Expanding Mills: Deinking Capacity Growing

Thomas A. Hemphill is associate market analyst for the Institute of Scrap Recycling Industries (Washington, D.C.).

The nation's solid waste crisis has almost everyone focusing on recycling as a primary method to manage our way out of the present dilemma. With paper and paper products making up approximately 40 percent of the municipal solid waste stream, it should come as no surprise that many are looking to the paper industry to do its part to close the recycling loop.

A growing number of states, especially in the Northeast, have passed legislation requiring collection of old newspapers (ONP), old corrugated containers (OCC), and office paper. This has brought tremendous pressure on paper stock dealers, particularly those handling ONP, to deal with a rapidly expanding volume of secondary fiber and locate end markets for the material. Consequently, as supply has outstripped demand for ONP, dealers have stopped taking new accounts and have begun charging fees to handle this grade. The result has been that many municipal recycling programs have stopped collecting old newspapers.

State policymakers have responded with special attention to newspaper publishers. Since 1988, eight states have passed laws requiring publishers to use newsprint containing a certain minimum percentage of secondary fiber, usually ONP and other postconsumer scrap paper. The required percentage typically increases over time.

Furthermore, newspaper publishers have recently begun pursuing voluntary agreements or pledges to state governments to increase secondary fiber content in their newspapers. Voluntary agreements or pledges were accepted by seven state governments by the end of 1990. The voluntary commitments tend to emphasize secondary fiber content without specifying postconsumer content.

Where will this paper come from? Only 8 of the 21 newsprint mills in the United States and 1 out of 41 Canadian mills had deinking capabilities--vital to turning ONP into new newsprint--in 1990, according to the National Solid Wastes Management Association (NSWMA) (Washington, D.C.). The remainder rely exclusively on virgin pulp. In fact, according to a 1990 NSWMA report, U.S. deinking capacity in 1988 was less than 20 percent of the country's newsprint capacity. Total North American deinking capacity was 1.4 million tons in 1988, or only 8.3 percent of total newsprint capacity, according to the association.

Such disparities seem to be fading, however. As of November 1990, U.S. newsprint, containerboard, paperboard, tissue, gypsum board, linerboard, printing/ writing paper, and market pulp mills were planning 66 expansions that would involve the use of scrap paper as feedstock, according to the American Paper Institute (API) (New York City).

Two newsprint recycling projects slated to go on-line in 1990 have been implemented, reports the American Newspaper Publishers Association (ANPA) (Washington, D.C.): Augusta Newsprint Co.'s deinking line (400,000 tons per year) was started in September, and Smurfit Newsprint's Pomona, Calif., 17,000 ton-per-year production line speed-up has been completed.

In addition, according to an ANPA January report, there were 19 newspaper recycling mill projects slated for 1991 and 1992 in the United States and Canada. Combined, these projects propose to add an estimated 4.3 million tons to the current annual North American newsprint recycling capacity of 2.2 million tons. Roughly 2.0 million tons would be added in the United States and 2.3 million tons in Canada. (Canadian mills currently supply about 60 percent of the newsprint consumed in the United States.)

According to ANPA, at least 23 other newsprint mill projects are under consideration for North America. The capacity for the four known projects is estimated at 819,000 tons.

Further evidence of this trend: API's annual mill capacity survey released in December shows the U.S. paper industry to be right on target to reach its goal of a 40-percent recycling rate by 1995. The association's 1989 annual survey had indicated that paper and paperboard manufacturers expected to increase scrap paper consumption by 5.9 percent per year between 1989 and 1992. The latest survey reveals plans for even more rapid growth, averaging 7.2 percent annually over the next three years.

According to API President Red Cavaney, 27.148 million tons of scrap paper would be used annually in the manufacture of new paper and paperboard by 1993, if mills operated at full capacity.

A recent study by Resource Information systems Inc. (RISI) (Bedford, Mass.) found that deinking investments are most economically accomplished as expansions to current mills in the United States and when recycled fiber is used as 40 percent of content.

RISI reports that "investment in 40percent deinking capacity generates moderate cost savings for U.S. producers, but provides little or no gains for the average Canadian mill." Canadian mills, however, will add deinking capacity simply to stay in the U.S. market. RISI also forecasts rising ONP prices.

Rising deinking capacity should result in increasing demand from newsprint nulls for old magazines (OMG) over the next decade, according to "The Magazine Waste Paper Stream: Addressing the Challenge," a report prepared by Risser and Associates (New York City) for the Magazine Publishers of America (MPA) (New York City).

OMG contributes clay, which stabilizes air bubbles in flotation deinking processes. According to the report, most flotation facilities use OMG in a 30-to-70-percent ratio with ONP. If 30 percent OMG is not used, another source of clay has to be added to the mix.

The report estimates that 1.39 million tons of OMG will be needed by newsprint mills by 1995 and projects 1992 demand for OMG from newsprint mills at 17.7 to 24.0 percent of all magazines printed in the United States. Projected demand for OMG for 1995 is 28.6 to 39.6 percent of all U.S. printed magazines; for 2000, OMG demand is expected to be 43.5 to 60.0 percent of magazines printed.

A number of magazine wholesalers reportedly have been asked to sign long-term (7 to 20 years) contracts to supply newsstand returns to deinking mills. MPA's report, however, projects that the supply of wholesale returns will be insufficient to meet demand for OMG by 1995. Thus, postconsumer collection of OMG and other coated papers will be required to meet increasing mill demand over the decade.

The rapidly expanding list of announced recycling mill expansions in North America bodes well for paper stock dealers. Although many of the projects are unlikely to be completed within the next five years, there appears to be enough industry commitment and public policy pressure to safely forecast that a majority of the announced new deinking projects will eventually come on-line.

NSWMA's "The Future of Newsprint Recycling" reports that, based on new deinking capacity coming on-line and expansions and developments expected in nonpapermaking markets, the percentage of ONP recovered--33 percent in 1988--will increase to 38 percent in 1992, 46 percent in 1995, 54 percent in 1997, and 65 percent--to 11.2 million tons--in 2000.

Paper industry experts speculate that the planned deinking mill expansions will boost the price of ONP substantially in 1991. Laidlaw Industries (Burlington, Ontario), which regards itself as the third largest solid waste collection company in North America, demonstrated its faith in those forecasts in 1990 by announcing that it was interested in 5- and 10-year contracts with local governments to buy their ONP at a fixed price of $25 per ton.

Deinking mills also are likely to seek long-term contracts with local governments to assure a consistent supply of ONP. This will insulate them from powerful export demand for ONP emanating, from the Pacific Rim countries.

While newspaper and containerboard recycling expansions will absorb significant quantities of ONP and OCC, office scrap paper will only be needed to supply a dozen tissue mill expansions. Only four new projects involving recycling of high-grade office paper have been announced.

Based on aggressive government and, increasingly, private-sector recycled paper procurement policies, however, the printing/writing paper segment of the industry may be the next wave of announced recycling mill expansions.•

Industry experts predict that North American newsprint recycling capacity could nearly triple in the next few years, if mill expansions develop as scheduled.