Canadian Paper Recycling Grows

CPPA head cites improvments in demand.

Canadian demand for recovered fiber in 1994 was sharply higher than that in 1993. By far, market pulp registered the largest gain in shipments. The total at the end of the first three quarters of 1994 eclipsed 7.2 million metric tons, an increase of nearly 1.3 million or 23 percent relative to 1993.

In absolute terms, the improvement in other sectors of the forest products industry has been more modest: 186,000 metric tons each for newsprint and printing and writing grades, 289,000 metric tons for containerboard, and 47,000 metric tons for boxboard. Still, in terms of volume of product sold, 1994 was a record year, and the Canadian market should easily surpass the 28 million metric tons mark.

One of the reasons behind the positive results in 1994 was the significant increase in the number of metric tons shipped. It is the dramatic improvement in selling prices, however, that turned the tide.

Northern bleached softwood kraft market pulp was selling for $400 per metric ton at the end of 1993. At the end of last year, it was trading at $700 — with yet another increase of $50 announced for the first quarter of this year.

Newsprint ended 1993 marginally above pulp at $411; at the end of last year the transaction price was expected to reach $550 — a 34-percent improvement in one year.

Operating rates in the Canadian industry have risen markedly on a year-to-year basis. For many grades, the supply-demand balance is already quite tight.

Newsprint mills are operating at 95 percent of capacity, according to statistics from the Canadian Pulp and Paper Association. However, if an allowance is made for Gold River Newsprint, which has been idle for almost a year, the operating rate is closer to 97 percent. In the Canadian paper industry, this is considered full capacity.

In the printing and writing sector, the operating rate has averaged 90 percent during the first nine months of 1994. In the later months of the year, though, the rate was closer to 94 percent. For uncoated freesheet, the operating rate is near 96 percent.

Producers of paperboard are operating at full capacity, as they were for most of 1994. By comparison, during the first nine months of 1993, mills operated well below 90 percent capacity. The market pulp sector has been running at 96 percent, an increase from the 82 percent capacity last year. Overall, the Canadian paper and paperboard industry is functioning at 95 percent of its productive potential — encouraging figures, given that the industry is still in the early stages of this upturn.

OPERATIONS. Improved operating rates translate into demand for additional raw materials of various sorts, including recycled fibers.

Between 1974 and 1991, the consumption of recovered fiber at Canadian mills grew 5.3 percent annually — well ahead of the 3.5 percent increase posted by paper and paperboard production. In 1992, however, a substantial gain of 31 percent was recorded. In 1993, another huge gain of 25 percent was registered.

On a global basis, Canada ranks third in pulp, paper and paperboard capacity. Last year, total output was slightly more than 27 million metric tons. But about 80 percent of the end products were exported to customers in some 70 countries around the world. For some grades, the ratio is even higher. As an example, 90 percent of Canadian newsprint was shipped out of the country in 1993.

Thus, as the Canadian industry’s use of recovered paper continues to expand, imports will have to be at the heart of procurement programs.

Consumption generally hovered between 25 and 30 percent of the annual paper stock requirement prior to 1992. Over the last two years, the pace quickened to 37 percent, and then 43 percent. Moreover, based on data from the first nine months of 1994, Canadian mills are expected to increase their use of imports by about 300,000 metric tons during 1994. This would push the percentage above the 45 percent mark.

Furthermore, the 12-month total for Canadian paper stock consumption from all sources surpassed 3.9 million metric tons at the end of last year. This represents an increase of 13 percent — more than half-million additional metric tons.

In 1993, domestic sources of paper and paperboard accounted for 57 percent of Canadian consumption — about two million metric tons. Imports from the United States added another 1.5 million metric tons to the furnish, while 5,000 metric tons came from other countries.

Sales of recovered fiber to other nations have declined steadily over the last five years. In 1989, fiber exports from Canada totalled 313,000 metric tons; by 1993, they fell by 82,000 metric tons to 231,000 metric tons. During 1993, a marginal increase in shipments to American papermakers — from 110,000 to 115,000 metric tons — was more than offset by the reduction to other offshore destinations.

Broken out by individual commodity groups, old corrugated and old newspapers/old magazines account for both 75 percent of all recycled fiber consumed during 1994 and 75 percent of the year-to-year increase. According to estimates, ONP/OMG consumption topped 1.660 million metric tons during 1994 — an increase of 11 percent from 1993. Growth in OCC use will be even greater — regardless of whether measured in absolute or percentage terms: 190,000 metric tons and 18 percent, respectively.

Prior to the third quarter of 1992, corrugated was the largest paper stock grade consumed in Canada. However, demand had grown by 137 percent beginning in the third quarter of that year — translating into about 100,000 additional metric tons per quarter.

Responding to the changing economics associated with the use of this type of fiber, however, MacMillan Bloedel’s mill is moving to reduce their consumption of this material, replacing it with a mix of boxboard, old news and sorted office waste. Moreover, Matane is rumored to be considering a shift back to virgin fiber. Additionally, Domtar may be reconsidering its plan to retrofit a second fine paper mill at Windsor, Quebec to take in OCC.

For ONP/OMG, the meteoric rise in consumption was a consequence of recycled content legislation in the United States, as 28 states looked to introduce some type of statute.

This and other factors have prompted 18 Canadian newsprint mills to produce newsprint with a recycled content level in excess of 10 percent. Abitibi-Price, Alma, Que.; and Rainy River Forest Products, Kenora, Ont., will be added to the list this year. In addition, six other operations use ONP in as much as seven percent of their total furnish.