The annual statistics report on the European paper and pulp industry published by the Confederation of European Paper Industries (CEPI) paints a positive picture. The industry has made a strong come-back after the COVID-19 pandemic, it notes. In 2021, paper and board consumption increased by 5.8 per cent, and production increased by 6.1 per cent in Europe. The sector’s operating rate, the capacity at which paper mills are operated, has reached 90 per cent over the year, compared to 85 per cent in 2020. The CEPI report also shows that the European paper recycling rate for 2021 was 71.4 per cent. The recycling of paper has performed well in Europe as the total recovered fibre quantity surpassed 50 million tonnes in 2021, however exports of paper for recycling decreased by 18 per cent compared to 2020.

Optimistic trends are observed in other parts of the world too. According to the American Forest & Paper Association, in 2021, the paper recycling rate climbed to 68 per cent, a rate on par with the highest rate previously achieved. The recycling rate for old corrugated containers (OCC) was also an impressive 91.4 per cent. In South Africa, the number stands at 61.4 per cent and in the UAE, it’s observed that there has been a marginal increase in paper recycling since the pandemic.

On the one hand, recovered fibre is in high demand globally, but on the other, the industry is bogged down by logistical issues, supply chain disruptions, unfavourable legislations and surge in prices. Industry experts review the contrasting situation the global paper market finds itself in.

Reasons behind the high recycling rate

 Speaking during the release of the CEPI report, Jori Ringman, Director General of CEPI, said, “The European paper industry has a long-term commitment to recycling. This has led to important technological innovations, researches and developments, which have enabled the use of recycled fibres in all key product categories. This was not the case 20 years ago.”

Ulrich Leberle, Raw Materials Director, CEPI, said, “There has been strong investments in recycling capacities in Europe. Environmental consciousness among people and the political will to solve waste management issues have contributed to the success of paper recycling.”

Bret Biggers, Senior Economist, the Institute of Scrap Recycling Industries (ISRI), shared a similar opinion, talking about the American scenario. “There’s a lot of investment by local and international paper manufacturers in the United States. A number of Chinese companies are setting up shop here and building new facilities to export pulp and recovered fibre back to China and other Asian countries.” He pointed out that the increase in awareness among people about recycling and the demand from mills for mixed paper have also contributed to high recycling rates.”

Jane Molony, Executive director, The Paper Manufacturers Association of South Africa (PAMSA) opined, “Waste paper is a commodity and there has been a huge demand for recycled fibre throughout the world. Though there was a slump during the COVID-19 pandemic, the recycling rate has already shown signs of recovery in 2022.

Anil Budhraja, General Manager, Union Paper Mills, commented, “All over the world, the emphasis is on recycling. There is more awareness among the public today. Governments are also taking initiatives to encourage recycling. The recycling rate of OCC, in particular, has increased manifold.”

Post-Covid recovery of paper market Commenting on the post-covid recovery of paper market, Venkatasubramanian M.S., General Manager, Alpha Emirates, said, “There has been a marginal increase in consumption of recycled fibre since the pandemic.” Citing a report, he said, “There has been a 22 per cent increase in online purchases of products, which has led to a consumption spike in brown grade papers. However, there is a significant drop in white grades as many are still working from home. Government establishments and institutions support ‘paperless policy’ and communications are done digitally.”

Joe Pickard, Chief Economist-Director of Commodities, ISRI, pointed out, “The Covid pandemic had massive implications on the generation of recycled paper and board. Markets are still playing catch up in terms of making sure that recycled paper and fibre can actually get to the consumers. Additionally, recovered paper and fibre prices have increased. Part of that has to do with the supply chain disruptions, but also the change in supply and demand due to the Covid pandemic.”

Budhraja said, “Since the pandemic, there have been logistics issues. We are not able to export as much as we used to and we have lost some good customers because of this. The market did bounce back after the pandemic but it was only for a while. Because of inflation and logistics issues, again we see a slowdown of demand. And there is a lot of uncertainty.”

Raw material shortage

 One of the challenges for paper manufacturers today is OCC availability, said Budhraja, reasoning that a lot of OCC gets exported to India and other Asian countries. “That puts pressure on us. We are forced to import or pay higher prices.” Jane Molony pointed out, “The raw material shortage in the sector is not just about waste paper, but actual fibre. Before we can plant a single tree, we need to do an environmental impact assessment. We need to have a water use license, a tree license, and we pay a streamflow reduction tax. Though the South African government agreed back in 2008 as part of the BBBEE Charter for the forestry sector to ensure a net increase in afforested land of about 100,000 ha over ten years, it hasn’t materialised. This is a problem. Trees are seen as a solution for climate change across the globe, but there are not as many trees as needed. There is a global deficit in demand and supply of timber of about 3 per cent. This is across all uses of timber whether for construction or for pulp and paper.”

Persisting challenges

 Venkatasubramanian attributed the rise in logistics cost to the increase in oil prices and the blockage of ships in China, due to strict Covid restrictions. “About four million containers were stuck at various ports of China. Coal shortage in India also hampered production in paper mills. Some of them were functioning only for 20 days in a month. All of these factors have affected the paper market.” There is a drop in overall demand due to the war situation in Russia and Ukraine. “As Russia regulates gas supplies to Europe and other parts of the world, paper mills in Europe and even those in the U.S. and China are affected. The drop in demand is also due to China’s move to discontinue purchase of semifinished pulp from India.”

In addition to logistics, the biggest challenge to paper recycling is infrastructure. Molony also drew attention to the challenge in collecting and recycling liquid board packaging. “We have to pay a reasonable price in order to get it, hopefully extended producer responsibility regulations and fees will assist in improving collection of used beverage cartons.”

Identifying the issues surrounding shipping, Molony pointed out, “Unfortunately, South Africa is no longer seen as the gateway to Africa. We’re losing trades because of the lack of efficiency. Not to mention the knock-on effect of Covid. Post Covid, people are trying to restock their supply chains but unable to do it quickly enough. Though the pandemic is almost behind us, the stock pipelines of products have not been refilled.”

Advantage domestic business

 Biggers noted the supply chain disruptions are forcing domestic processors to keep the business local. “There are more hurdles with shipping today that domestic fibre suppliers are increasingly finding a market within the country.” In fact, it’s difficult for suppliers to transport things even domestically. Since the last one year, the labour cost and inflation have gone up. Truck driver shortage is also plaguing the paper industry.”

Pickard said, “I would say that the rising energy prices add to operational costs as well as transportation costs. The increase in gasoline and diesel prices has just been further complicated by the conflict in Ukraine”

On regulations and legislations

 With the increased awareness and public criticism, most countries around the world are working on new environmental laws and regulations to combat pollution, global warming and climate change. Many of the rules are. Jane Molony said, “We now have extended producer responsibility. Although paper would be collected and recycled even in the absence of an EPR policy, it’s certainly forcing other material streams to take responsibility for the end-of-life of their product. The fee from EPR can be utilised for infrastructure development. We should also work on sorting and separation at source, which is currently not mandatory in South Africa.” Biggers noted, “In the United States, there’s no national policy on EPR, and there probably won’t be one for a long time. Three states have passed and several more have initiated legislation. As far as the paper industry is concerned, it is already meeting the recyclable content requirement. The new law and legislation may cause a price increase to some degree. There isn’t any benefit really, because the required percentages of recycled content in the final product is already there.”

The European Union’s proposed waste shipment legislation has come under criticism for being “restrictive of free trade.” Biggers said, “If the European Union’s rules on waste shipment becomes a law, it will not be good news for the United States because we export recycled fibre to a lot of European countries. It will affect other shipments too throughout the world. The European market wants to be self-sustaining, keeping all the recycled commodities within itself. But everyone knows and many people have commented that it is not realistic because the European Union needs fibre from outside. So we’re encouraging them to let the market dictate rather than local law.”

Pickard commented, “I would say there are vested business interests that are at work and involved in restricting the free and fair movement of recycled commodities, whether that’s steel makers or paper mills or other consumers of recyclables in Europe and elsewhere. They would like to have a contained supply of materials within their orders. And so it’s important to keep in mind that without the free and fair trade of recycled commodities, you can’t fully capture the economic and environmental benefits of recycling. If the materials don’t get to the consumers that demand them the most, the purpose is lost. The ISRI has certainly been a strong advocate for the free and fair trade of recycled commodities around the world, especially in light of sustainability goals and circular economy aspirations.”

Brighter future

Despite these challenges, the future of the paper industry is bright, say experts, listing out the opportunities that the paper industry can take advantage of. “There will always be ups and downs in the industry. It is a dynamic market. We have to identify opportunities and adapt to them quickly,” said Budhraja.

The demand for sustainable packaging is seen as a positive trend. Venkatasubramanian said, “The ban on single use plastics should trigger demand for kraft grade paper bags. It will also enable recovered fibre generation. Increase in online business is an opportunity mainly for packaging grades. Stringent measures undertaken by many countries to reduce carbon footprint will certainly support and keep the recycling industry vibrant.”

Molony stressed the need for innovation in the packaging industry. She added, “Newsprint consumption has been declining. Hence, newsprint machines are slowly being converted into packaging machines. So you have to be flexible in your supply. You should have that swing production to process more than one product on a machine, especially if the market that you are serving is smaller such as South Africa.”

According to the CEPI report, the crisis of the coronavirus pandemic also accelerated certain trends, observed over the past decade. The rise of e-commerce boosted the paper and board packaging market, while it benefited from the substitution of other solutions, often triggered by the EU Single Use Plastics Directive. The production of packaging grades reached an all-time high in 2021, increasing by 7.5% compared to 2020. The most impressive growth was registered for the production of wrapping grades, used for paper bag production, which increased by 11.6%. It benefitted from the EU-backed phase-out of plastic packaging. Biggers said, “The future of the paper industry is bright. In January 2020, just before the pandemic in the United States, mixed paper sold at a negative value. But now, it’s doing really well. The Bureau of Labor Statistics, which monitors the price changes of recyclable paper, indicated that prices of recyclable paper are five times more now than they were 40 years ago. So the future, without forecasting, is good. There’s so much investment going on. Agreed, there are challenges, but it’s going to be good.”

Pickard noted, “I think the outlook for paper recycling is extremely bright, in part because of sustainability goals and environmental concerns, but also for practical purposes. Recycled paper and fibre tend to trade at a discount to virgin pulp. And so for manufacturers of paper and paper board, there are real economic benefits to using recycled content as opposed to virgin pulp.”