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With China’s demand for scrap paper waning, North American paper producers appear ready to pick up some of the slack.

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December 6, 2018
Brian Taylor

Paper mills in North America have been investing to consume recovered fiber for several decades, though the industry’s commitment to scrap paper can get lost among two wider circumstances: the decline of newsprint and graphic paper production and the rise of China as a large-scale buyer of North America’s fiber.

Industry outsiders may associate paper recycling with the newspapers they have placed in curbside bins for many years (or, in many cases, formerly placed in such bins). These outsiders may be far less aware of the roles of containerboard mills and old corrugated containers (OCC) in the paper recycling chain.

Even people working in the recycling sector may have started to think of scrap paper in terms of export markets in the previous decade or so as mills in China ramped up their purchases of North American OCC and mixed paper grades.

Throughout the decline of newspapers and the buying spree of Chinese mills, mill buyers in the United States, Canada and Mexico have continued to purchase and consume scrap paper in significant amounts.

Change is in the supply chain

Since Recycling Today last attempted to list the largest consumers of recovered fiber in 2012, some paper mill firms have been acquired or disappeared from the list. Others have held steady or grown.

On the newsprint and graphic papers side, Resolute Forest Products, Montreal, has experienced reduced demand for its newsprint, though it still ranks on our list. The former SP Newsprint has seen its assets absorbed by other companies after bankruptcy proceedings, while White Birch Paper, Greenwich, Connecticut, operates mills using predominantly forest resources.

Boise Inc., Catalyst Paper and NewPage Corp.—each of which made the list in 2012—have either changed their fiber mix or seen their assets retired or absorbed after ownership changes.

The same two trends that have roiled the scrap paper markets in the past 10 years—the decline of print media and China’s recent import restrictions—have spurred reactions by papermakers responding to those trends.

Several paper machines and mills in North America have been retrofitted since 2012 to produce finished packaging grades of paper, converting from prior production centers for newsprint or printing and writing papers.

A trend in response to China’s scrap import scrutiny has involved the conversion of several mill stock prep systems in North America to be able to accept mixed paper, a grade upon which the Chinese government has put the most thorough restrictions.

On the mill or paper machine conversion side, Memphis, Tennessee-based International Paper (ranked third on our list) is spending an estimated $300 million to convert a paper machine that formerly made uncoated freesheet (copying machine and printer) paper to linerboard and containerboard. The project at its mill near Selma, Alabama, is scheduled for completion in mid-2019.

Ohio-based Verso Corp. (not currently ranked in our 20 largest consumers list) completed a paper machine conversion from printing and writing paper to linerboard at its mill in Jay, Maine, in 2018.

Regarding stock prep systems adjusted to accept mixed paper, Atlanta-based Georgia-Pacific (ranked second on our list) is among the companies deploying technology to use more mixed paper. In Mexico, Copamex (ranked 16th on our list) is working with technology provider Voith to install a system that will allow it to accept mixed paper.

(For a more comprehensive look at these investments, see the article “Moving the pieces” in the October 2018 issue of Recycling Today, available at www.RecyclingToday.com/article/recovered-paper-markets-in-flux.)

Mixed outlook for mixed paper

The investments by papermakers in packaging lines and stock prep systems have offered encouragement to paper recyclers in 2018 that new homes are becoming available for the recovered fiber they collect.

The year did not start out that way, particularly for operators of material recovery facilities (MRFs) that produce steady volumes of baled mixed paper. That grade has long been exported, and primarily to China.

The good news for paper recyclers is that even during the peak scrap paper export years, North American producers of containerboard and packaging grades have remained steady buyers of scrap paper. Also, the North American economy has been on a steady growth curve for nearly 10 years, providing ongoing demand for finished packaging.

Entering late 2018, the mill capacity rates calculated by the Washington-based American Forest & Paper Association (AF&PA) help demonstrate the health of the paperboard packaging sector in the U.S.

In September 2018, containerboard production in the U.S. was up 4.9 percent compared with September 2017, according to AF&PA. That helped boost the year-to-date growth rate to 2 percent. The containerboard operating rate was at 98.8 percent of capacity in September, 3.4 percentage points higher than in September 2017.

However, the boxboard sector in the U.S. experienced reduced output in the third quarter of 2018.

An AF&PA white paper, completed earlier in 2018 in partnership with the Massachusetts Institute of Technology (MIT), posits that provided these and other paper industry sectors sustain healthy volumes of output, collected scrap paper will find a consuming destination. The study’s authors warn that the mixed paper grade could remain problematic for the foreseeable future.

Among the report’s conclusions is that “containerboard, paperboard and the [away from home] tissue sectors could [create] opportunities in some regions for increased domestic [consumption] of mixed paper.” However, the authors add, “The current capacity of [consuming] mixed paper is not enough to handle all the mixed paper that has become available.”

Also, the report states, “Improving the quality of mixed paper recovery and residential recovery at their source would increase the opportunities for use of this material.”

Such measures could involve “improving MRF technical capability to [produce] higher quality recovered fiber” that can be met with “additional domestic demand” as well as attracting strong Chinese demand for U.S. recovered fiber.

The white paper’s researchers conclude that “should China stop all recovered fiber imports from the U.S. [as it might do as soon as 2021], the current paper recovery system would generate 9.1 million short tons of recovered paper that could not be domestically consumed.”

Paper recyclers and MRF operators are by no means taking their end markets for granted now that China’s government has changed the rules, but the problems created by the sudden change are showing signs of dissipating.

The author is senior editor of Recycling Today and can be contacted via email at btaylor@gie.net.