Seller's Market

The smaller-world syndrome brought about by globalization, which can certainly cause unwelcome change for businesses caught on the wrong side of a developing trend, has been credited as a major reason for recycling markets that have stayed vibrant, even as the U.S. paper and board industries are relatively flat.

SCRAP-FRIENDLY EUROPE. "Over the past decades, the paper industry has grown tremendously, especially in Europe; it has bypassed America," said Herbert Noichl of Austria’s Mayr-Meinhof Karton AG.

The growth of Europe’s paper and board production has been second to only Asia, Noichl said. He also predicted, "Rapid growth will move from Western to Eastern Europe."

Many of Europe’s paper mills use recovered fiber, which means that most of the 50 million tons of scrap paper collected last year stayed on the continent. Noichl said about 10 percent of Europe’s recovered fiber is exported, although "this percentage is growing," he noted.

Noichl foresees Europe’s recovery rate increasing from its current 60 percent up to a range of 64 percent to 67 percent in the next five years. "We will continue to be an exporter to the rest of the world," he predicted.

Much of that export tonnage is now heading to China, noted Wade Schuetzeberg, managing director of ACN (Europe), a Rotterdam brokerage that procures tonnage for the Nine Dragons mill complex in China.

Mills in China are now buying consistently from North America and Europe, rather than participating on a spot basis. The global trade between China and the rest of the world is "part of a wider trading loop that feeds into the recovered fiber market," remarked Schuetzeberg.

More papermaking capacity is being added in China, but "the highest growth rate, I believe, is behind us," Schuetzeberg said of China’s containerboard and boxboard segments.

But China’s new appetite for scrap paper has brought sustainable benefits, he added. "The outlook for paper recycling has never been better," said Schuetzeberg. "Trade has increased [and] so has pricing."

GLOBAL NATURE. Moderator Bill Moore of Moore & Associates, Atlanta, said the scrap paper market has truly become global, as price changes tend to occur quickly and globally.

The global nature of the industry is reflected not only by the speed with which information now travels from continent to continent, but also by the sheer size of the paper recycling industry as measured by the total global consumption of recovered fiber.

Information presented by Moore and assembled by Germany’s EU Consulting indicates that the total amount of recovered fiber consumed in 1970 was less than 40 million metric tons.

This figure increased to 50 million metric tons in 1980, and from there the growth has continued. By 1990, the world’s paper mills and other consumers were demanding some 80 million metric tons, a figure that had skyrocketed to more than 150 million metric tons 10 years later in 2000.

As China and other rapidly industrializing nations have emerged as consumers, the figure continues to grow. Projected consumption in 2006 stands at more than 190 million metric tons, according to EU Consulting, and that figure could grow to more than 220 million by the end of the decade.

A breakdown of the fiber consumption growth by global region during this span reveals the extent to which the North American market may have been the first to mature.

While tonnage consumed in North America grew impressively between 1970 and 2000, its annual tonnage figure has since stayed fairly flat.

Driving the growth this decade has been burgeoning demand in China and other parts of East Asia, as well as steady growth from Europe, where recovered fiber is gaining ground as a feedstock vs. wood chips.

As Europe is engaged in its ramping up of recovered fiber use at the same time that North American demand has stagnated, this has caused companies operating in Europe to devote more attention to research and development.

Moore said the European paper industry has become the "mill recycling technology leaders," while, "The U.S. paper industry is falling behind in maintaining its capital base, upgrading its technology [or] investing in research and development."

The rapid growth in recovered fiber use in Europe and Asia is not without its obstacles, Moore also noted.

Just as mill companies in North America have had to consistently preach quality to scrap paper suppliers domestically, European and Asian mills are finding it necessary to communicate that they do not want the increased tonnage to be accompanied by looser quality standards.

QUALITY COUNTS. Dealing in (and with) such a wide variety of languages can make terminology an issue in both Europe and Asia. Mill and recycling trade groups hope referring to a common code can cut down on some of the confusion.