The trend in the use of recovered paper by the world’s mills is quite clear; the usage will continue to increase. With this increased demand, the key factor will be the ability of the collection/supply community to source new tons that are competitive with the global fiber costs.
Moore & Associates' Fore$ightSM Price Forecasting for the major grades of recovered paper show an increasing importance of recovery cost on future prices of the various grades of recovered paper. No matter whose approach you use to measure recovery rate, one thing is obvious – every additional ton diverted from the waste stream will cost more to collect and process, both at the paper recycling processing facility and at the mill. The paper industry’s challenge will be to optimize collection, intermediate processing and stock preparation in order to provide a cost effective source of pulp.
Moore & Associates uses a Recovery Cost Index to represent the cost of collection and processing recovered paper. These costs include acquisition/maintenance of facilities and equipment (trucks, buildings, balers, etc.), labor, transportation of materials from point of generation to the processor, fiber cost, and general administrative expenses.
In developing the recovery cost impact for the Fore$ightSM models, Moore & Associates has constructed Recovery Cost Indices for the major bulk grades of recovered paper. The charts to the left show this relationship for OCC/Mixed Paper and ONP.
Beyond 80 percent recovery, the OCC/Mixed Paper recovery cost index rises even more rapidly and represents an uneconomical source of fiber. A similar (but higher cost) recovery cost curve exists for Office Papers.
In contrast to the recovery costs of the commercial grades of paper mentioned above, ONP has some economy of scale associated with collecting larger amounts of material. As can be seen in the ONP chart, Moore & Associates’ Recovery Cost Index for ONP increases somewhat linearly, up to approximately the 60 percent recovery level. It is reasonable to postulate that between 60-80 percent recovery, the cost per ton of ONP recovery will actually decrease. This is due to increase in efficiency of collection (e.g., residents putting out additional material and more households participating in a curbside recovery program). This will be the recovery scenario over the next five to ten years for ONP and curbside collection. Beyond 80 percent ONP recovery (our estimate of the practical national economic recovery level), the ONP recovery cost index escalates rapidly, similar to OCC.
As recovery levels of OCC continue to rise, the cost of collecting additional tonnage increases significantly because the additional supply is obtained from smaller generators. As can be seen from the ONP chart, increasing the recovery from 70-80 percent results in a $30 per ton increase in recovery costs as compared to a $10/ton cost increase from a recovery of 60-70 percent.
Moore & Associates’ sensitivity analysis of the OCC price forecast variables indicate the growing importance of recovery costs. When the trend price of OCC reaches its maximum economic level during the next decade, the cost to collect the last incremental ton is a major driver for OCC price. Market price and avoided disposal costs must overcome the recovery cost.
For mixed paper, the same Recovery Cost Index as OCC is used, but the major difference is that the US recovery rates for mixed paper are less than 25 percent (in contrast to OCC, which exceeds 70 percent). As can be seen from the Recovery Cost Index below, raising the Mixed Paper recovery rate as much as 20 percent results in only a $10/ton increase in recovery costs.
The easy-to-get (read “low-cost”) tons of all the major non-mixed grades have been recovered. It’s time to go back and fill in the gaps, increase the efficiency of the current collection systems to provide additional new tons.
One example of this is the use of routes to collect smaller quantities of office papers. All major office complexes producing large amounts of high quality free-sheet deinking grades have been tapped. Because small offices produce limited quantities of recovered paper, individual pickups are not economically feasible. However, putting together an organized approach and running routes to collect medium size quantity generators can effectively supply new quantities of material for the tissue and printing and writing sectors. Some of these mill furnishes may also come from collecting or sorting a deinking fraction from residential paper collections.
For the first time in a number of years there have been a series of recycle newsprint projects, primarily aimed at pulping changes (retiring the last of the stone-groundwood pulping in Canada, and also Cluster Rule impacts on bleaching systems in the U.S.). These new projects will create increased demand on a residential curbside and drop-off systems that, for the most part, are fully developed across the U.S. and Canada.
One good example of a state where residential recycling got an early start, received strong support, and is almost fully implemented, is Wisconsin. The chart on page S33 shows the current ONP supply available, recovery rate, and currently recovered ONP amount. The right side of the chart shows that there will be very little new tonnage that can be obtained from a state like Wisconsin because its residential recycling programs are mature. The only new tonnage available will be from improving existing programs and even that is not a large amount of material.
Where will the new tons come from? Most of the curbside recycling programs throughout the continent are not operating anywhere near the efficiency that they could, and the best new sources of old newspapers and old magazines involve improving the existing curbside recycling infrastructure. Local governments are not going to do this on their own. The newsprint mill companies need to get more directly involved in improving these collection programs. There are three objectives in this area: new tons, lower cost collection, and improved quality of the supply.
Although ONP is recovered at high levels throughout North America, OMG is not. Using Wisconsin, and considering the contrast of an ONP recovery rate of 76 percent, Moore & Associates estimates the OMG recovery level in this state is only 52 percent. In the United States, the industry has done a very good job of ONP collection with a current recovery rate exceeding 60 percent. National OMG recovery levels are only somewhat higher than mixed paper, at approximately 30 percent (with some states like Wisconsin well above the average). Many residential curbside recycling programs do not include magazines, and where they do, only a few obtain similar recovery levels for OMG as they do for ONP.
The increasing acceptance of #7 ONP (a mixed ONP/OMG pack), used by the flotation deinking newsprint mills, present an opportunity for local communities to more readily add OMG to their curbside collection. Adding a material like OMG is one thing, but promoting its addition and obtaining optimum recovery is another. The newsprint mills that desire greater quantities of coated mechanical grades of recovered paper (particularly post-consumer OMG) will need to play an active role in promoting this grade’s inclusion and recovery in residential recycling programs.
All of the large sources of OCC, including supermarkets, large manufacturing operations, and the major retail supply, are completely recovered. The options to collect smaller quantities of OCC are limited by the large number of sources and high collection costs. For the board products, particularly recycle paperboard mills (the containerboard sector has evolved to using OCC as a mainline source of pulp), other more innovative sources of fiber are necessary. The lowest cost and largest source available are both residential and commercial mixed papers. The challenge rests on both the collection side and stock preparation. The industry must develop residential collection systems that do not interfere with newsprint mills' needs for high quality ONP and OMG, and develop supply infrastructure for commercial mixed paper.
Residential mixed paper is a large quantity source of fiber that will need to be tapped for use in the world’s recycle paperboard mills. Certain fractions of this material (the bleached mechanical pulp and printing and writing papers) will also be used by the tissue and newsprint mill sectors. The key here will be removal of the unbleachables (paperboard and OCC) and maximizing the amount of high quality mechanical pulp grades (primarily ONP) that will be available for processing into newsprint. Stock preparation at paperboard mills will need to advance to be able to handle these more mixed paper streams, as the more pure OCC will be primarily consumed by linerboard mills.
Commercial mixed paper collection opens up many new opportunities for the OCC and office grades from generators that do not produce enough material to warrant separate collection of these grades. A high quality supply of bleached and unbleached chemical pulp fiber can be obtained from this type of commercial mixed paper collection.
The key is establishing collection routes that can economically deal with smaller quantities of material obtained from each generator stop. While this will be a challenge, it is far more economical than collecting smaller quantities of OCC and office paper separately from the generators.
Getting the next blocks of tons from existing programs is attractive – it will lower the overall costs of the entire collection network. This will involve efforts in the following categories:
· Improving the education to the supplier community, both residential and commercial
· Improved approach to collection vehicles
· Developing the next generation of intermediate processing facilities
· Enhancements in mill cleaning, screening, fractionation and deinking systems
These efforts will need to involve the players in the collection, intermediate processing and mill consumption side. Interest in the local government and solid waste haulers communities on further improvement in residential recycling programs has been limited. The mill community will need to step up to the plate and take on this challenge to continue to supply fiber of a quantity and quality that they will need for paper and paperboard production. Bill Moore.
The author is president of Moore & Associates.
Moore & Associates is a paper recycling consulting firm supplying market research and strategic analysis for the industry. William P. Moore of Moore & Associates can be reached at 8935 Ridgemont Drive, Atlanta, GA 30350, (770)518-1890 or (770)518-2779 (fax). Email MARecycle@aol.com