Building to Scale

Electronic communication’s widespread growth has caused considerable challenges for paper makers in a number of market segments in the past eight years. This has led to some of the changes to Recycling Today’s list of the 20 Largest North American Scrap Paper Consumers between its 2004 debut and this year’s version.

In the newsprint sector, companies have been fighting to gain share in a shrinking market for most of the past eight years. The recession of the past several years then brought similar circumstances to other major paper sectors, including the printing and writing sector and the containerboard market.

A search of the word “bankruptcy” on the Recycling Today website yields an out-of-proportion number of news stories drawn from the paper industry, including bankruptcy filings pertaining to a number of companies on this list (or their predecessor companies).

While difficult industry conditions have caused some of the changes to the 2012 version of the list of the 20 Largest North American Scrap Paper Consumers, mergers and acquisitions (including the purchase of bankrupt assets) have been another source of change.

To see the full list of the 20 Largest Scrap Paper Consumers, click photo above.

The companies appearing on this list have not only withstood the challenges in the market, but in several cases they have increased their consumption of recovered fiber despite the difficulties.

There is no guarantee that “too big to fail” is a philosophy grounded in reality within the paper industry. Our list of the 20 Largest North American Scrap Paper Consumers, however, provides a snapshot of which companies have maintained their market presence through eight years of challenging circumstances.
 

The Departed
In the three years since the previous edition of the 20 Largest North American Scrap Paper Consumers list (January 2009), several once-prominent company names have disappeared from the list.

The Smurfit-Stone name has been at or near the top of all previous versions of this list, but its 2011 acquisition by RockTenn has brought that era to an end. The resulting company has become a powerhouse in the North American containerboard and recycling plant operations markets. (See “Constructing a Corrugated Giant,” in the March 2011 edition of Recycling Today.)

Another stalwart on previous lists was containerboard maker Temple Inland, Austin, Texas. Yet another industry merger has brought Temple Inland’s former assets into the fold of International Paper (IP), Memphis, Tenn.

For its part, International Paper was already the largest buyer of scrap paper tonnage in North America (or of tonnage consumed here) before that acquisition. “The strategic benefits of this combination are clear, and we are pleased to be able to move forward on terms that are financially attractive for both sets of shareholders,” IP Chairman and CEO John Faraci said in September 2011 when the merger agreement was reached.

Another change to the 2012 list brings about the disappearance of two familiar names: Abitibi and Bowater.

The two newsprint makers merged in 2007 and ranked fifth on the 2009 version of the list, consuming some 2 million tons of scrap paper annually.

But the size of the newly combined company was no protection from the perils of the newsprint market. Abitibi-Bowater spent part of 2009 and most of 2010 operating under bankruptcy protection, emerging from restructuring in December 2010. In October 2011, the company announced it was changing its operating name to Resolute Forest Products as of Nov. 7, 2011.

More recently, the company has made an offer to purchase Montreal-based Fibrek, No. 13 on our 2012 list. Resolute has extended the expiry date for its offer to acquire all the issued and outstanding common shares of Fibrek to Feb. 13. The extension is intended to allow the Canadian Competition Bureau to complete its review of the proposed acquisition following its request for supplementary information and for Quebec’s Bureau de Révision et Décision to hear Resolute’s application for an order to cease Fibrek’s shareholder rights plan.

Of the companies ranking on our 2012 list, Catalyst Paper, Richmond, British Columbia, is currently in bankruptcy protection, as is SP Newsprint, Greenwich, Conn.
 

Staying the Course
Although the 2012 version of the 20 Largest North American Scrap Paper Consumers list brings several changes, a number of companies on the list have maintained their presence despite the economic turbulence.

Diverse forest products company Georgia-Pacific, Atlanta, continues to consume large amounts of recovered fiber as feedstock for the containerboard and tissue products it makes.

Canadian paper maker Cascades (See the cover story “Naturally Green,” in the September 2011 edition of Recycling Today.), has expanded its product line and its commitment to the use of recovered fiber in the past eight years. As a result, the company has reached the No. 3 spot on the 2012 version of our list.

Sonoco Products Co., Hartsville, S.C., also has both broadened its range of business activities and remained committed to the use of recovered fiber during the past decade, allowing it to remain among the largest scrap paper consumers.

The American operations of Australia’s Pratt Industries have been another growth story in this sector. The containerboard maker has continued to turn scrap paper into corrugated packaging products at its mills in Conyers, Ga., and Staten Island, N.Y., while also adding a third mill in Shreveport, La. That mill’s grand opening ceremony, attended by Louisiana Gov. Bobby Jindal, took place in September of 2009. This new mill has contributed to Pratt’s higher position on our 2012 list, where it ranks ninth, up from No. 12 in 2009.

The tissue sector is not completely recession-proof, however. Product lines made for the “away from home” market (restaurants, hotels, office buildings, etc.), a common destination for recycled-content tissues and towels, have been negatively affected by the recession and the slow economic recovery.

Nonetheless, the tissue makers on the 20 Largest North American Scrap Paper Consumers list have largely kept their places from list to list, with the biggest challenge often being competing with overseas markets for available white grades of scrap paper.

Also remaining on the list in 2012 is insulation maker Greenfiber LLC, based in Charlotte, N.C. The company ranks No. 15 on this year’s list, showing growth relative to our 2009 list, where it ranked at No. 20.

Despite the considerable challenges of the past five years, paper recyclers can take heart in the fact that domestic markets for recovered paper remain robust. Along with aggressive buying from brokers representing overseas consumers, paper recyclers continue to enjoy healthy demand for the materials they collect and process.

The author is editorial director of Recycling Today and can be contacted at btaylor@gie.net. Managing Editor DeAnne Toto helped gather and compile information for this list.

NOT LISTED?
If you work for or know of a company that you suspect should be on this list but was not contacted (or did not respond), please let us know, and we will make sure to let our readers know. Managing Editor DeAnne Toto can be contacted via e-mail at dtoto@gie.net.