Although some paper sectors are reeling, boosted output figures are predicted for others, meaning the paper industry is not dying.
Institutional investors consider it positive news when Apple Inc. reports booming sales figures for its iPad products or the electronics industry touts the sale of tablets overall.
Segments of the paper industry, as well as paper recyclers, receive such news less cheerfully, as they see the writing on the wall (or, more accurately, the writing on the tablet) for the declining production of books, magazines and newspapers.
Papermakers and recyclers alike are in the midst of a world that is rapidly changing how it views information, which is having a serious impact on how much ink-on-paper material is being produced.
Some better news for those in the paper industry supply chain lies in the ongoing creation of a larger global middle class, which is boosting the production of paper grades in the packaging and tissue sectors.
Reading Disability
The influence of the Internet and reading tablets on how Americans consume paper has become apparent in the past several years.
In a presentation at WasteExpo in the United States in late April, paper and paper recycling industry consultant Bill Moore of Moore & Associates, Atlanta, noted that the United States has gone from manufacturing 97 million tons of paper products in 2007 to just 79 million tons four years later in 2011.
This 18.5% decrease is attributable primarily to declines in the production of newsprint and printing and writing papers. The decline of the daily newspaper in the United States is evident when looking at newsprint production numbers.
Moore noted that newsprint production in the United States peaked in 2004, when 17.54 million tons of newsprint was produced. Just eight years later, in 2012, just 8.72 million tons of newsprint will be produced—less than half of the 2004 total. “In the span of eight years, that’s pretty drastic,” said Moore.
According to Moore, the rest of the world is beginning to follow suit. While Europe’s newsprint production has not fallen as fast, it is declining, he commented.
While the growing middle class in the developing world has been reading (and recycling) more newspapers in the past 10 years, this population sector also is gravitating toward tablets and other forms of electronic news distribution. Globally, “there has been no new newsprint capacity for five years, and there is none on the books,” said Moore.
At the Institute of Scrap Recycling Industries Inc. (ISRI) Annual Convention in mid-April, Ken Waghorne, vice president-global packaging practice at the United States-based paper consulting firm RISI, said in the 2011-2013 timeframe, global newsprint demand is anticipated to decline by 2%.
This includes a forecasted decline of 5% in Europe and 11% in North America, while Asia’s demand will increase by 4%.
Printing and writing paper is beginning to face similar circumstances, said Moore. Mills in the United States in that sector produced 32.7 million tons of product in 2004. Just eight years later, the sector is expected to produce just 20.2 million tons of paper, a decrease of 38%.
While offices in the U.S. and Western Europe are not yet “paperless,” the way companies and institutions are storing information is changing rapidly, Moore noted.
In the U.S., the federal government has mandated electronic medical record-keeping for much of the health care industry, a sector that has traditionally been a heavy user of printed forms and charts.
Other industry sectors have gravitated toward electronic record-keeping without government prompting, and the effect is evident not only in the reduced printing and writing production figures, but also in recycling plants in the United States.
“The document destruction business is slowing, primarily because we’re using less printing and writing paper [and paper records],” said Moore.
The RISI numbers presented by Waghorne reflect this, with North American demand for printing and writing paper predicted to decline by 5% from 2011 to 2013. Flat demand for printing and writing paper is predicted for Europe, while Asian demand is expected to leap by 10%.
The Better News
While recyclers in North America and Europe compete for declining tons of newsprint and office paper, two other paper industry sectors are faring better.
Waghorne’s presentation at ISRI was titled “Tissue and Packaging Become the Star Performers for the Global Paper Industry,” declaring the good news part of the paper industry story up front.
The production of containerboard and other types of paper and board used for packaging declined in Europe and North America during the 2008 and 2009 recession, but unlike news and printing grades it has rebounded along with the economy.
In the 2011-2013 timeframe examined by Waghorne, European containerboard production is expected to grow by 7% while a category RISI refers to as board/wrapping and specialty paper is expected to grow by 5%.
Similarly, North American containerboard production is forecast to grow by 5% and production in the board/wrapping and specialty paper sector is predicted to grow by 3%.
This presents good news for paper recyclers in those regions both in terms of supply and demand.
The tissue industry, while generating little that can be recycled, has become an important consumer of several grades. The “away from home” tissue sector, in particular, has helped provide domestic consuming markets for many recyclers in North America and Europe.
RISI’s forecast calls for 4% tissue production growth in North America from 2011 to 2013, 7% growth in Europe during that time and 13% growth in Asia.
Waghorne also commented that the potential for further growth in this paper sector remains enormous. While the average person in Western Europe consumes about 16 kilograms of tissue products each year, the average person in Eastern Europe, China and other parts of Asia consumes less than 5 kilograms per year.
From 2010 to 2013, RISI predicts annual tissue consumption growth of 3.6 million tonnes. China is expected to account for about 1.3 million tonnes (39%) of that growth, with Latin America adding 500,000 tonnes of tissue consumption.
“The next two years [are] expected to show good global demand growth,” Waghorne stated.
Demanding Times
While the global paper industry portrayed by Moore and Waghorne has a “Jekyll and Hyde” aspect to it, a common aspect has been a reliance on recovered fibre as feedstock.
According to Moore, in 2011, 55% of the paper produced globally was made with recovered as feedstock, a record percentage.
Recyclers in most of Europe and increasingly in North America have reaches about as far into the scrap paper stream as they can, noted Moore. “Maximum recovery is being reached in developing economies,” he stated.
“Major new recovery can only occur in the emerging economy areas,” said Moore, noting that the recovery rate in the Middle East is estimated at 37% and in Latin America at 43%. “That’s where the growth is going to come from.”
Supply strains are causing some papermakers to consider switching to virgin fibre in some cases. Moore cited containerboard producers in the U. S. as candidates to consider this switch. “If OCC supply is strained, containerboard makers in the Southeastern United States are likely to ramp up wood-based kraft pulp production.”
China has become the world’s foremost producer of paper and, as Moore noted, it is a nation with an absence of forest resources. (As is India, a nation producing far less paper than China but one that is growing as an export destination for recyclers in Europe and North America.)
This steady demand has caused pricing to trade in a high range during most of the past 12 years, and when there is a price downturn, recovery has usually followed within a few months.
“I don’t see any substantial downturn in the price of recovered paper coming up—not like the three-year cycles of the 1990s,” said Moore. “The world depends on it too much.”
source:Recycling Today Global Edition