Recovered Paper for Tissue Manufacturing - Bill Moore, President Moore & Associates - TAPPI.org
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Recovered Paper for Tissue Manufacturing
Bill Moore, President
Moore & Associates
October 1, 2019
Global Recovered Paper (RCP) Markets
Global RCP Usage by Grade
2008 2018
208 million tonnes 249 million tonnes
Other Other
Grades, Grades,
23% 22%
Printing/
Case
Writing,
Materials, Case
Printing/ 7%
49% Materials,
Writing, 62%
7% Newsprint,
6%
Tissue, 8%
Tissue, 6%
Newsprint,
13%
~55% of the world’s paper and board production is based on recycled fiber
3World RCP Demand by Grade
Million
Tonnes
180
160
140
Mixed Paper
120 High Grades
100 ONP/OMG
OCC
80
60
40
20
0
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21
4China: Major Factor in RCP Markets
China and High Grades/SOP • Even though China was not a large user/importer of RCP high grades, their import restrictions on all grades of RCP have effected the grades used by the tissue industry • Almost all of China’s tissue making capacity installed in the last ten years has been based on virgin fiber • But there is some recycled fiber tissue production in the country and they imported SOP for use in white top paperboards • In 2019, China’s imports of SOP were greatly curtailed
China's Imports of RCP
• In 2016, China imported 29 million tons of recovered paper (RCP) to supply
their domestic paper and board industry
• Chinese regulations restricting RCP imports into the country reduced the
annual import volume into China to 17 million tons in 2018.
• In 2019, we forecast that imports will fall to 12 million tons
• Looming on the near horizon is a total ban on imported RCP scheduled for the
end of 2020
• This leaves a tremendous shortfall of recovered paper in China resulting in
reduced operating rates, revenue reductions and creating a non-sustainable
supply chain disruption in the second largest paper and board production
market in the world
7Key Aspects of China 2018 Import Policy Effective March 1, 2018 (material arrival in China) • Weight of recovered paper (RCP) Prohibitives (non-paper contaminants) must be < 0.5% - all grades. This is the most important limitation • No unsorted RCP/Mixed Paper • China import permits regulated and issued quarterly • Mills with
Full Ban of RCP Imports into China
• Scheduled to take effect in 2020
• Will such pre-consumer grades as DLK, #9 Over Issue News, and Pulp
Substitutes, etc. be exempted?
• Recycled Fiber (RCF) pulp not affected?
• Will create a shortage of fiber for the Chinese paper and board industry of
13 million tonnes/year
• A boon for RCF pulp?
• While there is some impact on high grades, OCC and Mixed Paper markets
much more effected
9US RCP Market
Recovered Paper Price Ticker
RCP Price Ticker:
Average combined domestic mill price for Mixed Paper, #8,
Market thinks China
ONP/SRPN, OCC, Hard White Envelope Cuttings, SOP, SWL.
restrictions may be eased
$/Ton FOB seller’s dock
$180 $180
$175 $171
China buys heavily $170 $169 $170 $169 $170 $169
$170
$165 $166 $167 $167
$163 $165 $166
$165 $162 $161
$160
$160 $156 $156 $156 $157 $155 $154 $154 $154 $156 $156
$153
$155 $151
$149 China's import
$150 restrictions kick in $150
$146
$145 $142
$140 $146
High grade prices $140
$140
increasing / bulk
Sharp decline in
$135 grades decrease
Realization that China's import all grades
$130 restrictions are real and China's $129
Typical upward market
RCP buying drops
$125 movement after period
of low prices $118
$120
$115 $113
$108
$110
$105
Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Aug-19
11
Source: Fastmarkets/RISI RCP Price TickerUse of US RCP, 2008 vs. 2018
2008 2018
52 million tons 53 million tons
Other,
11% Other, 6%
Exports, Tissue, 8%
Exports,
Tissue, 8% 38% 39%
Paperboard,
11%
Paperboard,
14%
Containerboard, Containerboard,
14% 35%
12US RCP Exports by Country, 2018
All Others, 17%
Canada, 4%
China, 40%
Korea, 6%
Indonesia, 6%
Mexico, 9%
India, 18%
13SOP Demand
Recovered fiber declining as
a raw material for tissue
Global fiber Furnish in Tissue Manufacture
100%
90% 47% 53% 56%
41% 44% 45% 46%
42%
80%
Other
70%
Mechanical Pulp
60%
Chemical Pulp
50%
50% 51% Recovered Fiber
46% 49% 48% 47%
40%
42%
39%
30%
20%
10%
0%
1990 1994 2000 2004 2008 2012 2016 2018
15Historically, 'High Grades' have
been used in tissue
High grades are made up of:
• Deinking High Grades (DHG)
• Pulp Substitutes (PS)
The approximate composition of Deinking High Grades (DHG) is:
– 55% SOP
– 20% Coated Book Stock/Printers Mix (book and printing scrap)
– 15% Sorted and Manifold (pre-consumer from printers) Ledgers
– 10% Other Bleached Chemical Grades – mostly SBS scrap (white/bleached box scrap)
Note that DHG is not an actual grade but an aggregate statistical category.
Pulp Substitutes (PS) used for tissue include:
– Bleached Kraft: bleached white sulfate and cuttings; some tissue paper converting scrap; some coated
book stock
16Usage of SOP and CBS declining globally
The trend in all regions of the world are similar:
• Sorted Office Paper (SOP) supply is declining – fewer printed documents
• Less use of Coated Book Stock:
– More coated material in SOP
– Process changes to reduce the need for this low yield grade
• Ledger grades have been merged and supply is declining
• All SBS scrap is recovered; slow growth in developed economies as more
SBS packaging makes more supply available
• Some increase in the mechanical fiber grades – magazines and coated
groundwood sections
17Why is SOP demand declining?
• Yields on SOP have declined because quality of
the grade is dropping
• Processing costs have increased
• SOP cycle costs have increased (until this last
low cycle)
18Recovered fiber trends are
similar in all regions
• Recycled fiber-based tissue is more prevalent in certain markets – North
America (US, Canada, & Mexico), Europe, Middle East, and developed Asian
countries (Japan, Korea, etc.)
• Regional trends in recycled fiber use in tissue:
– North America - slow decline
– Europe - declining
– Middle East - declining
– Developed Asia - slow decline
• China’s tissue business is growing largely with virgin fiber (vs. newsprint and
paperboard sectors, which rely heavily on recycled fiber).
19The search is on for alternative types of fiber
• Developing regions and emerging Asia – the clear trend is for the use of
virgin fiber in tissue production.
• Searching for alternative grades and fibers: bamboo, agricultural residues
• Other sources of fiber are replacing SOP for tissue:
– Greater use of Pulp Subs (PS) – primarily the SBS grades for which
supply is increasing
– Greater use of virgin pulp such as Bleached Eucalyptus Kraft (BEK)
• Other grades of post consumer RCP: cups/other poly coated SBS
• Other post industrial grades: undeliverable mail (UMM), silicone release
papers
20Little new RCF-based tissue
capacity planned in NA
• No recycle tissue mills are planned in the US or Canada.
• Mexico has one new machine coming on line in 2021 that is recycled fiber-
based: Papel San Francisco in Mexicali.
– This mill will use an additional 30,000 tons per year of SOP, fairly small
use.
– Future expansions in Mexico are expected and will probably use more
SOP.
21Significant drop in SOP demand in NA, 2019
• Shutdown of three recycled fiber tissue mills – note that most of the
production was shifted to other mills
• Significant SOP use by the Fairmount, WV mill mostly stopped: conversion to
‘brown’ pulp for shipment to China by ND Paper
• Fires causing shutdowns at the Soundview/Marcal and GP – Muskogee –
again note that most of the production loss was shifted to other mills.
– Both of these are transient: Marcal down almost a year, GP down one+
month
• In 2019 at the margin some low quality SOP is being sold as Mixed Paper.
The largest imbalance (over-supply) in the SOP market ever
22North American SOP exports on the decline
• Declines to all regions except Mexico.
• China, although never a large importer of North American SOP, is now
importing no SOP.
• Exports are declining for the same reasons as domestic demand.
• Definitely a shift in the use of recycled fiber in tissue in all the world’s
regions.
23India the largest buyer of
US High Grade exports
US Exports to Asia, Q1 2019
1% 1% 1%
1%
2% 3% 1%
4%
India India
Indonesia 9% China
12% South Korea Indonesia
Taiwan South Korea
66%
Thailand 17% 69% Taiwan
15% China Thailand
Vietnam Vietnam
Deinking High Grades Pulp Subs
(45,149 Tonnes Exported) (111,365 Tonnes Exported)
Source: US Dept of Commerce, Bureau of Census, PPI Pulp & Paper Week 24High Grades are a small share
of US RCP exports
TOTAL TONNES
EXPORTED ('000s)
Corrugated 46% 18% 11% 7% 7% 7% 7%
3% 1%
14%
Mixed Paper 43% 29% 8% 13% 4% China
India
15%
Indonesia
67% News 33
71% 4%5% 15%
Vietnam
S. Korea
17% Taiwan
Pulp Subs 69% 9% 3%
Corrugated - 2,210.5 Thailand
Mixed Paper - 477.7
News - 455.6 Deinking 66% 15% 12% 42
Pulp Subs - 111.4
Deinking - 45.1 0% 20% 40% 60% 80% 100%
Source: US Dept of Commerce, Bureau of Census, PPI Pulp & Paper Week NOTE: 1% values are shown graphically but with no data label 25SOP Supply
Global tissue consumption is growing – while
P/W papers decline
Million Tonnes
130
110
Global
90
Tissue
70 Global
Printing &
Writing
50
30
10
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
NOTE: Not all tissue is produced from recycled fiber. 27The rise and fall of printing and P/W papers…
• From the late 1990s through 2010, the global supply of SOP steadily
increased:
• Printing and writing paper use was still increasing
• Fast growth of confidential document destruction/shredding
• Since 2010, overall decline in use of P/W papers
• World printing industry is declining - structural trend of printing fewer
hard copy documents
• Drop in postal mail delivery
28Document destruction has also peaked
• After fifteen years of rapid increase, the growth of document destruction in
the developed countries began to slow.
• Prior to 1998, shredded office papers made up less than 10% of all office
papers generated.
• From 1998 through 2005, the growth in SOP supply from shredded office
papers kept SOP market pricing down.
• Moore & Associates estimates that shredded material now accounts for about
70+% of the US SOP market.
29Recycling practices affect SOP quality
• Conventional office paper source-separated recycling programs are virtually
gone.
• Single stream commercial recycling collection is the growth area for collection
of the 'last' of office papers
– Frequently cannot be separated into SOP and will go into Mixed Paper, a
much lower quality grade.
• Could we get a deinkable tissue grade pack from residential recycling? Mail,
office papers, SBS packaging, poly coated foodboards, magazines, etc.
30Uncoated Freesheet is declining faster
than SOP in NA
'000
Tonnes Forecast 2019-2028
9,000 8,363 8,344
7,985
8,000 7,524 7,488
7,310
7,093
7,000 6,687 6,530
6,466 6,403 6,354
6,234
US & Canada:
5,914 5,779
6,000 UFS Consumption
5,000
SOP Consumption
4,000
3,000 2,400 2,324 2,533 2,377 2,445
2,186 2,122 2,108 2,053
2,009 1,997 1,978 1,949 1,920 1,909
2,000
1,000
0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Source: Moore & Associates SOP Supply & Demand Forecast, June 2019 31Long Term US Average SOP Price
($/ton) – Source RISI/Fastmarkets & Moore & Associates
$250
$230
$210
$190
$170
$150
$130
$110
$90
$70
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
YTDOCC Demand and
Supply Trends
• New OCC based containerboard mill projects in Asia (including China), Europe,
Middle East, and North America – demand it is creating will strengthen the market
• New demand for OCC especially strong in the US
• OCC recovery in the developed regions of the world is very high, really at the
maximum level in many parts of Europe and headed that way in the US, but box
supply growth continues
• China and India (as well as the rest of the developing regions of the world) will
continue to increase their domestic OCC recovery
• All of the “easy to get” OCC is already recovered – grocery store and large
generators. Residential e-commerce box recovery lagging
• But we are not ‘running out’ of OCC that can be recovered. In the U.S.– almost 25
million tons per year of paper is still disposed, OCC is a part of it 33Average Annual North America OCC Price
Source - Moore & Associates
$/Ton, Baled,
FOB Generator’s Dock
$190
$177
$169
$170 $160
$150
$137
$132
$130 $127
$129 $117
$110 $109
$97 $99 $96
$94 $111
$91 $83
$90 $83 $99
$88
$70 $78 $79 $75
$74 $74
$55
$50 $39 $55
$37
$30
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
H1
34Thank you for your attention
Moore & Associates
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