years to be able to handle the direction the [recovered] paper was headed.
That being said, the amount of ink that we get in on some of the material, even with that investment, is more than we can handle. We are seeing a lot less yield. There is a lot more ash, a lot more fillers in the paper, so our yield numbers are down.
Overall, it is costly. The base sheet is of lower quality. You are getting the brightness out of the fillers, out of the coatings, and so you have extra sludge and less paper.
… It used to be that you could use trim as a brightener. But now the inks go right to the edge, and you are getting shorter trims out of the paper coming in. The majority of the paper that does hit the doors these days, where we used to have a lot of white, unprinted areas, now has got ink all the way to the edge. It definitely has become much more difficult and costly to remove it.
Q: I’m wondering with the shrinking supply of ONP are mills substituting wood chips for ONP?
JL: Definitely from what I’ve seen in mills that have that capability. In our case we have some swing capacity on pulping in Newberg so that we can swing between recovered fiber to wood chips depending on the cost of the head box.
BM: … If you look around the world at newsprint machine closures, there has definitely been a bias … to close recycle facilities. Over the cycle and clearly at the high end of the recovered fiber ONP cost cycle, ONP is noncompetitive with TMP (thermomechanical pulping) with virgin fiber, and that is why we have seen those shutdowns. And I think it is going to continue to be that way, which coincides with the declining supply of ONP, so it gives you a little bit of balance.
Q: ONP No. 8, whatever the quality is from the MRFs, when do you think the standard and the quality can match each other so we don’t have disputes all over the world?
BM: It is really an issue of the PSI guidelines versus what is being produced in the market. And, John, I know you are on the front line of that in many ways.
JL: I think that the low-grade ISRI/PSI specifications need to be looked at. I think you have to remember that those specs are a guideline. … Each mill is going to make its own decision on what they can handle, what they can buy, what they need to buy, and I don’t think you can default to a published document to do that.
That being said, we are definitely not receiving material from our suppliers that meets that ISRI spec—not even close. We are working very aggressively, sampling what is coming in, understanding what is there, trying to educate our suppliers as to what we can tolerate and what we can’t tolerate and trying to develop a meaningful spec for our operation. And I’m sure everybody up here and all the other mill groups have that same dilemma. So we will do that, and then we will enforce that and buy against that specification.
BM: If you look at the ISRI guidelines, first of all, they are not specifications, they are guidelines, and many mills have their own. That is the first thing to understand. And PSI has made revisions to the low-grades, in particular to the ONP guidelines, at least once or several times over the last five to 10 years. … those guidelines are supposed to reflect what is being traded in the marketplace. It is a bit of a Catch 22, because if you raise the prohibitive and raise the outthrows, is it a spiraling effect that if you keep raising it people exceed it and you revise the spec again.
JL: From the mill perspective, there is this concern that the spec is X and we are getting Y. If we make the spec X+5 we are going to get Y+10. What is being traded isn’t necessarily what mills can use or want or can deal with. I do think that is something that those of you who aren’t members of PSI, here’s the pitch, you can be at the table. We have a specifications committee. We went through this two or three years ago. It was quite a long debate, and there are quite a few different viewpoints, and we did change those guidelines. But that is an ongoing process, and we need everybody’s involvement in that.
BM: Joel (Litman of Texas Recycling/Surplus, Dallas) is president of the chapter, and I see he has the microphone:
Joel Litman (JL): I think you guys did a great job explaining it. But it is a process; it is always evolving. What we talked about three, four, five, six years ago is different from today. … Like Bill said, it is a guideline. It is kind of like making a recipe. Everyone has a recipe for chicken soup, but one household may make it a little differently than another, even though the recipes are the same. It really depends on what the mill is buying, what their needs are. The PSI specs are guidelines, but it really depends on what the mill’s recipe is for their end product.
BM: It is also a process that takes time. There is a lag time because it is a consensus-building approach. And it can take a year to two years to change a guideline from when someone says, I think the guideline should be changed, to when it gets implemented.
JL: Like John was saying, you have to be at the table. … You have to come to PSI, join our organization and have a seat at the table. We do take comments from the public. Once the specifications get to a point they are published in the trade journals for comment. But if you really want to have a hand in it, join us at the table, because PSI members and ISRI members are the ones that vote on it.
Q: I’ve heard a lot of talk about reduced fiber and prohibitives in the process. We’ve recently acquired the rights to a patent-protected coating process. It is a water-soluble coating that replaces PE and PLA and has allowed us to make a 100 percent recyclable paper cup. The early feedback from the foodservice guys is that this is something the whole industry might be interested to adopt. My question is, assuming we can get that level of adoption, will that help with some of these problems that you’re facing in terms of having a new supply of something you can recycle compared with something that you can’t?
RA: That is largely going to come down to the process. I’m not sure what kind of wet strengths you are putting in there, what you are using as that water barrier. It would be determined on whether we could remove the fibers from that source and how it had to be conditioned to know if it is worthwhile to put it in that process to be able to recycle it. Without knowing more about the actual product itself, it is hard to say whether or not that would be a viable source. But it would definitely be something that we are interested in looking at. If this is new technology and there is fiber available there, that is something that definitely would be of interest.
BM: The devil is in the details.
PW: When I think of adding a cup to the collection process, there is still a variety of other cups out there. It’s that education again of how do we know that we’ve got the right cup and that it is going to come through the system appropriately.
JL: I’d guess I’d add that my views are that you have to be careful. Like Bill said, the devil is in the details. You start telling the public that a “cup” is recyclable, it is going to end up in that bin with everything else, and that is how we have kind of got ourselves in the mess that we are in today.
BM: Overzealous recycler, I call them.
Q: What do you think is the reason why it is kind of difficult for OCC and mixed paper from the Dominican Republic to get into the U.S. given the fact that we are even closer than other markets?
BM: It is all about freight, first of all, and then there’s China. I’m sure China buys from the Dominican Republic.
JN: Normally if it goes in a container, it is going to go to China in most cases.
BM: The U.S. isn’t an importer of OCC. We are an exporter of OCC, so I suspect that that is one reason. It always has to do with transportation flows.
JL: The freight opportunity is out of the U.S. back to a market, not into the U.S.
BM: That’s right, look at your container freights outbound and find out where the lowest cost destinations are, and that is where the OCC will flow. Because almost every country has recycled board making capacity and, therefore, uses OCC and mixed.
Q: This summer, our trade industry, AF&PA, introduced a public education campaign called “Think Before you Shred.” Now nobody here has mentioned that shredded paper is an issue—at least it’s paper—and we’re talking about other contamination issues. When I called them, he said that’s what their members requested. So it seems to me that there is a disconnect with what our trade organization is hearing as an issue with paper mills and with what everybody is talking about here at this conference. …Are you all no longer members of AF&PA or are you not sharing the quality issues that you have that are bigger than shredded paper?
JL: We use a little bit of office pack from time to time in our mills, and the mill doesn’t like it for a couple of reasons. One … they can’t see what is inside there, and so they have some problems with contaminants. But I think a bigger issue is housekeeping. Bales fall apart, we have a trommel that fluffs the material before it goes into the pulper, and it creates a dust storm in the facility. They physically can’t see the feed belts on the cameras. They don’t like it; they’d just as soon not buy it.
From a MRF perspective, we’ve tried to work with the municipalities in our area to tell them to tell the public to keep that stuff out of the curbside because all it does it goes through the fines screen that we’ve installed to take out the glass and the bottle caps and the chicken bones and the batteries, and it’s a yield loss to us. It’s fiber, but it’s not suitable to be collected in that fashion.
We’ve squawked at the municipalities that they need to educate their residents about what can go in that bin. And they make a token shot at it by sending a flier out with a garbage bill. But it is very ineffective and part of it is confused by marketing efforts by some of the packaging manufacturers. For ONP, the generator is confused, and if the generator is confused, we’re going to just keep getting junk like we are getting now.
BM: We know how to do the public education; it’s a matter of funding. Do your companies spend money on education for the grades you use and who should be responsible for education: the mill? The processor? The generator? The collector?
PW: I feel that we are all stakeholders in the process and we all have a responsibility to try to educate. From the mill’s perspective … whatever we can do to provide [the generator] with a better understanding of the process so they understand why they need to put certain materials in the bin. We have a video of the process, and we are happy to go to communities to share that … and get them engaged in quality from that perspective.
In terms of funding … I think we’d be open to the discussion, if you will. But it is a good point that a lot has changed in the industry in terms of education.
RA: From our end, we have also taken a look at this issue. I know we have done some work with our marketing group, and I don’t know exactly where we are at in that process. It is something that we are looking at and understanding that we may have to be one of the ones to step up and try to do some of the education.
JL: Over the years when we were looking to build the ONP supply, SP was extremely aggressive with schools and provided lesson plans, comic books. ISRI has got a project now to help provide lesson plans for teachers.
I think the biggest issue is that we don’t typically have the resources that the solid waste companies have or the large consumer product companies have to … make a pitch. Most of our public involvement is that our managers are on solid waste advisory committees, they attend public meetings, but they also have full-time jobs on top of that. These other entities have full-time people that are just focused on public relations and that kind of thing. Our industry hasn’t had the resources or hasn’t thought it necessary to [allocate] the resources. We do rely on AF&PA to do that. But even that doesn’t seem to have the horsepower that the consumer products folks have to influence packaging decisions and that kind of thing.
JN: At our MRFs, we do have education centers and we bring students in and spend a lot of time there. I think the next generation will be smarter recyclers than we are. To me, that is where it begins.
At the end of the day it is all going to come out in price to municipalities. The price of curbside has continued to increase, but as it is becoming more contaminated and it costs more to process … At some point, to me, the municipalities have to be clear on what can be collected effectively. A lot of things are recyclable but you can’t just put it all together and expect to sort it all out. The price will ultimately determine who pays.
Having just come back from several paper recycling conferences, I must say there is more to the industry than meets the eye. While I do my best to keep up to date with all the activity in the paper recycling industry, getting out and talking to recyclers in person gives me a far better appreciation of what they are currently dealing with. Talking to people on the phone and interacting via email are often fast and easy ways to keep track of general business conditions; but, meeting face to face, I find, is a great way to really get a feel for the business.
If I focus on what I hear and read from my office, I would think the paper and paper recycling industries were on their way to extinction. The daily complaints about lack of generation for many grades of fiber, tighter quality specifications from paper and paperboard mills and pricing volatility as well as the general malaise I hear from many segments of the paper industry would make me a permanent bear.
However, one thing I often forget is that many paper recyclers are, by nature, entrepreneurs. And, despite the challenging environment, these entrepreneurs are looking at the next big opportunity. Networking with other individuals at these shows gives many recyclers the idea or foundation for the next big thing.
As for me, I am quite impressed at some of the concepts and projects the recyclers I talk to at conferences are putting together. For those people who feel that going to a conference is just an excuse to have some fun and get away from the office, the number of business deals that result from these events definitely refutes that idea.
By interacting with many recyclers face to face at conferences, I come away far more hopeful about the industry. As challenging as paper stock markets may be currently, many paper recycling industry executives are positioning their companies for or creating new businesses that tap future market opportunities. That may mean handling different commodities, establishing unique partnerships or even introducing spinoff companies that are far removed from the traditional paper recycling business.
Regardless of how these paper recycling professionals respond to the challenges they are facing presently, after covering the recycling industry, especially the paper sector, for more years than I would like to admit, the resiliency of this segment of the industry never ceases to amaze me. And that makes covering this industry far more interesting and engaging and leaves me more optimistic about the future of the industry.