March/April 2005
Manufacturers of tissue products—from toilet paper to paper towels—consume more than 4 million tons a year of recovered fiber. Here’s an overview of this major market and a look inside the newest U.S. tissue mill.
By Robert L. Reid
Let’s get the bad joke out of the way up front: For scrap paper processors, the tissue industry is nothing to sneeze at. In fact, tissue—which covers products ranging from facial tissue and toilet paper to paper napkins, paper towels, and similar items—represents the third-largest market in the United States for recovered fiber.
In 2003, the U.S. tissue industry produced some 7.1 million tons of product (other industry watchers put production even higher at 8 million tons) and, in the process, consumed about 4.1 million tons of recovered fiber, according to statistics from the American Forest & Paper Association (AF&PA) (Washington, D.C.). That recycled tonnage is well behind the two largest markets—containerboard (15 million tons) and recycled paperboard (7 millions tons)—but ahead of newsprint (3.5 million tons) and printing/writing (less than 2 million tons), AF&PA notes.
Given the above figures, it’s clear that recovered fiber represents a substantial portion of the overall furnish of U.S. tissue mills. In describing that portion, AF&PA refers to ratios rather than percentages due to the large “shrinkage factor associated with cleaning, deinking, and transforming recovered fiber into paper.” Some recovered fiber gets washed away during these processes, the association explains, with the most contaminated material suffering the greatest shrinkage.
Thus, the 4.1 million tons of scrap paper consumed in 2003 represented a ratio of 0.57 tons of recovered fiber for each ton of tissue production that year, down slightly from 0.58 in 2000 but up from 0.51 in 1990, when the industry consumed slightly more than 3 million tons of recovered fiber while producing just under 5.9 million tons of tissue products, AF&PA says.
The tissue industry’s growing appetite for recovered fiber becomes even more impressive if you look back over the past 25 years. Taking losses during papermaking into account, recovered fiber supplied roughly 33 percent of the furnish for tissue products in 1980 compared with roughly 50 percent today, notes Andrew Battista, senior economist for Resource Information Systems Inc. (RISI) (Bedford, Mass.), the economic forecasting arm of Paperloop, who writes Paperloop’s “Tissue Monitor” and the new “World Tissue Forecast” reports.
A Tale of Two Tissue Markets
The U.S. tissue industry is divided into two main categories:
• the at-home or consumer market, which accounts for roughly 60 to 70 percent of sales and which includes many household brand names; and
• the away-from-home (AFH) market for restaurants, businesses, and other institutional uses, which represents the remaining 30 to 40 percent of sales.
Each side of the industry is highly concentrated, thanks especially to a wave of consolidations in the mid-to-late 1990s and early 2000s. Three firms—Georgia-Pacific Corp., Kimberly-Clark Corp., and Procter & Gamble Co.—control about 80 percent of the at-home market.
On the AFH side, a roughly similar percentage is in the hands of Georgia-Pacific, Kimberly-Clark, and SCA Tissue North America, explains Shaw Shahery, president of Convermat Corp. (Great Neck, N.Y.), which brokers parent rolls of paper to the tissue industry. SCA Tissue, a subsidiary of Swedish-based Svenska Cellulosa Aktiebolaget AB (SCA), is a relative newcomer to the AFH tissue world in the United States, having acquired most of its assets from Georgia-Pacific in 2001, following G-P’s acquisition of the former Fort James Corp. In Europe, though, SCA is a leading producer of both AFH and at-home tissue products.
Recovered fiber, especially deinked material, is critical to both the at-home and AFH markets, but it is most important to AFH producers, whose products usually contain 90 percent or more recycled content, says consultant Bill Moore of Moore & Associates (Atlanta). By contrast, some of the leading consumer brands of facial tissue and toilet paper use 100-percent virgin fiber, Moore adds, though even paper towels for the at-home market can contain some recycled content.
Tissue producers use a variety of recovered fiber grades in their products depending on what they manufacture—toilet paper, for instance, requires different levels of softness than do paper towels—or whether, say, the paper napkins end up a kraft brown product or get bleached white. In 2003, for instance, tissue producers consumed nearly 1.6 million tons of high-grade deinking material, about 1.1 million tons of mixed paper, 755,000 tons of ONP, 516,000 tons of pulp substitutes, and 122,000 tons of OCC, notes AF&PA.
Stability and Capacity
Tissue production is seen by industry watchers as more stable than other segments of papermaking. “It’s a market that’s always going to be there,” notes Joel Litman, president of Texas Recycling/Surplus Inc. (Dallas), whose firm has supplied recovered fiber to the tissue industry for the past 20 years. Unlike the newsprint and packaging industries—which face stiff competition from the Internet and plastics, respectively—“people are always going to need paper towels, bathroom tissue, and napkins, so it’s a market that’s always going to be growing,” Litman says.
Shaw Shahery agrees. Tissue tends to enjoy better margins and generally isn’t subject to the pricing “peaks and valleys” of more commodity-like segments of the paper industry, he notes. In the past 30 years, tissue demand in the United States grew an average of 2.1 percent annually, Shahery wrote in a 2003 “Tissue Watch” column for PaperAge magazine.
That same year, the North American tissue industry enjoyed nearly $15 billion in sales, with the AFH market representing $4 billion of that total and the at-home market claiming $11 billion, said Nick Marcalus of tissuemaker Marcal Paper Mills (Elmwood Park, N.J.) in a 2003 speech. U.S. production accounts for more than 80 percent of that North American total, Marcalus reported, explaining that the at-home market is linked to population growth while the AFH market tends to follow growth in U.S. gross domestic product. “So if you read or hear that McDonald’s store sales are going up,” he said, “then you know dispenser napkin sales are increasing.”
Capacity increases are also a regular feature of the tissue industry, Marcalus said, though he added this warning for paper recyclers: While recycled fiber remains important to the tissue industry, “the fiber base is moving away from recovered paper.” As evidence, he cited six capacity expansions that were either built or planned from 2003 to 2005. Five of the expansions involved a new process—called through-air-dried (TAD) technology—that produces premium at-home products using little or no recycled content. The single exception was SCA Tissue’s greenfield plant in Barton, Ala., which uses 100-percent recycled feedstock (for more on this plant, see “Inside the Newest Mill” on pages 70-71).
Bill Moore can also point to one new machine at Scott Paper Canada’s existing mill in Crabtree, Québec, which reportedly uses a mix of virgin fiber and deinked furnish.
Fortunately for recyclers, TAD is a relatively expensive new technology that requires a considerable learning curve to master, says Shaw Shahery. Thus, only a limited number of papermakers are producing substrate with TAD machines. Moreover, AFH producers—the biggest tissue consumers of recycled fiber—are unlikely to use TAD anytime soon, if ever, says RISI’s Andrew Battista.
Technology, Price, and Prejudice
Though Battista insists that “deinked pulp will remain vital to the tissue industry,” he concedes that some mills are moving away from recycled content.
Tissue mills currently “feel less pressure to use deinked pulp as a marketing tool” to emphasize their concern for the environment, he explains.
Plus, as Nick Marcalus noted in his 2003 speech, there is a definite “prejudice in favor of virgin fiber” among some large buyers of finished tissue products. He described conversations he has had with potential retail buyers that began—and ended—with the buyer asking if Marcal’s products were made with virgin feedstock.
“That prejudice exists,” Marcalus noted, “and it’s sometimes difficult to overcome.”
At the same time, improvements in cleaning and screening technology have enabled tissue mills to make a high-quality sheet from less-expensive recycled furnish.
That’s what recyclers like Johnny Gold, senior vice president of The Newark Group’s Recycled Fibers Division (Marblehead, Mass.), have noticed. According to Gold, certain scrap paper grades were once difficult to sell to tissue mills because of contamination issues involving laser printing, stickies, insoluble inks, and other concerns. Today, that same material can find a home at the many mills that have invested in modern cleaning equipment.
“At one time, selling to tissue mills was very, very difficult—more than to any other aspect of the industry,” Gold recalls. “Today, it’s probably as simple a transaction as it is selling to a corrugated or a newsprint mill.”
Texas Recycling’s Joel Litman likens the tissue industry’s increasing ability to consume once-difficult grades of scrap paper to a football game in which each team has to keep developing new plays to counter what the other side has done (in this case, it’s the tissuemakers vs. the scrap paper generators). To assist the mills, Litman says, his company makes note of what items pose problems to tissue mills.
For instance, tissue producers can have trouble handling certain catalogs with a lot of ink and color—especially red—that are difficult to bleach white. So Texas Recycling will produce a special tissue pack by removing those products from the material it bales for tissue mills, Litman notes.
In the end, price remains the strongest factor in recovered fiber’s favor, says Andrew Battista. Earlier this year, for instance, the mixed office paper grade SOP37 was selling at $138 a mt compared with $650 a mt for the virgin grade NBSK market pulp, he explains.
Going and Growing Globally
Finding adequate sources of recovered fiber is becoming a challenge for tissuemakers, especially since U.S. paper and paperboard production remains below 1997 levels, Battista says. And like others in the domestic paper industry, tissue producers must compete with China for high-quality fiber.
SCA Tissue, for instance, finds itself fighting overseas competition for fiber supplies in traditional export markets such as Chicago as well as unlikely places such as Memphis, Tenn., notes David Knight, director of fiber procurement. Previously, he says, China had a relatively smaller impact on the deinking grades of recovered fiber—such as office scrap and coated bookstock—because it was focused on newsprint and container manufacturing. Currently, he adds, “there are quite a few new tissue and deinking projects on the board over in China and Asia, so I think their impact on the deinking grades is going to become stronger over the next year or two. That’s a primary concern for us.”
Globally, tissue demand is growing faster worldwide than in North America, says Shaw Shahery.
At a sanitary supply convention in 2000, Shahery noted that North America remained the strongest market for tissue at 35 percent of global demand, though Asia had moved into second place at roughly 27 percent followed by Europe at 26 percent. Moreover, since 1990, Asian demand had grown nearly 7 percent annually and European demand had grown 5 percent compared with North America’s 2 percent annual average increase.
Even Latin America, representing just 10 percent of the world market, experienced “impressive” annual growth of nearly 6 percent, Shahery reported.
For paper recyclers, the growth in the global tissue industry represents increased opportunities for sales, especially after North American consolidations shut down a number of mills in certain regions.
The Newark Group, for instance, coped with tissue mill closures throughout New England partly by shifting material to other types of domestic mills and partly by exporting recovered fiber to overseas tissue mills from Mexico to Korea, notes Johnny Gold.
In the end, the growing export demand, coupled with ongoing domestic consumption, should keep the tissue market in the “nothing-to-sneeze-at” category for years to come.
Inside the Newest Mill
It took SCA Tissue North America just 17 months to go from groundbreaking to papermaking once it decided to build a greenfield tissue mill in Barton, Ala. Not only was this $240-million project on a fast-track for construction, it was also on the right track for its raw material furnish—at least as far as scrap paper processors are concerned. SCA’s Barton mill added roughly 110,000 tons a year of capacity to the away-from-home (AFH) tissue market, which makes tissue products out of nearly 100 percent recovered fiber for restaurants, hotels, and other institutional markets.
The Barton mill, which was announced in October 2002 and produced its first products in March 2004, was built at a time when most of the new capacity in the tissue industry targeted the at-home or consumer market, which primarily uses virgin fiber. Industry watchers seem divided on whether this upsurge in virgin capacity is a coincidence or a trend. Regardless, SCA’s new mill certainly attracted attention, in part because of its size—about 30,000 tons a year larger than most of those virgin expansions—and in part because it was the first greenfield papermaking project in the United States in some time, as well as the first for SCA.
Designed primarily to service customers in the southeastern United States, the Barton mill produces roughly equal amounts of bleached white and kraft brown napkins and toweling. The mill buys recovered fiber from as far east as Florida, as far west as parts of Texas, and from Tennessee on down, notes David Knight, SCA’s director of procurement. The company prefers to work directly with scrap paper processors, waste haulers, and municipalities rather than brokers, and it has been locking in long-term contracts to secure recovered fiber, he explains.
Aside from Barton, SCA runs four other tissue mills in the United States—in New York, Wisconsin, Illinois, and Arizona—plus three recently acquired sites in Mexico. Together, these operations consume more than 700,000 tons a year of recycled fiber, primarily a coated bookstock “printer’s mix” and office paper, each of which accounts for about a third of SCA’s furnish. The remaining third includes OCC and mixed paper, which are mostly used to make kraft-brown products. SCA also uses pulp substitutes and higher-grade papers when a product needs greater brightness, and it consumes some groundwood material when brightness isn’t as important, Knight says.
Located on 700 acres a few hundred yards from the Tennessee River (whose waters are essential to the papermaking process), the Barton mill features a physical plant with roughly 1.2 million square feet under roof, notes James Haeffele, Barton’s director of operations. It is SCA’s largest integrated facility in North America.
Recovered paper bales arrive, usually by contracted trucks, at the plant’s eight receiving docks, where the bales are unloaded and stored before being sent through an automatic dewiring machine. The dewirer has scales to keep the correct amount of scrap paper flowing up one of two conveyors to feed the plant’s two pulping units. After pulping, the material passes through an extensive cleaning and screening system that removes first the heavier contaminants and then finer and finer contaminants.
Much of the recovered fiber used at Barton comes from document destruction programs, largely because the mill’s cleaning and screening equipment can handle that material’s higher level of plastics and darker papers (such as file folders), Knight says.
As the pulp moves through the system, it is washed to remove ink and lighter contaminants. Pulp that will be used to make a white product is then bleached.
Though SCA says it can currently get enough recovered fiber to feed its mills, it is always looking for additional good suppliers. As printing technology changes, SCA’s preferred “printer’s mix” scrap is becoming harder to use, especially when it includes ultraviolet inks that are applied at high speeds, Knight notes. So his procurement staff spends a lot of time working with scrap paper processors, explaining SCA’s quality specs and helping them produce a tailored product to meet the company’s requirements.
As the Barton mill approaches its first anniversary, SCA is fairly tight-lipped about the facility’s plans other than to note that the Southeast has some of the fastest-growing demographics in the United States. One thing is certain: SCA and its scrap paper suppliers probably hope all those new southeasterners like to eat out.
Robert L. Reid is managing editor of Scrap.
Manufacturers of tissue products—from toilet paper to paper towels—consume more than 4 million tons a year of recovered fiber. Here’s an overview of this major market and a look inside the newest U.S. tissue mill.