ISRI 2020 Fall Commodity Spotlight Series: Recovered paper experiences major changes in supply and demand

Recovered paper markets have gone through significant changes in the last few years as a result of China’s recovered paper import policies first enacted in 2017 as well as changing generation. Demand for paper and board as well as printing and writing papers also has changed.

During the Paper Spotlight webinar Sept. 16 as part of the Institute of Scrap Recycling Industries (ISRI) 2020 Fall Commodity Spotlight series, Kelly McNamara, senior market analyst at Montreal-based Numera Analytics, reported that old corrugated containers (OCC) have grown to represent about two-thirds of all global recovered paper collected today, making it an important focus for many recyclers.

She reported that the way exports of OCC flow out of North America have shifted considerably in the last four years. In 2016, about 3out of every 4 tons of exported OCC would be shipped to China. In 2019, only 4 out of every 10 tons of exported OCC were shipped to China. Next year, that number likely will be zero, and about 4 to 5 million tons of North American OCC that were exported to China this year will need to find new homes.

Even though China’s consumption of U.S.-based OCC is going down, McNamara said other Asian countries are stepping up to consume those tons. India, Indonesia, South Korea, Malaysia, Taiwan, Thailand and Vietnam have added about 5.5 million metric tons of containerboard capacity in recent years to supply China’s containerboard needs.

During the webinar, Hannah Zhao, senior economist at Boston-based Fastmarkets RISI, said countries in Southeast Asia are hungry to consume North America’s recovered fiber to produce containerboard.

“[W]e all know Indonesia, India and South Korea set up some rules to restrict recovered paper imports. Will other Asian countries, like China, stop buying recovered paper anytime soon? We don’t think so,” Zhao said. “We think this region will be very, very hungry for recovered paper, and in general, North America will be an important supplier to this region.”

Since 2017, mill's recovered paper quality requirements have increased domestically and abroad partly in response to China’s National Sword Policy. Palace Stepps, president and general manager at Hartsville, South Carolina-based Sonoco Recycling LLC, touched on how that’s been affecting material recovery facilities (MRFs) in recent years.

“With increased quality requirements, it’s slowed down lines, lessened our capacity and forced us to upgrade equipment to clean up the supply,” he said, adding that he thinks the new demand for high-quality recovered paper is “here to stay. I think it’s a good thing for us to produce a higher quality product.”

Stepps reported that Sonoco has had to make investments in its material recovery facilities (MRFs) to produce high-quality recovered paper and plastics.

Consumer education is another important factor, he said. “Greater consumer education is a big deal for Sonoco, making sure that the local consumer understands what is recyclable. We’re making a big push there.”

Packaging impact on recovered paper

During the webinar, McNamara said overall demand for packaging and tissue papers is growing, but printing and writing paper demand has gone down substantially in the last decade. McNamara shared figures from Numera Analytics related to paper demand:

• Newsprint demand declined 47 percent between 2010 and 2019.
• Printing and writing paper demand declined 21 percent between 2010 and 2019.
• Containerboard demand increased by 17 percent between 2010 and 2019.
• Boxboard demand increased 5 percent between 2010 and 2019.
• Tissue demand increased 34 percent between 2010 and 2019.

Much of the containerboard and boxboard demand growth has been driven by packaging and hygiene products. During the webinar, Bob Beckler, chairman at Richmond, Virginia-based TemperPack, reported that the global paper industry is being fed by about 60 percent recycled fiber. He noted that number could grow in the future.

“That’s been a long-term growing trend,” he said. “Consumers are demanding” recovered fiber, “and brand owners are absolutely expecting it.”

Stepps said Sonoco has been focusing on developing new, more sustainable packaging solutions in response to this growing trend. Some items that Sonoco considers with its packaging design is protecting products with moisture barriers, oxygen barriers to keep products fresh, security to ensure it’s tamper-proof, the ability to open and close the package easily as well as shelf presence.

Beckler added that some consumer packaged goods companies (CPGs) and packaging companies are even developing ways to use recovered paper as an alternative to plastic in packaging. He reported that Graphic Packaging and WestRock are using recovered paper for paper-based ring holders for beverages, and some companies are even testing paper-based beverage bottles.

Regarding paper-based bottles, he said, “This is a terrific example of brand owners and manufacturers pushing boundaries of fiber and formation technology. This illustrates the power of partnerships to solve really difficult challenges. In this case, bottle developments are bringing together paper companies, bottle makers and a group of powerful consumer packaged goods companies, including Diageo and Carlsberg.”

Additionally, some paper-based products, such as coffee cups, that have traditionally been tough to recycle are now starting to enter recycling streams, Beckler said.

“Groups such as the NextGen Consortium are leading a rethink of the coffee cup, backed by well-known brand owners,” he said. “Paper companies, coating developers and converters are developing advanced materials with recycling in mind.”

Smart packaging is another trend in the pipeline that could help to ensure recyclability of both paper and plastic packaging. Beckler said some packaging will likely contain invisible embedded codes in the near-term future that could enable automated scanning, classification and sortation of these materials in recycling operations. He referenced HolyGrail 2.0, which is a pilot project in Europe aimed at proving the viability of digital watermarking technologies for accurately sorting recyclables. Since launching the project, more than 85 companies and organizations from the packaging value chain have signed up to assess whether this technology can enable better sorting and higher quality recycling of packaging.

“This is a sign of how seriously the industry is taking this technology and this concept,” Beckler said, adding that the HolyGrail 2.0 pilot project is backed by both paper and plastic packaging companies from around the world.