Recovered paper keeps on growing in Europe.

The European paper industry has been so successful at recovery and recycling, analysts are now wondering where the upper limit will be in practical terms.

"I think the main message to get across is that the paper industry is already doing a remarkable job on recycling. Probably more than almost any other industry in fact," said Jori Ringman, recycling director at CEPI (Confederation of European Paper Industries). The sector is certainly doing something right when it comes to recovered paper. The industry can be rightly proud of its record on both recovery and utilization across Europe, he said, and the most telling factor underlining the progress made to date is that analysts are already contemplating where the ceiling might be in terms of capturing recovered paper streams.

"Taken as a whole industry, I think we've all been working very hard on this issue of recycling for some time now. But it takes more than just the paper industry to make it work to its full potential," Ringman pointed out. "One of the things we set out to do as part of our sustainable development reporting commitment was to improve our knowledge of fiber flows. We already know quite a lot, but there's a lot of the loop that's not in our hands. As a result, we've been commissioning research and the findings seem to suggest that there are about 19% of paper products that are just not available to be recycled, which means there's a theoretical maximum of 81%. Given that we're already recycling almost 56%, I think it's fairly clear that we're already doing quite a lot."

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The 56% figure Ringman refers to is based on a CEPI target for recovered paper utilization that was set in 2000 under the "Declaration on Paper Recovery." The voluntary initiative was designed to push the rate up to 56% (+/- 1.5%) by the end of 2005. The latest verified figures available for 2003 show that the industry had already boosted the annual amount of paper and board recycled by 12%--or five million metric tons in absolute terms--since 1999. As such, the rate was 54% for that year and the number crunchers believe that CEPI's target of 56% is well on its way to becoming reality and could well be there already.

Included in the 19% figure for unrecoverable paper and board is a very long list of products such as toilet tissue, paper used for archive purposes and even material used in drywall (or plasterboard as it is called in Europe). So the key question that the industry is left to mull over now is how to determine the optimal point between 56% and 81% where the maximum environmental benefit is gained.

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That, however, is where things get much trickier, according to Jaakko Poyry Consultant Ilpo Ervasti. "First of all, I think we should highlight one key fact when you're talking about the paper industry that often tends to get overlooked, and that is that globally half of the fibrous raw material that we're using today is recovered paper," he explained. "The latest figures available show that we have 49% utilization in relation to paper production worldwide, so the paper industry is really doing a lot of work in recycling its raw material. That means we're already using a lot of the big sources. In Europe, we are looking at adding to the target on top of that, so the question is just how long can we keep going up in terms of recovery?"

COMPLEX FLOWS

Ervasti believes that the 19% figure for unrecoverable material fits well with several other studies that have been conducted on the subject, but he is quite clear that figuring out an "optimal" number is no easy task if all the relevant economic and life cycle factors are to be taken into account. Also, the dynamics of the industry and the associated trade flows are changing all the time.

Between Europe, North America, Asia and the other regions, there is a complex web of inter-linked commerce that moves recovered paper tonnage around the globe. But as Ervasti explained, commerce is also taking paper flows in other directions all the time in the forms of boxes for packaged goods and other paper products.

"In Asia, the economy is growing fast and consumption along with it, while in the U.S. and Canada consumption is slowing or even declining and in Europe there is a small amount of growth, although Eastern Europe is slightly better," Ervasti pointed out. "At the moment, Asia is investing in papermaking capacity and importing both paper and fiber from the rest of the world. In Asia, they are saying that they will continue to import increasing volumes from the U.S., but because of stagnating consumption that means that they will need to provide a lot more recovered paper. To do that means that the U.S. must boost its recycling activity and they'll have to look to waste streams that are harder to get at and therefore more expensive. So the big question then becomes are the Americans really going to go to that extra effort so that they can export fiber that is going to come back and compete with their own producers?"

According to Jaakko Poyry's projections, China alone could be looking to import 20 million metric tons of recovered paper in a few years time, which, if it happens, would put huge pressure on the global recovery system. While there is still some slack in the system, Ervasti has his doubts about how quickly the recovered paper market can respond to the extra demand.

Some analysts are predicting that, in the long term, China may even have to follow the Japanese route and develop vast areas of plantations around Australasia to feed its ever-increasing appetite for fiber. In the meantime, shortages of recovered fiber could drive serious price increases across an increasingly volatile market.

However, the managing director of Kappa's paper recycling group, Henri Vermeulen, believes that fears of a great fiber shortage that will send the market into chaos are vastly exaggerated. "China is set for growth, that's for sure. But if you look at recent headlines, you'll see that the Asian market for recovered paper is sluggish just now and there is oversupply in the paperboard sector," Vermeulen explained. "Yes, demand continues to grow, but a lot of the new machines that are announced are not always built or there are issues with the finance, so there's a lot more uncertainty there than people take into account. Of course, there might still be the occasional short term fiber shortage, but I don't think it's going to be anything like the extent that people are sometimes saying."

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In fact, Vermeulen believes that there is ample opportunity to build new volumes and current trends in Europe and around the world show that this is already happening.

"I was speaking at a conference in Germany recently and some people in the audience were getting worried because they were moving to a situation where they would be using more than they were collecting and they might have a shortage of recovered fiber," he said. "But as I pointed out to them, that might be the case, but you shouldn't look at just Germany. Across the whole of Europe, collection is increasing by more than consumption. Collection is going up by about 7% compared to about 3% for consumption across Europe and that is the same situation for every country except one--Germany. So there is more recovered paper available, but they just have to look outside their usual suppliers in Germany to get it."

COUNTING ON QUALITY

Of course, increasing the volumes of recovered paper transported around the world means that collectors will have to be more aware of quality issues. As more than one trader pointed out, "Even the Chinese won't buy rubbish."

As a result, encouraging separate collection streams and harmonizing standards and definitions for recovered paper have both become major issues in Europe and further afield.

According to Ringman, CEPI is lobbying hard to encourage legislators to promote the separate collection of wastepaper, as well as trying to educate the authorities at all levels that recovered paper is not a "waste" product at all, but should be treated as a valuable raw material. The organization has also made good progress with the European Recovered Paper Association in creating standardized, cost-efficient, quality control guidelines.

However, there is still a long way to go before the European market moves towards true standardization. "If you look at the two big countries for recovered paper in Europe--the UK and Germany--you can see that they've both grown up in very different ways and it's very difficult to have truly harmonized ideas about how collection systems should work when they each have such different environments in which companies operate," said Ringman. "There are clearly some challenges, but we can still do more, for example, by explaining to people how to improve recyclability in an economic way and by campaigning for better collection systems."

The European recovered paper market is highly influenced by big legislative initiatives such as the Packaging and Packaging Waste Directive and the Waste Framework Directive, which is currently under revision.

As such, Ringman is very busy trying to get across the views of the industry to ensure that there is a consistent approach to paper recovery across all legislation and to try and head off potentially distorting legislation that could, for example, introduce subsidies for burning "waste" paper.

"It's very interesting at the moment, but of course there are a few

challenges along the way such as incineration," he said. "We're trying to get the European Commission to reprioritize in some areas, but I think generally they have a better understanding of our situation now. I have some confidence that we'll get our point across, especially as I think the public image of CEPI among legislators is quite good and people take us seriously when we make a point."

Ringman and the team at CEPI are also working out how to frame the next Declaration on Paper Recovery that will set new voluntary targets for collection and utilization for the next half-decade. And, of course, now that much of the "low-hanging fruit" is already being gathered in Western Europe, the targets will depend as much on support from local authorities, national, and EU legislation as they will on what the paper industry can do by itself.

The signs that the sector will get support are good, said Ringman, but perhaps more reassuringly, it is now clear that most stakeholders recognize there are economic and practical limits to recovery and utilization that everyone will have to work within.

TIPPING POINT

Away from the EU legislative environment, the market is unlikely to see smooth sailing for too long though. Ervasti believes that there is still the possibility that shifts in global recovered paper trade flows could introduce greater price volatility to the market. Also, the prospect of supply shortages could yet shrink the price gap between recovered fiber and hardwood pulp--possibly for good.

On the other hand, there is no doubt that there is room for increased collection in the West and as paper and board consumption rates rise in the developing countries, they will cultivate their own recovered paper streams. New equipment and advancing technology will also help reduce process losses as recyclability gets engineered into more products.

However things pan out, it will certainly be interesting. And if anyone wants to add their suggestions on precisely where between 56% and 81% recovery proves to be economically and environmentally optimal, we would love to hear from you.

Western Europe

Wood pulp              42.5%
Non-wood pulp           0.5%
Recovered Paper        42.0%
Non-fibrous materials  15.1%

Raw material consumption structure in paper and paperboard
manufacturing in Western Europe in 2002. Jaakko Poyry & CEPI.

Note: Table made from pie chart.

WHAT YOU WILL LEARN:

* How paper recovery is growing in Europe.

* Where global trade flows are developing.

* How the market is set to grow in the future.

ADDITIONAL RESOURCES:

* "Managing rejects from recycled fiber plants," by: G. Wunsche and B. Niemczyk, Solutions!, July 2004. To access this article, enter the following Product Code in the search field on www.tappi.org: 04JULSO42.

* "Chances are 50-50 that you will recycle this paper: How can we improve those odds?," by W.P. Moore, Solutions!, October 2003. Product Code: 03OCTSO12.

* "Recovered paper prices: Changes in the historic relationships," by W.P. Moore, Solutions!, August 2002. Product Code: 02AUGSO30.

* Web sites: www.kappapackaging.com; www.poyry.com; www.cepi.org

JIM KENNY, CONTRIBUTING EDITOR/INTERNATIONAL

ABOUT THE AUTHOR

Jim Kenny is contributing editor/Europe for Solutions! magazine, and is based in Brussels, Belgium. He is the former vice president of editorial for Paperloop and today heads his own company, DSI. Contact him by phone at [phone], or by email at [e-mail].

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