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Recovered Fiber: Generation and Recovery

May 03, 2012
Author: Suz-Anne Kinney

Based on the increased convenience of recycling these days—single stream curbside pickup and adoption of recycling at business parks, schools and public buildings—it seems logical that the supply of recovered fiber would be increasing as well. Because the economy, technology advances and natural disasters all impact fiber supply and generation, however, supply constraints are not uncommon.

The following table illustrates the complexity of the relationship between fiber generation and the economy. The supply of fiber began dropping in 2007, the year the recession officially started. In 2009, the year with the slowest growth during this seven-year period, fiber generation was at its lowest. As a result, though the recovery rate was 63.4%, total fiber recovered was at its lowest—50,036,000 tons.Overall, though the recovery rate has increased every year since 2005, from 51.5% to 66.8%, the actual number of tons of recovered fiber has remained relatively constant. In 2011, the total tons collected were below 2006-2007 levels. The figure below illustrates these trends.

recovered-fiber 2006-2007

The important correlation here is GDP. Until GDP shows strong growth and the unemployment rate decreases, generation will not increase. In addition, discretionary household income is being strained by the lackluster economic environment, unemployment and underemployment. People spend less on items that require packaging and shipping cartons as a result.

The weak housing market has a similar effect because moving into a new home generally sets off a string of purchases that require packaging and shipping. Finally, consumer goods companies have repackaged and reduced product sizes in lieu of price increases resulting in less packaging to be recycled. Together, these events have led to lower generation rates and, therefore, fewer tons of recovered fiber on the market.

The advancement of technology in both developed and underdeveloped countries has resulted in decreased paper and packaging generation as well.  Tablets and SmartPhones have replaced paper in many cultures.  Sorted Office Paper generation is directly impacted by the results of “paperless” initiatives.  In 2009, for instance, the Federal government began offering incentives for paperless medical records.  The adoption of this initiative will negatively affect paper volumes as acceptance moves through the medical community.

Multiple trends in technology portend further shrinking of the fiber supply. In general, people worldwide:

  • Fax less—The ability to scan and send more is widely available and more precise.
  • Write fewer checks—Online bill pay and wire transfers are increasingly more common.
  • Mail less—Online statements and electronic invoices are becoming the norm.
  • Read fewer printed materials—online books, magazines and newspapers are increasing in popularity.
  • Shop online—Impulse purchases have been reduced as shoppers flock online; items displayed at front registers are packaged and shipped in cartons, but fewer people are in the store to be tempted by them.

On the recovered fiber side, nature can be a friend or foe to demand and collections, either shifting demand or restricting supply.

  • Snow and ice—While this past winter was mild with little impact on collections, severe winter weather limits the amount of fiber that can be recovered.
  • Rain—Rainy seasons with above normal rainfall amounts can impede logging.  Mills using both virgin and recovered fiber may increase the recovered fiber usage.
  • Earthquakes—The 2010 Chilean earthquake put a strain on the pulp sub market.  Approximately 9% of the world’s pulp is produced in Chile.  Mills typically using pulp pushed back on the pulp sub market, running Hard White Envelope and Unprinted SBS.
  • Tornadoes and Hurricanes—The impact of tornadoes and hurricanes is local.  The extent to which collections are impeded is correlated to the extent of the damage.

Ultimately, trends toward slower growth over the near (and perhaps long) term, wider adoption of paperless technologies and what appears to be an increase in natural disasters will limit both fiber generation and recovery. These trends are likely to support recovered fiber prices.

At the end of the first quarter of 2012, US-wide weighted average prices for OCC and DLK, as reported in Mill2Market at the end of the first quarter of 2012, increased. OCC traded on the open market for an average of $140.36/ton in March (US-wide average), an increase of $10.55/ton, with significant price variation of the period and an increase in volume over the previous month. Contract prices for OCC were $139.41/ton (US-wide average), an increase of $8.81/ton during March, with mild market price variation and no change in volume over the previous month. DLK traded on the open market for $153.41/ton (the US-wide average), an increase of $8.48/ton with mild market price variation and an increase in volume over the previous month.

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