Holmen Paper uses recovered paper at its newsprint mill in Madrid, where production is based entirely on the use of recovered paper. Since 2015, the Swedish mills have been exclusively using fresh fibre due to a transition to new products for book and magazine production with higher brightness and bulk. The raw material base has therefore switched to fresh fibre. Raw material use has thus changed at the Swedish units.
Market trend for recovered paper
Asia and its packaging industry are major users of recovered fibre in global terms. The majority of all recovered fibre is used in manufacturing packaging and paperboard. Global demand saw stable growth in 2015 (0.6 per cent). Asia saw the biggest growth (1.5 per cent) while Eastern Europe and Latin America have reduced their consumption somewhat. The trend in North America and Western Europe remained stable over the year.
The European newsprint sector is predominantly based on recovered fibre, while other graphic papers have a considerably lower share of recovered paper in the production. Capacity expansions within the packaging sector, mainly in Asia but also in Europe, are based mainly on recovered paper. Over the long term, demand for recovered fibre will therefore increase. Economic development is a key driver of demand for recovered fibre. Chinese imports of recovered fibre rose by 6.4 per cent in 2015. This increase can in large part be explained by a substantial drop in imports in 2014 (-5.9 per cent). Growth in Chinese consumption will, over the coming years, involve higher domestic collection, since the supply of approved import permits is low.
European prices for recovered paper rose in the early part of 2015. This trend was broken in the second half of the year with a downturn in prices. For the whole of this period, prices remained at what can be considered a "normal level". The price trend for recovered newsprint and recovered paperboard followed suit. It is important to note, in this context, that the packaging industry is able to pass the price rise for recovered fibre onto its end customers, thanks to high solvency. This stands in contrast to the newspaper industry, which is experiencing a very tough market situation, with shrinking demand and margins as a consequence.
The reduced use of printing paper will have an impact on the balance in the raw material market. This is because large parts of the production of newsprint, in particular, are currently based on recovered fibre.
Consequences for Europe
The European recovered paper market is going to change:
- Continued structural decline in the supply of higher grades such as office and printing paper.
- Capacity increases in recovered paper, primarily in the packaging segment and outside Europe.
- Continued high volumes of recovered paper for export outside Europe.
The high demand for recovered paper from the packaging sector continues. At the same time, demand for recovered paper for the manufacture of printing paper is falling. As a consequence, there will be a greater risk of impure consignments that contain old newspapers and magazines as well as various types of paper packaging. This risks a loss of focus on pure collection streams for each type of material.
The increased competition for recovered fibre means that substantial quantities of recovered paper for deinking (old newspapers and old magazines) are sold to the packaging industry as "mixed paper" or unsorted recovered paper. This greater proportion of "mixed paper" is partly a consequence of a reduced proportion of paper collected from households and partly due to the fact that some countries do not sort the material at source but instead co-mingle material. Holmen Paper's experience of co-mingled collection is poorer quality material. One result of this is that the newsprint industry is forced to pay a higher premium for sorting and material of good quality.
Procurement in Spain
Much of the recovered paper used at Holmen Paper Madrid comes from CARPA, a wholly owned paper recovery company, and from partly owned companies. Just over half of the recovered paper is purchased in Spain. Other volumes are imported from France and Portugal. Spain is a net importer of recovered paper due to high imports of recovered paper for deinking.
The collection system in Sweden – producer responsibility
Holmen is co-owner of Pressretur AB, whose task is to ensure that recovered paper is collected effectively from consumers. Pressretur serves the majority of Swedish producers of newspapers, magazines, catalogues and direct mail. The company is active in collections from recycling stations and also organises curbside collection in partnership with contractors. Over 90 per cent of the paper that the producers place on the Swedish market is currently collected after use.
Producer responsibility for newsprint
Legislation on producer responsibility for recovered paper came into force in Sweden in 1994. This legislation regulates the obligation of producers, defined as newsprint manufacturers, printers and publishers, to collect and recover paper supplied to the Swedish market. In 2013, over 90 per cent of all newspapers, magazines, catalogues and direct mail were collected in Sweden. The EU's recovery goal of 75 per cent was achieved as early as 1997. A joint company, Pressretur AB, has been formed by Sweden's producers, including Holmen. They will be setting up a national collection system that has a high level of acceptance among consumers of print media and a good service level.
Producer responsibility has been under review for a number of years. In August 2014, the previous coalition government established the current system, where the producers have main responsibility for collection and for recycling.
The government now in power has indicated that it would like to see municipalities shouldering responsibility for collection. A commission of inquiry has therefore been set up. A political decision on the issue is expected once the inquiry has published its report. It is therefore highly likely and regrettable that the uncertainty surrounding the future system of producer responsibility is set to continue. This uncertainty is leading to major risk-taking when it comes to forecasting future competition for recovered paper as a raw material. This is of particular concern, since Swedish producer responsibility under today's system is of absolute world class. Sweden is unique in having a collection system that differentiates between packaging paper and printing paper. Today's recovery rate of over 90 per cent of the newspapers placed on the Swedish market exceeds even the higher future target.
Interesting facts about the recovered paper market
- 74 per cent of all paper and paperboard consumed in Western Europe is thought to have been recovered in 2014 (Source: RISI)
- Paper fibres can be used five to seven times before they become unusable.
- Globally, paperboard and packaging production is forecast to rise by 16.8 million tonnes between 2014 and 2017. Over half of that increase will occur in China (Source: Numera Analytics)
Recovered paper is a key raw material component in global paper and paperboard production, accounting for around 50 per cent, and the single largest fibre raw material in paperboard production.