Substitution problem

Features - Recovered Fiber Commodity Focus

Demand for tissue grades is improving, but supply is a concern, and more mills are turning to virgin pulp as an alternative.

March 12, 2021

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The COVID-19 pandemic and the lockdowns connected to it have had a big impact on the supply of and demand for recovered paper grades such as sorted office paper (SOP), sorted white ledger (SWL) and coated book stock (CBS). Offices are the primary generators of most of these grades, and many of them were closed or only partially open throughout most of 2020 and into 2021. Yet, demand for these grades also declined in the past year because they primarily are used in the away-from-home tissue market. That sector was adversely affected by the pandemic as restaurants, stadiums and other venues closed.

Although more businesses will opening in 2021 as vaccines roll out, sources say things haven’t normalized just yet. Things also vary by region, as some states are more locked down than others during the first quarter of 2021.

“In California, specifically the Bay Area, there are still lockdowns,” says Kari Talvola, president of Oakland, California-based Shred Works, a document destruction company. “A lot of companies are still working from home, which is throwing off generation. Some even announced permanent work-from-home [plans], especially in the tech industry.”

Cory Tomczyk, owner of Mosinee, Wisconsin-based IROW Shredding, a secure destruction firm, says he also has noticed that generation of tissue grades has declined in the past year mostly because many people are working from home.

“I’d say generation [in 2020] was down 15 percent or so from 2019,” he says. “More people are working electronically, away from home. If they are generating things, I don’t think it’s making it back to collection bins in the offices. [In the past year], there has been a downward trend on generation, and the pandemic has affected it to some degree.”

A mill operator based in the North says SOP generation typically is slower in the winter as well.

“January is always a tough month for SOP generation,” she says. “Then you add on top of that all the shutdowns of offices, schools and governments, so, January has been difficult for generation. But I’m optimistic that more will pick up probably in the next four to six weeks,” she says in late January.

For years, printing and writing paper demand also has been declining. Recent reports from the Washington-based American Forest & Paper Association (AF&PA) indicate that printing and writing paper shipments declined in the past year. In AF&PA’s January 2021 “Printing-Writing Monthly” report, the association says shipments declined 25 percent in January 2021 compared with January 2020. U.S. purchases of printing and writing papers also decreased in January 2021 by 22 percent compared with January 2020.

Pricing for tissue grades wasn’t great in the second half of 2020 following the spike at the onset of the pandemic, but prices have inched upward a bit since their decline last summer.

“In the last half of the year, [demand] was soft, and that was reflected in the pricing. But I can ship better at this point, and we’ve seen pricing come back,” Tomczyk says. “But there’s a looming fiber shortage” once away-from-home markets open, he adds.

Mill operators, as well, have expressed their concerns about potential supply shortages.

“Our mills right now have very high inventory of office paper, surprisingly,” one national mill operator says in mid- January. “We have excess material, which I’m surprised [by] with printing and writing papers declining significantly. Now, and throughout the year in 2020, I would say we have had very good inventories.

He continues, “But I think a lot of mills like us are concerned about the [future] supply of office paper.”

Away-from-home needs

Conditions are expected to improve for the away-from-home market this year as more people get vaccinated and more businesses, schools and government offices reopen. As a result, recyclers and mill operators alike think reopenings will prompt price increases for tissue grades such as SOP, CBS and SWL.

“There is limited generation currently, so, as consumer demands increase due to reopenings, pricing for recovered paper should go up,” Talvola says.

Yet tissue mill producers have stated that they aren’t sure the away-from-home market will return to prepandemic levels this year. Many anticipate minimal growth this year and suspect a supply shortage will become a bigger concern once away-from-home needs rise.

The national mill operator says he estimates that the away-from-home market “will probably come back from 2020 levels, but not to the 100 percent it was at before COVID. We feel that away-from-home will still be down significantly in 2021. Right now, the away-from-home market is still struggling because businesses, stadiums and restaurants are not opening or are on a reduced schedule.”

He adds, “There are so many questions, so it’s difficult to answer if away-from-home markets will surge. When vaccines come into play and confinement rules are lifted, will people go to malls and restaurants? Probably. And will that help away-from-home business? I would think so.”

The mill operator based in the North says she is hopeful the away-from-home market will come back in 2021 and will be meet by increased generation of SOP. However, she says, it’s hard to forecast anything with certainty. “If last year taught me anything, it’s to go month by month and deal with things as we go along.”

Export opportunities and headaches

Recyclers say steady demand exists in export markets for tissue grades, but the bigger challenge is securing shipping in the first quarter of 2021.

“With overall demand, I haven’t seen any curtails of requirements, especially for good-quality office pack and other grades,” Talvola says. “But the port situation is a nightmare. There has been a shift in how shipping lines are carrying cargo. Rather than load full, they are taking empty [containers] into China.”

“We’re scrambling for container space,” a recycler based in the Southeast adds. “You have to be nimble and you have to have a very fluid planning ability and also have a balance between domestic partnerships and export partnerships right now.”

Joe Passalacqua, a U.S.-based commodity manager for India-based Khanna Paper, says India has very healthy demand for tissue grades, but the biggest challenge is with shipping. “Vessels aren’t coming in,” he says of U.S. ports. “Piers are packed—truckers are waiting too long at the piers, which are overrun.”

Transportation concerns aside, Passalacqua says India’s appetite for tissue grades is “voracious” as of late January. “SOP and high grades, all the mills are asking for it,” he says, adding that it seems like India’s economy is opening up more since the pandemic started. “We’ll be making more copy paper as [Indian] schools might be going back.”

Pulp sub possibilities

The national mill operator says he has noticed the virgin pulp market is “starting to heat up” as more tissue mills choose to use hardwood or softwood pulp. He says, “Big shredding operations’ volumes are down ... and mills are using alternative grades in their recipes, using more virgin pulp. A lot of customers—big retailers, grocery chains—they want a certain amount of better quality, more brightness or whatever it might be. ... Large retailers have made grade changes and are planning for the future; they’re not ignorant of the secondary fiber business.”

The mill operator based in the North adds that she has seen pricing for hardwood pulp rise because that virgin material is in short supply. “Demand is still there and is going up. There is a general fiber shortage out there on both the softwood and hardwood pulp [sides]. I wouldn’t say there’s a shortage of deink, but when there is a shortage on softwood and hardwood, demand picks up for deinking materials.”

With demand rising among tissue mills for virgin pulp, recyclers say mills could consume more deinking grades and pulp substitutes.

“There have been some in the away-from-home market that have gotten smart and are producing at-home products with small recycled-content levels using pulp subs—things that are brighter and yield more,” the recycler based in the Southeast says. “There is so much virgin tissue starting to be made for the at-home market, so nimble tissue manufacturers are starting to buy more pulp for that purpose.”

The author is the managing editor of Recycling Today and can be reached at