EPRC: A Capacity to Cope

Papermaking capacity is undergoing some major changes globally, and is likely to do so because of wide-ranging social and global economic trends.

Three speakers at a session entitled “Paper Industry Trends” at the 2008 European Paper Recycling Conference pointed to a variety of factors affecting how much paper is being produced and where it is being made.

Graham Moore from the Leatherhead, U.K., office of Pira International said that electronic substitution will remain a factor in the demand for newsprint as well as office (printing and writing) papers.

“Newspaper survive because advertisers like them,” said Moore, who also cautioned that the electronic media is “increasing its share of the spend.”

Studies Moore has undertaken for Pira have convinced him that demographics do not favor the widespread, continued use of paper among young people who have “less of a propensity to read . . . printed words on a sheet, but more likely images on a screen.”

In Europe, tabloid-sized newspapers that are distributed free to commuters have helped keep newspaper readership relatively steady, but the overall trend in the developed world is toward smaller and fewer newspapers.

In the workplace, many office workers still read and conduct work in progress on paper, but information is more commonly distributed and stored electronically. Subsequent generations are likely to use even less paper.

Henri Vermeulen of Smurfit-Kappa and CEPI (the Confederation of European Paper Industries) noted that the paper industry and the recycling industry were “pushing very hard to reach the target” of a 66 percent paper recycling rate mandated by the European Union.

Nations such as Germany, the United Kingdom, the Netherlands and Norway have already reached the target, while Poland “has the most room for improvement,” according to Vermeulen.

Vermeulen expressed concern however, that “the quality is getting worse,” and in particular cited the presence of plastic and glass in materials that had been recovered through commingled collection. He would favor “separate collection for paper, metal, plastic and glass in all member states by 2015” as an outcome from a revised EU Waste Directive.

Per-Ove Nordstrom of the Stockholm office of McKinsey & Co. predicted a “wave of mergers” in the paper industry, in part because some companies are in “dire financial straits.” Should credit markets remain clogged, these companies will have little choice but to have their assets acquired.

Wider economic circumstances—such as a decrease in demand for containerboard after considerable new capacity has come online—could add further stress.

A chart produced by McKinsey showing debt loads and margins for paper companies revealed AbitibiBowater and Boise as companies with warning signs while China’s Lee & Man and Nine Dragons appear healthier. “We do see a changing corporate landscape,” said Nordstrom.

The 2008 European Paper Recycling Conference, hosted by the Recycling Today Media Group, took place at the Marriott Amsterdam Oct. 6-7.