Concerned About Quality

This year’s Paper Recycling Conference & Trade Show, held June 26-28 in Atlanta, attracted roughly 550 attendees who heard presentations from some of the industry’s top executives.

Reflecting the growing importance of the show for paper recyclers, the American Forest & Paper Association (AF&PA) and the Paper Stock Industries Chapter of the Institute of Scrap Recycling Industries Inc. held meetings during the three-day program.

The hallmark of the annual Paper Recycling Conference & Exposition has been highly interesting and informative educational sessions. Many speakers this year addressed the effect of China’s demand on the market and quality issues related to single-stream collection programs and the document destruction industry.

AS THE WORLD TURNS. China’s demand for recovered fiber is among the top trends driving the global paper market, according to speakers on the keynote panel.

According to Bill Moore of Moore & Associates, who moderated the session titled "As the World Turns: Fiber Flow Dynamics," Asia (particularly China) is expected to lead the world in investment in additional recycling capacity through 2007, while North America is expected to lose capacity during the same time period.

Old corrugated containers and old newspapers (OCC and ONP)—and to some extent mixed paper—are the grades getting the most attention on the world stage. Demand in North America for OCC is declining because goods that require packaging aren’t being manufactured in that region, said Moore.

Panelist Ron Thiry of SCA North America commented that tighter supply, lower quality, consolidation among suppliers and consumers and the emergence of the document destruction industry will be key domestic factors that will continue to affect the global paper market in the near future.

Ming Chung Liu of Nine Dragons Paper Industries Co. echoed the rest of the panel’s opinion on China—that it will continue to be the largest importer of recovered paper through 2007 and that it will keep most of its own fiber in domestic mills.

Liu also mentioned Japan’s emergence as a "new player" in the world market as an exporter of recovered paper.

Panelists from the document destruction industry touched on paper consumers’ quality concerns during a session at the conference, stressing that their priorities lie first and foremost with the secure destruction of information; the market value of the shredded paper ranks a distant second.

TORN TO SHREDS. Nick Wildrick, co-founder of Shred First LLC, Spartanburg, S.C., urged those entering the secure document destruction field to think first of the value of the shredding service being offered and not of the tons of paper that can be recovered. "Everything we sell is about security," he said.

Wildrick presented a business model based on a "per container" charge that may seem low-yielding taken alone (both in dollars and in pounds of paper), but when multiplied by 1,000 bins presents a scenario for $900,000 in revenue before the value of the shredded scrap paper is even considered.

Chris Ockenfels, manager of the Document Destruction and Recycling Services (DDRS) subsidiary of City Carton Co., Iowa City, Iowa, also noted that the commodity-based model of the recycling industry does not always align with the service and security-based model of the document destruction industry.

Attendees at an educational session.

Confidential shredders have the additional responsibilities of facility security, employee background checking and chain of custody agreements for the documents they handle, Ockenfels noted.

Increasingly, shredding firms have to meet shredding particle size specifications that may even negatively affect the value of their scrap paper product. For security reasons they must often shred entire files—folders, paper clips and plastic report covers included—which can also negatively impact the value of their scrap paper.

As far as complaints from paper mills because of these practices and the potential downgrading of such material, Wildrick said flatly, "I don’t care." He noted that the first duty of a shredding firm is the protection and destruction of the information.

Robert Johnson, executive director of the National Association for Information Destruction (NAID), Phoenix, Ariz., urged recyclers who also offer shredding services to consider using NAID as a resource to help ensure that they follow best industry practices and stay in touch with key legislative issues affecting document destruction firms.

Attendees in the exhibit hall.

The growing effect of the document destruction industry was also addressed in a session titled "Solving the Procurement Puzzle."

PROCUREMENT PROVES PUZZLING. Speakers on the procurement panel offered their thoughts on the influence of the export market, contract buying, inventory strategies, logistics, consumption volatility and quality issues.

Ed Tucciarone of Smurfit-Stone Container Corp. moderated the session, which included presentations by Andrew Bell of Sonoco, Tom Cihlar of Caraustar Recovered Fiber Group, Colin Johnston of Abitibi-Consolidated and Marc Forman of Georgia-Pacific/Harmon Associates.

In his introductory comments, Tucciarone said that as more companies consolidate and acquire debt, their cash flows tighten, resulting in less material being held in inventory. He said this was true regardless of the grade.

In terms of OCC recovery, Tucciarone said that Western Europe leads the pack with an 86 percent rate, the United States follows with 76 percent and China reports a 52 percent to 61 percent rate, though the quality of the fiber is marginal.

When it comes to ONP, the gap is much narrower, with 30.8 percent going back to newsprint mills and 28 percent being exported, he said, again citing AF&PA figures.

With the growth of new mill capacity occurring in Western Europe and China, export of recovered fiber is expected to grow, he said, adding, "Mixed paper is the growth grade."

Ming Chung Liu of Nine Dragons

Tucciarone said that U.S. recovered fiber exports will need to grow from the current 14 million tons to 20 million tons in 2010 to satisfy world demand.

Mills are also becoming more concerned about the quality of the recovered fiber available. Tucciarone said that newsprint mills are worried about the glass contamination in fiber from single-stream collection programs. Also, Asian OCC is negatively impacting fiber yield for containerboard mills, while shredded paper is also exerting a negative influence at some mills.

Sonoco’s Bell talked about the degradation in the fiber supply, saying that Sonoco will pay more for higher-quality fiber and less for Asian-only OCC because of its shorter fibers.

To ensure a regular supply of material, Bell said Sonoco likes to contract half of its material, giving the company flexibility and taking mill downtime into account.

Bell also talked about how the relationship between the buyer and seller is key to success. "Building and maintaining relationships is very, very important."

Caraustar’s Cihlar also emphasized the need for quality fiber. "Quality is most important to our mills. Everything else is secondary," he said. "Buyers must be in sync with vendors on their quality expectations and must be consistent in holding to their standards."

He also said that consistency was the key to good mill buying because it leads to good quality and lower delivered costs.

Cihlar said several of Caraustar’s mills share fiber sources, which helps to provide consistent movement for its vendors. "A lot of our mills overlap in our buying efforts, and we have to be careful that we don’t compete against one another," he added.

Caraustar uses open market purchasing for most of its recovered fiber, Cihlar said, because the company does not consume major quantities of particular grades at most of its mills.

The company’s mills keep anywhere from two to 12 days on inventory on hand, he said. "Consistency of usage and supply allows us to have lower inventory at some mills," he added. "Some carry only two to five day inventories.

Harmon and Associates surveyed its suppliers, asking them to rank the most important aspects of fiber procurement, Forman said. Integrity, payments, customer service and relationships were the top four "givens," and price came in at number five.

Forman said that Harmon aims to be a "consistent home to our suppliers," and that the company prices itself competitively to get the tonnage it needs.

When it comes to the quality concerns surrounding shredded office paper, Forman said, "The issue is not shredding, the issue is sorting. We don’t need new specs for shredding. The industry doesn’t need to respond to shredding." He added that shredders needed to know the specs and to take more care when sorting.

Abitibi Consolidated’s Johnson said that the sorting line requires proper supervision and that it is critical to quality control.

Johnson said that centralized buying has worked well for the company, which employs four North American buyers, one Pan-Asian buyer and one buyer for outside sales. Abitibi shares tonnage among its mills and exports off shore if its tonnage is high, he added. "Mill consumption volatility is a given," he said. "Centralized buying helps in this case."

In addition to these educational sessions, attendees had to opportunity to sign up for a post-conference workshop titled "OCC Close Up: A Comprehensive Analysis of the Grade," which was presented by Bill Moore and Peter Engle of Moore & Associates. The program addressed supply and demand trends, export and import trends and pricing as well as procurement and quality issues.

The 2006 Paper Recycling Conference & Trade Show will be June 25-27 at the Hyatt Regency Chicago O’Hare.