A Difficult Endeavor

A mixture of consumer trends and economic conditions are continuing to make the recovered fibre recycling segment a difficult one to navigate.

With the books closed on 2011, the Altpapier division of Germany’s BVSE (Bundesverband Sekundärrohstoffe und Entsorgung) was willing to declare a “difficult waste paper market” for 2011. “The recovered paper market proved, especially in the second half of 2011, as quite difficult,” notes a recent report from the German secondary commodities association.

In reviewing the first quarter of 2012, however, the BVSE found a few causes for optimism. “The month of March was marked by a consistently strong demand for waste paper,” notes the BVSE in a 30 March 2012 news release. “Many paper mills ordered at high volume levels [and] built [their inventories],” the groups reports.

Recovered fibre purchases from neighboring eastern European countries — notably Poland — also absorbed large quantities of recovered fibre from the German market, according to BVSE.

The Asian market did not play a large role in the German market in March, according to the BVSE. “Scrap paper from orders from overseas remained relatively subdued in March,” the group writes in its late March report.

Speaking to U.S.-based paper recyclers who attended the Institute of Scrap Recycling Industries Inc. (ISRI) Convention in April 2012, Recycling Today reporters learned that Asian mills remain a significant factor in the North American market.

Despite the slowing Chinese economy, several U.S.-based exporters say Chinese mills are still interested in buying steadily, especially old corrugated containers (OCC), although they are not willing to bid up prices. “China has been adamant about pushing prices down,” one Pacific Coast exporter comments. “They can’t get the price increase they want for the finished product, so they are trying to keep their margins.”

Office and printer grades do not seem to be enjoying strengthening demand or higher prices. Deinking grades, coated book stock and ledger grades are struggling in North America because of reduced buying from a number of larger tissue mills in Mexico. That country has been a key end market for many deinking grades. Recently, however, Mexican mills do not seem interested in increasing orders for deinking grades in light of softer orders for their finished products.

In its review of the previous 12 months, the BVSE reports that recovered paper consumption in the German paper industry in 2011 amounted to 16 million tonnes, a figure that is 1.5% less than in 2010. The production of paper and paperboard declined similarly, to a level of 22.7 million tonnes produced in 2011.

Among factors influencing the German market throughout 2011 were reduced demand from German mills during the summer as well as “subdued paper orders” from the East Asia, BVSE said. The lackluster demand from East Asia extended into early 2012, BVSE says.

Collection in Germany remains strong, says the group. While German winters can cause downturns in collection, January 2012 presented “relatively unproblematic wintry road conditions” says the BVSE, with recovered fibre collection volumes at “seasonally slightly elevated amounts.”
 

While fibre collection has remained consistent, figuring out the mill demand side in 2011 and 2012 has proven to be part of the difficulty. “The demand side was inconsistent [in 2011],” reports BVSE.

Brown grades received some large orders heading into the Christmas holidays period of 2011, but these orders were not as long-term or sustained as hoped.

In a presentation at the ISRI Convention, Ken Waghorne, vice president, global packaging, with U.S.-based consulting firm RISI, referred to the tissue and packaging sectors as “the star performers for the global paper industry.”

In Europe from 2011 to 2013, Waghorne noted, RISI predicts that while newsprint production will shrink by 5% during that timeframe and printing and writing paper production will be flat, the prospects are different for tissue and board products. In that three year-span RISI foresees 7% growth in tissue production, 7% growth in containerboard production and 5% growth in the production of other types of board, wrapping and specialty paper.

Those growth rates are dwarfed by predictions for output in Asia, where in that same three-year span RISI predicts growth rates of 13% for tissue, 12% for containerboard, 10% for printing and writing papers, 9% growth in the other board, wrapping and specialty paper category and even modest growth (4%) for newsprint.