For the past year, the fate of postconsumer paper and plastics exports has been uncertain.

Following China’s strict restrictions on scrap imports, the country could move to an all-out ban on recovered paper imports by 2020. In response to the shifting market, material recovery facility (MRF) operators in the U.S. have set their sights on new shores to ship America’s curbside collected recyclables, as temporary as those markets may be.

For the past two decades, the U.S. and many other parts of the world relied on China to consume their postconsumer paper and plastics. Exporters would “dress up” bales to pass inspections and they lived by the motto, “If we bale it, they will take it,” said David Lee, managing director at California-based Pacific Genesis Resources, who moderated the session Alternate Markets to China – India, Indonesia, Vietnam, Mexico, Latin America at Recycling Today’s Paper & Plastics Recycling Conference in Chicago in October.

This year, China shook the global market, and rightfully so as many exporters will admit, he said. The paper and plastic scrap that China rejected moved to nontraditional Southeast Asian markets, such as Vietnam, Thailand and Indonesia. It has even moved beyond Southeast Asia into India and Mexico. However, it didn’t take long—six months to be exact—for some countries in Southeast Asia to adopt bans on imported recyclables. Once again, millions of tons of scrap paper and plastic have been left without a home.

A grim outlook

During the session, panelists painted a grim picture of what paper recycling will look like if the industry doesn’t change its ways and address the persistent quality issues that led China to introduce the scrap import ban.

Lee said he has lived through decades of changes in the recycling industry, from trading with Southeast Asian countries before China was a factor to when MRFs made the transition from dual- to single-stream processing and the quality of U.S. recovered materials went from “good to bad.”

His partner’s company, Genesis Resource Enterprise Inc., Springfield, New Jersey, has been in business for almost four decades.

“We started out in Singapore and we were servicing Southeast Asian countries before China was even a market, so after the ban of mixed paper and 24 different commodities, it was an easy transition to fall back on because our specialty was the market outside of China before,” Lee said of Pacific Genesis Resources.

“We have lost a long-standing trust. We must ship quality shipments for the longevity of the industry.” – David Lee, managing director, Pacific Genesis Resources

He explained that other countries will “mirror” China’s restrictions. Some already have. Taiwan and Thailand are closing their doors to paper and plastic scrap imports. It all comes down to a matter of trust, he said.

“It only took six months for Vietnam, Malaysia and some of these other countries to raise the white flag and basically say no more,” Lee said. “We shipped the mixed paper, the plastics, all the rejected banned material; their ecological concerns were immediately raised when all these shipments landed at their ports.

“We have lost a long-standing trust,” he added. “We must ship quality shipments for the longevity of the industry.”

Limited markets south of the border …

In Mexico, scrap paper consumption is minuscule compared with the million tons China consumed every month. Latin America can consume about one-third of the excess material on the market, according to Rogelio Silva, the director for Latin America at Continental Paper Grading, headquartered in Chicago.

“Are there alternate markets in Mexico all the way down to Chile [and] Argentina?” Silva asked. “The answer is very simple: No, not as we know it. The paper industry has to rethink itself. It has to redesign all the processes. It has to get creative.”

Silva said small paper mills in Mexico are producing recycled pulp and exporting the material to China.

He said Mexico is “a very traditional country with a very traditional way of recycling” that is thinking “outside the box” so it can continue exporting recovered paper.

Paper mills in Latin America are expected to grow more than 2 percent per year until 2021. New mills are “popping up,” Silva said, and will be able to process 700,000 additional tons of scrap paper, but the demand is for “clean grades.”

Silva added, “If you are one of many who has grades coming from single stream, then it’s going to be hard to allocate those tons in Mexico or anywhere in Latin America.”

Photo by Austin Friedline with Phierce Photography

… And further east

As a recycled paper and pulp buyer for Hansol Paper, headquartered in Seoul, South Korea, Sung Soo Lee said the Korean market also was devastated by China’s scrap paper import restrictions.

“Since 2010, Korea had been exporting a lot of volume to China,” he said. After China enacted its ban, which also affected Korean companies’ ability to export scrap paper, Hansol Paper’s “Korean plant couldn’t hold the volume of residential recycling and commercial [paper],” available, Sung said. “We don’t have the volume to expand [storage] capacity,” either, he added.

Steve Sutta, president of Green Planet 21, Oakland, California, warned that the markets in China for paper and plastics scrap “aren’t coming back” unless there’s drastic change within the industry.

“Half of waste paper and plastic that was being generated in the world in the second half of 2017 went to China,” Sutta said. “You have 15 million tons a year, 1 million tons per month looking for a home. It will find homes as the stream gets cleaner.”

Thinking outside the bale

Mills in North America, Latin America, Japan and China are expanding capacity to consume more scrap paper.

The current market situation isn’t an economic problem, said Sutta, who has been involved in recycling since 1985; it’s about quality.

“Our options on the export side are manifold, but you’re going to be less likely to move dirty material,” he said. “You’ve got to push back upstream to your suppliers, the cities and the municipalities running single stream. We’ve got to clean it up.”

Over the next few years, the industry will shift its focus from shipping recovered paper bales to China to growing operations in the U.S. that can consume this material. As China’s labor and energy costs rise, the southeastern U.S. is positioned to be a “low-cost processor,” Sutta said, but Americans “are going to have to clean up their paper and plastics.

“There’s new capacity coming up in the U.S. that’s designed to utilize mixed paper,” he added. “I know of projects that are going to use significant amounts of mixed paper in the U.S. over the next two years. The Southeast is a viable option. Nonetheless, they’re not going to take rejects of 25 percent, which was being shipped to China in 2017.”

While Southeast Asian markets are enforcing new restrictions and regulations, Sutta said, other countries are expanding their capacity to consume the excess volume of scrap paper available because of China’s import ban.

Over the next few years, he said, it’s also not safe to count China in, or out of the market.

“It’s a moving target right now,” he said. “Everyone’s guessing. We’re going to see uncertainty. We’re going to see a continuous shift in the market over the next two years.”

Looking at a large world map, Lee asked whether Africa or India could be the next to dominate the global market for recovered paper.

One thing is certain: “We don’t have an ending to this story,” Lee said. “Today, I don’t think any of us has the answer. We’re living through a situation that’s happening and changing every day.”

The author is the web editor for the Recycling Today Media Group and can be contacted at kmaile@gie.net.

Restrictions on recovered paper imports into China made 2018 especially rough for some of those commodities. More specifically, mixed paper experienced much change in just the past 12 months. While export demand remained relatively the same from 2016 to 2017, export demand significantly declined from 2017 to 2018.

As a result, it’s likely that as much as 500,000 tons of mixed paper have been landfilled this year in the U.S. as of mid-October.

Bill Moore, president of Atlanta-based Moore & Associates, says reduced exports of mixed paper from the U.S. to China ultimately have led to the collapse of the mixed paper market. He adds that China has made it clear it won’t be changing its tune on mixed paper trading anytime soon.

So, what’s next?

“I was always on the bandwagon of we need to have more capacity in the U.S. to handle more mixed paper.” – Bill Moore, Moore & Associates

Moore thinks increased domestic use of mixed paper and additional exports to non-China countries will help alleviate some of these setbacks. Moore discussed his perspective during Recycling Today’s Paper & Plastics Recycling Conference (PPRC) at the Marriott Chicago Downtown Magnificent Mile Oct. 17-19 in the workshop Feeling China’s Fatigue – What’s Next, which included Dan Gee, a senior associate with Moore & Associates.

While some in the industry think China could import mixed paper again in the future, Moore said it’s far from certain and the U.S. needs to have a Plan B besides relying on China for its recovered paper.

“There is potential [things] will change,” he said. “Even some of the smart, top people in China are saying, ‘Well, this might not last.’ But long before this China thing, I was always on the bandwagon of we need to have more capacity in the U.S. to handle more mixed paper.”

Domestic activity

Photos by Austin Friedline with
Phierce Photography

China’s doors have closed on low-quality recovered fiber products, but Moore said he thinks domestic demand within the U.S. could be a solution to this problem. He added that the U.S. had become too reliant on exports in the last 15 years.

“With domestic demand, we can process the materials here and we won’t rely so much on exports,” he added. “That’s better for the collection system, and it’s better for the mill system, too.”

It’s also very much a possibility, as Moore said new domestic mill projects have been planned over the next 24 months that will consume about 1 million tons per year of mixed paper.

Moore listed a few companies that will have projects coming on board that will consume mixed paper. Pratt Industries, Conyers, Georgia, is constructing a new mill in Wapakoneta, Ohio, and Moore said most Pratt mills consume about 200,000 or more tons per year of mixed paper. “They are the largest user of mixed paper in the U.S.”

Photos by Austin Friedline with
Phierce Photography

Also, Wisconsin-based Green Bay Packaging announced it will be replacing its mill in Wisconsin and will be able to consume significant quantities of mixed paper. Similarly, Cascades, Kingsey Falls, Quebec, has plans to add a mixed paper system at its recently acquired White Birch Bear Island paper mill in Ashland, Virginia, and Mexico-based Bio Pappel has plans to install a mixed paper system at its McKinley Paper Co. mill in Port Angeles, Washington.

Hong Kong-based Nine Dragons also has announced it will make more than $300 million in investments in U.S. mills, which Moore said will only create additional demand for old corrugated containers (OCC) and mixed paper domestically.

Aside from the construction of the Pratt mill that has been planned for a while, Moore said, “the China situation” drove most of the other recent domestic investments in mixed paper.

“All those other projects were going to use OCC almost exclusively, then came the China mixed paper situation, pushing those folks to use mixed paper—Green Bay Packaging, Cascades, Bio Pappel,” he said. “And, of course, Nine Dragons wouldn’t have happened if it wasn’t for the restrictions. It’s a different story, but the same end result.

“I think some natural economics are going to push it back to domestic. Mixed paper prices are low, and the consensus of thought is that OCC is going to continue upward price movement. If you can substitute some mixed paper, especially mixed paper with a lot of corrugated boxes in it, that’s an economic[al] bale.”

Opportunities abroad

Moore said he also anticipates other countries have and will boost their imports of U.S. recovered paper in the next few years. He said containerboard projects in other parts of the world will help to consume U.S. mixed paper and OCC.

“With domestic demand, we can process the materials here and we won’t rely so much on exports.” – Bill Moore, Moore & Associates

“Just looking at the projects coming and containerboard projects around the world—many will consume mixed paper and OCC,” Moore said. “If you look at the projects and you project a little bit of where things are going with e-commerce and corrugated box business, you can come up with a replacement for the tons that were going to China.”

Moore estimated it will take up to four years to fully replace the tons that had been going to China, but he said the situation will likely improve steadily each year.

India is buying more today from the U.S.—the country has posted large increases in recovered fiber imports from the U.S. However, as Moore put it, “they’re no China in terms of size.

“It’s a different game than China,” Moore said of India. “The numbers are different. But India is catching up a bit, but [it’s] nowhere near China [levels]. Percentage increase is large, but the tonnage is small.”

Moore adds that he’s noticed more opportunities for recovered fiber from the U.S. East Coast to flow to European markets. He says several conversations on this topic were heard throughout Recycling Today’s PPRC, and he thinks it’s likely because of better pricing and increased demand in Europe.

“More European mill buyers have come to [the PPRC in] Chicago than we have ever seen,” he says. “They were there to buy. I saw it happening in 2018, and I think it will continue into 2019.”

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

A scary situation is occurring with residential mixed paper—about 2 million tons per year of this material in the United States need to find new homes since China placed restrictions on recovered paper imports. To add to the challenge, about 60 percent of mixed paper coming to U.S. material recovery facilities (MRFs) has no value.

Bill Moore, president of Atlanta-based Moore & Associates, said he thought the issues with residential mixed paper have been escalating for a while.

“Even before [the] China issues, mixed paper was a ragged grade,” Moore said during the Alternative Markets for Mixed Paper session at the 19th annual Paper & Plastics Recycling Conference, Oct. 17-19, in Chicago. “Things were not happy in the mixed paper market for 15 to 20 years.”

With the growth of single-stream recycling during the last decade, mixed paper quality has decreased significantly, making it a mounting concern regardless of China’s restrictions. However, Moore said, China’s restrictions ultimately collapsed the market.

With so much low-value residential mixed paper available in the U.S. and its main export market closing its doors, changes must be made. Material streams entering MRFs need to be cleaner, MRFs need to improve their processes to ensure a higher quality end product and new end markets need to be found. Moore said it will take years for the industry to return to stability with mixed paper, but he was optimistic that the industry will get to that point.

“Even before [the] China issues, mixed paper was a ragged grade. Things were not happy in the mixed paper market for 15 to 20 years.” – Bill Moore, Moore & Associates

“[Mixed paper is] a large source of fiber,” he said. “The situation will get better one year out, two years out.”

The Alternative Markets for Mixed Paper session also featured input from Susan Robinson, federal public affairs director at Houston-based Waste Management (WM), and Steve Miller, CEO of Bulk Handling Systems, Eugene, Oregon. Robinson offered her insights on how the mixed paper issues are affecting collection and processing, while Miller provided his insights on how the issues are affecting equipment and technology being used in MRFs.

The collection perspective

In recent years, Robinson said most residential mixed paper has come from single-stream recycling. She added that the cost of processing recyclables has gone up dramatically at WM facilities, while the value of material has decreased. “Mixed paper makes up 20 percent of the overall stream, and that value has gone down a lot,” she said.

Overall, residue has increased at MRFs. While most facilities were made to handle old newspaper (ONP), mixed paper, tin, aluminum, glass and plastic bottles, what’s flowed into single-stream recycling programs—yogurt cups, clamshells and plastic trays to name some items—has changed considerably.

About a decade ago, WM single-stream facilities had contamination rates of about 8 percent. Today, Robinson estimated that number has more than doubled. She said WM is not unique in its experience with increased contamination rates.

Infographics courtesy of Susan Robinson's presentation

“The magnified issue overall across the country is an increased amount of contamination in our recycling programs,” Robinson said. “You factor [contamination] in, and it really plays into that overall drop in the average value of a ton of recyclables.”

She said the industry has had conversations about facilities transitioning to dual-stream recycling to reduce contamination. However, Robinson said she doubts many facilities will shift in that direction because of the cost and labor-related issues associated with dual-stream collection in addition to the reduced convenience for residents.

She said she thinks a combination of education and improved technology is key to reducing contamination rates to improve market opportunities for mixed paper.

“The next year or two will be rough,” Robinson said. “The good news is markets for paper will improve—domestic demand is increasing. New equipment is being added to help clean up the stream. Success requires a lot of investment in quality. Education of our customers must be built into the cost of our programs so that we ensure we provide good quality product for the long run.”

The technology perspective

Mixed paper might be a tougher commodity to move profitably in the current market, but Miller said mixed paper sold for $87 per ton just last year.

Miller said he thought mixed paper still held value—it offers good fiber content for paper mills—but it’s not being captured because of contamination.

“Your customers understand mixed paper is terrific fiber,” he said. “[Mixed paper] has 45 percent fiber content, and [your customers] are taking advantage of that. There are ways to bring the returns back.”

To improve mixed paper quality, Miller said MRFs need to remove contamination by investing in technology. He said camera tools can be used to help MRFs determine various paper products by color to better sort them. “If you can do that, we can make products that are marketable, and you can capture more value,” he said. “With this technology, OCC (old corrugated containers) can be up to $91 per ton and mixed paper quality can be $70 per ton.”

Also, Miller said 2-D or 3-D separators can help MRFs reduce their need for additional labor while also improving the quality of their end products.

To improve mixed paper quality, Miller recommended companies invest in equipment and technology to reduce contamination. He reminded attendees that changes need to be made to increase end product quality if companies want to receive returns on their mixed paper bales.

“This is not the first transition the industry has been through, but it’s not the last,” Miller added. “A major customer for the industry closed its doors, and everyone’s scurrying to find replacements. In the meantime, you can take matters into your own hands and make investments to improve your process and make sure you capture value that’s inherent in material.”

The author is managing editor of Recycling Today and can be reached at msmalley@gie.net.

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.