A Decade of Change

A Decade of Change

Attendees of the recent Paper Roundtable focused on pressing regulatory concerns facing the paper industry as it enters a decade of change and challenges.

William A. Nielsen, chairman of the Paper Stock Institute, and president of Nielsen & Nielsen, Pomona, California, moderated the afternoon program. Nielsen pointed out that while scrap paper markets were listless at midyear, the past 14 quarters generally were "very good" for mills, packers, and brokers. He also spoke of the challenges ahead--especially in the legislative arena--and termed the 1990s "a decade of change" for the industry. In keeping with that theme, most of the speakers focused on domestic and social forces affecting the paper industry.

Scrap Paper Is Not Waste

As the leadoff speaker, George B. Elder, public affairs manager, Southeast Paper Manufacturing Co., Marietta, Georgia, set the tone by highlighting some areas of concern for the industry. Elder stressed that there exists considerable confusion in the public sector over the difference between recycling and the disposal of solid waste. Use of the term "waste paper," in particular, he noted, perpetuates this lack of distinction. According to Elder, the industry “seems to be obsessed with using a term that is working to its detriment at the federal, state, and local levels." He said that the scrap paper industry must emphasize the fact that its products are made from recovered materials--not from solid waste. If the industry is subjected to regulations as a solid waste business, Elder warned, it would be a "clear and present danger to the dealer/processor network." Even companies with the word "waste" in their names should seriously consider a name change, he advised.

Elder also observed that attempts by governments to get involved in so-called recycling could produce unintended outcomes detrimental to the industry. Efforts to mandate the use of "postconsumer" material, for example, could actually displace certain "preconsumer" materials, he pointed out, thereby sending the latter resource to landfills.

Looking closer at the newsprint industry, Elder noted that the domestic newsprint industry currently recycles 37 percent of its old newspaper (ONP), adding that demand projections are expected to push the ONP recycling rate to 50-55 percent by 1995. He foresees that by 2000, newsprint manufacturers will consume more than 40-percent ONP as furnish. He also predicted that, as a result of announced newsprint mill expansions, the ONP market will gain strength--possibly in early 1991.

EPA Procurement Guidelines

Richard Braddock, of the Environmental Protection Agency, Washington, D.C., presented a detailed outline of EPA's procurement program and reviewed the statutory requirements set forth by the Resource Conservation and Recovery Act (RCRA).

Of special interest to attendees were the definitions covering mill broke, manufacturing waste, and postconsumer waste. According to Braddock, EPA defines mill broke as any paper waste generated in a paper mill prior to completion of the papermaking process that is usually returned directly to the pulping process and is excluded from the definition of "recovered materials." "Manufacturing waste" is defined as dry paper and paperboard waste generated after completion of the papermaking process as well as other paper and paperboard waste resulting from printing, cutting, forming, and other concertina operations; bag, box, and carton manufacturing wastes; butt rolls, mill wrappers, and rejected unused stock; and finished paper and paperboard from obsolete inventories of paper and paperboard manufacturers, merchants, wholesalers, dealers, printers, converters, or others. In comparison, “postconsumer waste” is defined by EPA as paper, paperboard, and fibrous waste from retail stores, office buildings, and homes after it has passed through its end use as a consumer item.

Following a brief review of states that currently have legislation favoring purchases of recycled products, Braddock noted that EPA has set up a procurement guideline hotline (703/941-4452) that could help in answering questions.

Working Toward Legislative Understanding

Jerry L. Hayes, manager of environmental affairs, Sonoco Products Company, Hartsville, South Carolina, emphasized in his address that the paper industry is misunderstood in the legislative and public arenas. Consequently, he said, legislation often is written without the full benefit of understanding the industry's operations, and therefore can "be devastating." Legislative effects on the industry are further complicated by the issue of exactly what constitutes pre- and postconsumer material, he said.

Of the 2,200 solid waste bills introduced at the state level this year, between 600 and 800 were paper-related, Hayes said. Unfortunately, he observed, these bills have no uniformity in paper recycling definitions. Therefore, he said, industry leaders must play an active role in the development of legislation at the state and local levels. "If we don't get aggressive, [public policy] will pass us by," he warned, "and we'll be required to implement programs that are unworkable, unmanageable, and uneconomical to our businesses."

Hayes also noted that, over the next five years, most of the growth in paper recovery will come from postconsumer feedstock--accounting for as much as 75 percent of all that is recovered. Given these facts, he questioned the practical significance of making post- and preconsumer distinctions in government procurement preferences.

A View From Canada

Perhaps the most popular talk of the roundtable was delivered by Richard W. Loyst, general manager, recycling division, Kruger Inc., Montreal. Kruger has nine operating mills worldwide and is said to be the world's third largest newsprint manufacturer, producing approximately 1.4 million metric tons annually.

In describing his company's position on consuming secondary fiber in newsprint, linerboard, and tissue, Loyst explained that Canadian mills may be in the wrong place for manufacturing newsprint from recycled fiber instead of wood pulp. According to Loyst, a modem deinking facility designed to handle 70 percent ONP and 30 percent coated groundwood scrap stock requires a $40-million investment (Canadian dollars), for a daily per-ton cost of $250,000. Given these parameters, he questioned the Canadian newsprint industry's ability to invest while holding market share.

Loyst observed that when it comes to recycling, the pulp and paper industries ought to be criticized for their "poor job in keeping the public informed of their recycling progress and success stories." As a result, he pointed out, the word "recycling" is being used by everyone today, “99 percent of the time incorrectly.”

Loyst also noted that because ONP is regarded as a recycling target by environmentalists, the marketplace has quickly shifted from one that was originally "market driven" to a "supply-push situation." "Somehow," advised Loyst, "the industry must get back into the supply position it deserves and has earned."

Far East Review

Don Rogers, vice president of marketing, Allen Co., Baldwin Park, California, noted that of all the countries importing scrap paper, "three of the five largest consumers are located in the Far East." According to Rogers, Japan--which consumes an average of 50,000 tons of scrap paper per month--is consistent in its consumption rates and regularly imports various grades of both high and brown grades. However, he noted, reductions in Japanese imports of coated book stock has depressed the West Coast market. With respect to quality standards, Rogers stated that Japan expects "near perfection" and its requirements “are without a doubt the toughest in the world.”

South Korea, which consumed approximately 108,000 tons of scrap paper per month through the first four months of 1990, is likely to experience import stability through the balance of 1990, according to Rogers. Mill inventories are normal to low, he said, and the country's general economy is growing at a 4- to 5-percent annual rate. Declining freight rates may offer an additional incentive for exporters to South Korea, he noted.

China continues to be a questions mark, observed Rogers, characterizing the current level of demand as "sporadic at best." China currently purchases blocks of corrugated, ONP, and some deinking and high grades, he reported.

Taiwan is the second largest importer in the Far East, said Rogers, at some 100,000 tons per month--the majority of which is corrugated (50,000 tons) and ONP (20,000 tons). Taiwan also is an active importer of several deinking grades. However, he observed, in contrast to other Far Eastern buyers, exports in Taiwan have been off in 1990, "down 5 to 7 percent, with a 20-percent drop in corrugated imports."

Rogers also touched on paper recycling in the Philippines, India, Thailand, and Indonesia, classifying Indonesia as "the Fort Howard of the East" because of the country's wide variety of readily acceptable grades.

A Look at Europe

Stephen J. Vento, vice president of sales, Durbin Paper Stock Co. Inc., Miami, spoke about market conditions throughout Europe and offered a view of near-term trends and expectations. In terms of business conditions, observed Vento, "Europe has been a mirror image of what we have been experiencing in the United States and throughout the rest of the world since the beginning of 1990." He termed the past three to four years as “excellent," but felt, at the same time, that the "bottom has fallen out from under us." He predicted the fourth quarter of 1990 will be "unexciting," but, after the first quarter of 1991, "we should start to see some light at the end of the tunnel."

Vento highlighted several reasons for the decline in the paper industry: a slower domestic economy that is now being repeated in Europe and the rest of the world; severe price decreases in virgin pulp as a result of overproduction and rising inventories; shipping problems caused by the lack of export containers and exacerbated by rising ocean freight rates; and an increase in secondary fiber recovery within Europe, which has lessened dependence on the U.S. market.

Vento detailed scrap paper markets in Sweden, the Netherlands, Belgium, West Germany, France, the United Kingdom, Italy, Spain, and the Eastern Bloc countries. Although he was generally positive about potential continued growth, especially in Eastern Europe, he expressed concern over business conditions m the United Kingdom, Italy, and Spain.

South American and Mexican Markets

Following a quick review of the principal South American importing countries, including Venezuela, Brazil, Colombia, and Argentina, Kevin Preblud, vice president, Les Mendelson and Associates, Los Angeles, focused the balance of his presentation on the Mexican marketplace.

Mexico is the third largest market for scrap paper, trailing only Korea and Taiwan, stated Preblud. Last year, he noted, shipments to Mexico totalled more than 1 million metric tons, and this year, he estimated shipments should be at or somewhat less dm last year's. Preblud predicted the fourth quarter will be "comfortable," with little price change expected.

In describing the Mexican pulp and paper business, Preblud reported that most Mexican mills run fairly steady at around 80-percent capacity. At the same time, however, because of tax considerations and mill inventory practices, shipments from the United States, and, therefore, prices, have proved to be erratic in 1990, he added.

Preblud also reviewed key industry trends that could have an impact on Mexican consumption, quality, and buying habits. As the Mexican market opens up, he said, mills likely WM be setting up buying offices in the United States, thereby allowing Mexican paper mills to rely less on domestic supplies.

Packaging and Recycling

As a change of pace to the day's program, Norman F. Nieder, group director in the packaging technology department, Anheuser-Busch Inc., St. Louis, provided interesting insights into how Anheuser-Busch looks at its packaging requirements. Nieder noted that Anheuser-Busch is the world's largest brewer, holding a 43-percent share of the American beer market, and spent $2.4 billion on packaging materials last year.

He credited some of his company's success in recycling all aluminum beverage cans to Container Recovery Corp (CRC), Anheuser-Busch's recycling subsidiary. Last year alone, CRC recycled approximately 375 million pounds of used beverage containers, making it “one of the nation's largest recyclers of aluminum," said Nieder.

Anheuser-Busch is using much less corrugated packaging than it did 20 years ago, Nieder noted, crediting this to the "superior quality of corrugated materials" and "more durable beverage containers that require less protection" during shipping. Unfortunately, however, he conceded, bottle and canning lines are running at such fast speeds that the use of hot melt glues is necessary for certain packaging applications, but the glues are contaminants that inhibit recycling of these containers. He reported that Anheuser-Busch is working on folded "lock containers" that would reduce the use of hot polyethylene glues.

A Decade of Change

Attendees of the recent Paper Roundtable focused on pressing regulatory concerns facing the paper industry as it enters a decade of change and challenges.

William A. Nielsen, chairman of the Paper Stock Institute, and president of Nielsen & Nielsen, Pomona, California, moderated the afternoon program. Nielsen pointed out that while scrap paper markets were listless at midyear, the past 14 quarters generally were "very good" for mills, packers, and brokers. He also spoke of the challenges ahead--especially in the legislative arena--and termed the 1990s "a decade of change" for the industry. In keeping with that theme, most of the speakers focused on domestic and social forces affecting the paper industry.

Scrap Paper Is Not Waste

As the leadoff speaker, George B. Elder, public affairs manager, Southeast Paper Manufacturing Co., Marietta, Georgia, set the tone by highlighting some areas of concern for the industry. Elder stressed that there exists considerable confusion in the public sector over the difference between recycling and the disposal of solid waste. Use of the term "waste paper," in particular, he noted, perpetuates this lack of distinction. According to Elder, the industry “seems to be obsessed with using a term that is working to its detriment at the federal, state, and local levels." He said that the scrap paper industry must emphasize the fact that its products are made from recovered materials--not from solid waste. If the industry is subjected to regulations as a solid waste business, Elder warned, it would be a "clear and present danger to the dealer/processor network." Even companies with the word "waste" in their names should seriously consider a name change, he advised.

Elder also observed that attempts by governments to get involved in so-called recycling could produce unintended outcomes detrimental to the industry. Efforts to mandate the use of "postconsumer" material, for example, could actually displace certain "preconsumer" materials, he pointed out, thereby sending the latter resource to landfills.

Looking closer at the newsprint industry, Elder noted that the domestic newsprint industry currently recycles 37 percent of its old newspaper (ONP), adding that demand projections are expected to push the ONP recycling rate to 50-55 percent by 1995. He foresees that by 2000, newsprint manufacturers will consume more than 40-percent ONP as furnish. He also predicted that, as a result of announced newsprint mill expansions, the ONP market will gain strength--possibly in early 1991.

EPA Procurement Guidelines

Richard Braddock, of the Environmental Protection Agency, Washington, D.C., presented a detailed outline of EPA's procurement program and reviewed the statutory requirements set forth by the Resource Conservation and Recovery Act (RCRA).

Of special interest to attendees were the definitions covering mill broke, manufacturing waste, and postconsumer waste. According to Braddock, EPA defines mill broke as any paper waste generated in a paper mill prior to completion of the papermaking process that is usually returned directly to the pulping process and is excluded from the definition of "recovered materials." "Manufacturing waste" is defined as dry paper and paperboard waste generated after completion of the papermaking process as well as other paper and paperboard waste resulting from printing, cutting, forming, and other concertina operations; bag, box, and carton manufacturing wastes; butt rolls, mill wrappers, and rejected unused stock; and finished paper and paperboard from obsolete inventories of paper and paperboard manufacturers, merchants, wholesalers, dealers, printers, converters, or others. In comparison, “postconsumer waste” is defined by EPA as paper, paperboard, and fibrous waste from retail stores, office buildings, and homes after it has passed through its end use as a consumer item.

Following a brief review of states that currently have legislation favoring purchases of recycled products, Braddock noted that EPA has set up a procurement guideline hotline (703/941-4452) that could help in answering questions.

Working Toward Legislative Understanding

Jerry L. Hayes, manager of environmental affairs, Sonoco Products Company, Hartsville, South Carolina, emphasized in his address that the paper industry is misunderstood in the legislative and public arenas. Consequently, he said, legislation often is written without the full benefit of understanding the industry's operations, and therefore can "be devastating." Legislative effects on the industry are further complicated by the issue of exactly what constitutes pre- and postconsumer material, he said.

Of the 2,200 solid waste bills introduced at the state level this year, between 600 and 800 were paper-related, Hayes said. Unfortunately, he observed, these bills have no uniformity in paper recycling definitions. Therefore, he said, industry leaders must play an active role in the development of legislation at the state and local levels. "If we don't get aggressive, [public policy] will pass us by," he warned, "and we'll be required to implement programs that are unworkable, unmanageable, and uneconomical to our businesses."

Hayes also noted that, over the next five years, most of the growth in paper recovery will come from postconsumer feedstock--accounting for as much as 75 percent of all that is recovered. Given these facts, he questioned the practical significance of making post- and preconsumer distinctions in government procurement preferences.

A View From Canada

Perhaps the most popular talk of the roundtable was delivered by Richard W. Loyst, general manager, recycling division, Kruger Inc., Montreal. Kruger has nine operating mills worldwide and is said to be the world's third largest newsprint manufacturer, producing approximately 1.4 million metric tons annually.

In describing his company's position on consuming secondary fiber in newsprint, linerboard, and tissue, Loyst explained that Canadian mills may be in the wrong place for manufacturing newsprint from recycled fiber instead of wood pulp. According to Loyst, a modem deinking facility designed to handle 70 percent ONP and 30 percent coated groundwood scrap stock requires a $40-million investment (Canadian dollars), for a daily per-ton cost of $250,000. Given these parameters, he questioned the Canadian newsprint industry's ability to invest while holding market share.

Loyst observed that when it comes to recycling, the pulp and paper industries ought to be criticized for their "poor job in keeping the public informed of their recycling progress and success stories." As a result, he pointed out, the word "recycling" is being used by everyone today, “99 percent of the time incorrectly.”

Loyst also noted that because ONP is regarded as a recycling target by environmentalists, the marketplace has quickly shifted from one that was originally "market driven" to a "supply-push situation." "Somehow," advised Loyst, "the industry must get back into the supply position it deserves and has earned."

Far East Review

Don Rogers, vice president of marketing, Allen Co., Baldwin Park, California, noted that of all the countries importing scrap paper, "three of the five largest consumers are located in the Far East." According to Rogers, Japan--which consumes an average of 50,000 tons of scrap paper per month--is consistent in its consumption rates and regularly imports various grades of both high and brown grades. However, he noted, reductions in Japanese imports of coated book stock has depressed the West Coast market. With respect to quality standards, Rogers stated that Japan expects "near perfection" and its requirements “are without a doubt the toughest in the world.”

South Korea, which consumed approximately 108,000 tons of scrap paper per month through the first four months of 1990, is likely to experience import stability through the balance of 1990, according to Rogers. Mill inventories are normal to low, he said, and the country's general economy is growing at a 4- to 5-percent annual rate. Declining freight rates may offer an additional incentive for exporters to South Korea, he noted.

China continues to be a questions mark, observed Rogers, characterizing the current level of demand as "sporadic at best." China currently purchases blocks of corrugated, ONP, and some deinking and high grades, he reported.

Taiwan is the second largest importer in the Far East, said Rogers, at some 100,000 tons per month--the majority of which is corrugated (50,000 tons) and ONP (20,000 tons). Taiwan also is an active importer of several deinking grades. However, he observed, in contrast to other Far Eastern buyers, exports in Taiwan have been off in 1990, "down 5 to 7 percent, with a 20-percent drop in corrugated imports."

Rogers also touched on paper recycling in the Philippines, India, Thailand, and Indonesia, classifying Indonesia as "the Fort Howard of the East" because of the country's wide variety of readily acceptable grades.

A Look at Europe

Stephen J. Vento, vice president of sales, Durbin Paper Stock Co. Inc., Miami, spoke about market conditions throughout Europe and offered a view of near-term trends and expectations. In terms of business conditions, observed Vento, "Europe has been a mirror image of what we have been experiencing in the United States and throughout the rest of the world since the beginning of 1990." He termed the past three to four years as “excellent," but felt, at the same time, that the "bottom has fallen out from under us." He predicted the fourth quarter of 1990 will be "unexciting," but, after the first quarter of 1991, "we should start to see some light at the end of the tunnel."

Vento highlighted several reasons for the decline in the paper industry: a slower domestic economy that is now being repeated in Europe and the rest of the world; severe price decreases in virgin pulp as a result of overproduction and rising inventories; shipping problems caused by the lack of export containers and exacerbated by rising ocean freight rates; and an increase in secondary fiber recovery within Europe, which has lessened dependence on the U.S. market.

Vento detailed scrap paper markets in Sweden, the Netherlands, Belgium, West Germany, France, the United Kingdom, Italy, Spain, and the Eastern Bloc countries. Although he was generally positive about potential continued growth, especially in Eastern Europe, he expressed concern over business conditions m the United Kingdom, Italy, and Spain.

South American and Mexican Markets

Following a quick review of the principal South American importing countries, including Venezuela, Brazil, Colombia, and Argentina, Kevin Preblud, vice president, Les Mendelson and Associates, Los Angeles, focused the balance of his presentation on the Mexican marketplace.

Mexico is the third largest market for scrap paper, trailing only Korea and Taiwan, stated Preblud. Last year, he noted, shipments to Mexico totalled more than 1 million metric tons, and this year, he estimated shipments should be at or somewhat less dm last year's. Preblud predicted the fourth quarter will be "comfortable," with little price change expected.

In describing the Mexican pulp and paper business, Preblud reported that most Mexican mills run fairly steady at around 80-percent capacity. At the same time, however, because of tax considerations and mill inventory practices, shipments from the United States, and, therefore, prices, have proved to be erratic in 1990, he added.

Preblud also reviewed key industry trends that could have an impact on Mexican consumption, quality, and buying habits. As the Mexican market opens up, he said, mills likely WM be setting up buying offices in the United States, thereby allowing Mexican paper mills to rely less on domestic supplies.

Packaging and Recycling

As a change of pace to the day's program, Norman F. Nieder, group director in the packaging technology department, Anheuser-Busch Inc., St. Louis, provided interesting insights into how Anheuser-Busch looks at its packaging requirements. Nieder noted that Anheuser-Busch is the world's largest brewer, holding a 43-percent share of the American beer market, and spent $2.4 billion on packaging materials last year.

He credited some of his company's success in recycling all aluminum beverage cans to Container Recovery Corp (CRC), Anheuser-Busch's recycling subsidiary. Last year alone, CRC recycled approximately 375 million pounds of used beverage containers, making it “one of the nation's largest recyclers of aluminum," said Nieder.

Anheuser-Busch is using much less corrugated packaging than it did 20 years ago, Nieder noted, crediting this to the "superior quality of corrugated materials" and "more durable beverage containers that require less protection" during shipping. Unfortunately, however, he conceded, bottle and canning lines are running at such fast speeds that the use of hot melt glues is necessary for certain packaging applications, but the glues are contaminants that inhibit recycling of these containers. He reported that Anheuser-Busch is working on folded "lock containers" that would reduce the use of hot polyethylene glues.