Paper Recycling Supplement - Supplying a Demand

In the years following the North American Free Trade Agreement (NAFTA), the most common form of cross-border investment involved American-owned companies establishing increased operations in Mexico.

But commercial opportunities created in the post-NAFTA environment have not been a one-way street.

Mexico’s Corporacion Durango (formerly Grupo Durango) purchased the McKinley Paper Co. in 1997, acquiring a containerboard mill in Prewitt, N.M., and a small network of recycling facilities. Additionally, Durango has also purchased box-making capacity in the United States, including a plant it owns in Mesquite, Texas.

Corporacion Durango, based in the Mexican city and state of Durango, has significant market share in that nation, with seven mills producing a variety of finished paper.

Throughout most of the post-McKinley buyout period, the U.S. recycling plants worked separately as part of Durango McKinley Paper Co. (with a focus on supplying the Prewitt, N.M., mill), while the FMT trading division would source secondary fiber from within North America to ship to Durango’s mills in Mexico.

Frank Sanchez, GM of fiber operations for the newly combined FMT and Durango McKinley Recycling divisions, says the Albuquerque, N.M., Phoenix and El Paso, Texas, recycling plants provide nearly 60 percent of the furnish needed for the Prewitt mill.

That mill, he notes, runs entirely on old corrugated containers (OCC) and needs about 20,000 tons per month.

Additionally, the U.S. recycling plants send fiber to four of the seven Durango mills in Mexico, according to Rogelio Silva, a procurement manager for the company. Two containerboard mills in Mexico (one in Monterrey and one in Durango) run entirely or predominantly on the OCC grade, while a mill in Veracruz produces printing and writing papers using a combination of old newspapers (ONP), sorted office paper, sorted white ledger and manifold white ledger. The fourth Mexican mill that accepts secondary fiber is in the Mexican state of Oaxaca and has two paper machines: a newsprint machine that is fed with ONP and rolls and a kraft grocery bag machine that accepts the DLK grade as part of its furnish.

With one very productive mill in the Western United States and four equally productive mills in Mexico, the fiber procurement specialists of Durango McKinley Paper Co. operate with a sense of dedication to keep the mills supplied.

The challenge for the traders and plant operators extends beyond acquiring adequate volume. As suppliers to a mill company, the recycling plants are reminded daily that the mills they serve expect clean loads with minimal contamination. Additionally, the Prewitt mill operates on a "just-in-time" inventory basis, meaning deliveries promised must be shipped on time.

"We need to be juggling different factors," says Silva. "In addition to the quality of the fiber and the timing needed to get it to the mills, there are also freight rates and the factor of cost. Our job is to get supply to the mills in sufficient volume, in a timely manner with the correct quality at the proper cost."

The good news for Corporacion Durango is that its staff members have been working hard to meet all of these objectives. Its Phoenix recycling plant is handling about 5,000 tons per month, with some 4,400 of those tons being OCC, according to plant manager Cliff Roberts.

In Albuquerque, two sorting lines help that plant ship about 4,000 tons of OCC per month to the nearby Prewitt mill, part of a total of 4,500 tons per month of secondary fiber and other recyclables handled at the plant, Plant Manager Martha Reyes says.

The newest Durango McKinley Recycling plant is in El Paso. "We started six years ago and in the first month handled only 700 tons of material," recalls Plant Manager Carlos Ruiz. "But we’re now handling 4,100 tons per month, with basically 90 percent of our production being OCC for Durango mills."

Obtaining adequate volume in Albuquerque is especially critical, says Sanchez. "This plant is basically the inventory depot for our Prewitt mill, because it is only about 90 minutes away," he says. "The recycling plant in Albuquerque has the capacity to hold up to 8,000 tons of OCC in storage."

The El Paso plant does not have automated sorting equipment, but its rich yield of cardboard comes in largely from clean industrial and commercial sources. The industrial sources along the U.S.-Mexico border are particularly valued, according to Procurement Manager Sofia Welsh, who says the long fibers help improve the pulping yield at the Prewitt mill.