Written by: Peter Engel and William Moore on October 29 2013 for Pulp & Paper International (PPI)

Recovered paper (RCP) supply is heading towards global supply challenges which points towards less developed countries as only major untapped sources. However, the normal conditions that drive recovery – RCP value versus virgin fiber, recovery costs lower than waste disposal costs, and efficient collection and processing infrastructure – are absent or limited in many of these areas. A number of opportunities and solutions have been tried, and more work is needed to overcome the unique challenges in less developed countries and to increase RCP recovery to sustain the industry’s need for recycled fiber into the future.

WHERE TO LOOK FOR NEW SUPPLIES?

According to RISI’s 2012 Outlook for Global Recovered Paper Markets, worldwide recovered paper (RCP) demand will increase by approximately 40 million tonnes from 2012 to 2016. Most of that new demand growth will be in developing countries, with China accounting  for about 60% of expansion but also notably elsewhere in Asia and South America. Meanwhile, RCP supply from the traditional “breadbaskets” of North America and Western Europe is forecasted to grow by just by less than 3 million tonnes over the next five years due to limited economic growth and recovery rates approaching maximum achievable levels. So where is the RCP supply going to come from to meet future demand? The RCP industry needs to focus in developing countries, where current recovery rates are comparatively low. Global RCP recovery rate was 57% in 2012, with Japan, Western Europe, and North America leading the pack at 78%, 73%, and 65% respectively, while the countries that lead demand growth trail well behind the global recovery average. Currently, domestic RCP demand exceeds supply in China, India, Indonesia, Thailand and other countries.  Looking at the global RCP picture through the lens of RCP grades and finished products, Table 2 and  3, the important take aways include:

  • Overall OCC recovery rate is already quite high with little room to increase the rate and any ncreased tonnage due primarily to increased supply;
  • ONP recovery is moderate but supply is shrinking due to declines in the newsprint sector;
  • Mixed paper and high grades recovery are comparatively low and represent the primary source for future growth in RCP tonnage.

Table 1- RCP consumption, usage and recovery- Select countries and regions 2012

REGIONAL AND COUNTRY HIGHLIGHTS

The RCP recovery market picture varies from country to country. In the most important country to the global recovered paper market, China, a large percentage of paper packaging materials is exported and thus cannot be recovered domestically. The government’s commitment to a 70% recycling goal is expected to mean major investments in recovery infrastructure.

Thailand’s situation on OCC recovery is much the same as China’s as many boxes are shipped out of the country containing goods. In India, export of packaged goods is much lower. Despite this fact, India’s paper recovery rate is estimated at 26% versus 44% in China in 2010.

The key factors affecting the supply and demand of recovered paper in the emerging/developing regions of the world are summarized:

  • India- has a high dependence on recycled fiber for paper/board and printing/ writing papers production, very little domestic virgin pulp supply, very low disposal cost, and low recovery and high RCP cost.
  • China- printing/ writing and tissue papers and high quality packaging are primarily produced from virgin fiber, other packaging grades (container and cartonboard) use high levels of recycled fiber, disposal costs are low, recycled fiber cost are very high, and domestic recovery of packaging grades (primarily OCC) is fairly high. Significant amounts of packaging grades produced in the country are export.
  • Thailand & Vietnam (SE Asia) – have good virgin short fiber production for printing/writing papers, packaging grades are highly dependent on recycled fiber, much of the packaging produced is exported, domestic recovery is fairly low, and disposal costs are low.
  • Indonesia- has significant virgin short fiber production for printing/writing and tissue as well as export, board products and newsprint rely primarily on recycled fiber, in-country fiber recovery is low, and there is less of an export economy than China and SE Asia.
  • Brazil- has significant pulp production especially short bleached fiber, overall RCP grades are under-recovered, and RCP demand is limited because of significant virgin supply.
  • Russia- has high virgin fiber use in most grades with some recycled fiber based packaging grades, domestic recovery is low, and disposal costs are low but increasing.
  • Middle East & North Africa-  all paperboard and most tissue production capacity is based on recycled fiber, there is no appreciable graphic paper production capacity recovery rates are low, as are disposal costs.
  • Mexico-  has one of the highest utilization rates in the world of recycled fibers in almost all grades (printing/writing grades being the exception), disposal costs are generally low although rising near the large cities, and recovery rates are rising.

Table 2- Global RCP recovery rates 2012

Table 3- Global RCP Consumption 2012

PAPER RECOVERY IN LESS DEVELOPED COUNTRIES: KEY CHALLENGES

Boosting RCP recovery in emerging and developing countries faces many challenges. The infrastructure, institutions, regulations and financial underpinnings for recovery – the enabling context for recovery in North America and Europe – are fragmented or insufficient in most developing countries. The unique conditions, strengths and weaknesses of the recycling value chain and municipal waste management must be recognized in order to develop successful strategies for RCP recovery systems in developing countries.

Value: in less developed countries, the recycling sector is economically driven; in particular the intrinsic value of recyclable materials drives the value chain. For example, in China and India many households in cities have access to informal collectors and waste buyers for corrugated/solid fiber boxes and newspaper. If money cannot be made on a particular material (i.e. the market value is not sufficient to support actions across the value chain) and/or there is no domestic end-users, then it is not collected from households and business. This is fundamentally different than North America and Western Europe where socio-environmental drivers (e.g., the reduce-reuserecycle waste management hierarchy) and avoided disposal costs help determine what is recycled.

Contamination: For mills in less developed countries, obtaining RCP that meets quality requirements is the biggest issue. Separation at the source prior to collection and disposal is the most effective means of limited contamination, but the only types of RCP that are source separated are the ones with existing value and market as discussed above. Municipal solid waste in less developed countries has more wet organics waste than dry packaging waste. Once paper and packaging has been mixed with other waste, it quickly becomes too contaminated to be readily recyclable. Because of the gap between generators and mills in the recovery chain, the value of some grades of RCP (notably office paper) is not effectively communicated up the recovery chain to incentivize source separation. Linkages across the recovery chain are needed.

Informal sector: The informal sector – waste pickers, itinerant recovered material buyers, and scrap dealers not part of the formal economy – traditionally plays an essential role in the recovery chain, especially in the first steps of collection, sortation and selling of RCP. Waste pickers and itinerant buyers perform the critical first link to collect RCP from households, businesses, streets and dumpsites. In the case of door-to-door collection, households may be paid or their waste collected at a reduced fee in exchange for the value of the recyclable paper. The informal network of collectors, buyers, and scrap dealers then sell RCP to the formal economy of recyclers who consolidate materials into commodities purchased by recycle mills.

Government engagement: Major cities in less developed countries face multiple challenges: rapid growth and urbanization, inadequate infrastructure, limited governmental capacity, limited financing, insufficient environmental regulations and enforcement, corruption and lack of business transparency. Local governments struggle to provide basic public health and environmental protection services (clean water, sanitation, and waste collection). They typically have limited capacity and involvement in recycling. Efforts to establish municipal recycling programs are rarely successful and sometimes even disenfranchise well-functioning informal sector recovery. In less developed countries, the lack of well-functioning municipal recycling contributes to the lack of robust recovery supply chains for RCPs. To put this in perspective, developed countries might still be relying on volunteer drop-off programs to collect newspapers, magazines and mixed paper if not for the recycling policies, mandates, and investments made by government to build municipal recycling programs.

RCP market structure: In less developed countries, traditional RCP supply chains are generally locally driven by small capacity mills seeking supply within their metropolitan area. Given limitedamounts of capital investment in the supply chain and low labor costs, most sorting activities are performed manually in small workshops which handle a several tons per day of RCP. And transport routes are served by small capacity trucks (e.g. <10 tonne). In large cities there may be thousands of independent waste brokers and scrap dealers all moving relatively small quantities of materials. With notable exceptions for state-of-the-art large RCP mills in countries such as China and Brazil, the traditional RCP mill sector in less developed countries has been dominated by small mills with small supply basins.

RCP market coordination: Local and highly complex market structures mean there are many diverse actors and complex relationships. Most transactions are based on verbal agreement and historical practices. Standard industry grade specifications are not commonly referenced. For example, ONP is sometimes considered to be purely discarded newsprint, while international ONP grades include a wider range of mechanical fibers which currently go unreceovered or under-recovered in less developed markets. Established, formal commodity markets with price indexes and common understanding of RCP grades may not exist. Lack of transparency and coordination can make it difficult for RCP markets to expand.

OPPORTUNITIES AND SOLUTIONS

Efforts to increase RCP collection in less developed countries are framed by the challenges outlined above, and must be based on the unique conditions – strengths and weaknesses – in a given country. Following are some general solutions for the common conditions encountered upon which customized solutions can be created.

Recovery value chain development: By connecting linkages in the recovery value chain, one can increase domestic supplies of RCP. This work can be led by different stakeholders – not necessarily the mill. For example, Tetra Pak has been instrumental in developing recovery supply chains for paper cartons in less developed countries. Its initiatives are driven by a 40% global recycling goal by 2020. The company has worked to establish the intrinsic value of  used cartons, identify RCP mill demand, and make targeted investments in collection and processing infrastructure. These initiatives have established the “demand pull” that enables waste pickers to collect used cartons without relying on government-led programs. Similar strategies can be used to develop mixed paper and high grade recovery.

Government and informal sector engagement: Integrating waste pickers and municipal waste services can leverage each sphere’s drivers to increase RCP recovery. For example, Bogota, Columbia, has launched an initiative to enfranchise informal sector waste pickers for recycling collection and processing. Waste pickers are given formal recognition and status and paid a guaranteed wage to collect recyclables from a specified area. Thus, they do not need to rely solely on the value of recyclables for their livelihood. With this type of approach it can be possible to drive source-separation of lower grade RCP that can meet mill quality specifications. In Venezuela, waste picker cooperatives are working to secure guaranteed access to recyclables and to be in charge of sorting plants in coordination with local governments. In these examples, significant issues still need to be resolved for the systems to be sustainable.

Pricing of waste disposal: Two factors led to public sector-driven materials recovery: the waste management hierarchy which recognized recycling as preferable to disposal and solid waste disposal regulations which put a clear price tag on proper disposal. Incorporating the true cost of environmentally-sound disposal in MSW management systems establishes a key economic driver for recovery, especially for grades of RCP where intrinsic values are low (mixed paper) or end market capacity is limited (highgrades) in less developed countries.

Voluntary industry coalitions: There is a growing convergence of interests regarding recycling in less developed countries. Consumer packaged goods brand owners, packaging manufacturers, recyclers, NGOs and donor agencies all share the goal of building circular economies that recover packaging and products including RCP. Typically, the RCP industry has “minded its own business”. But in less developed countries, the challenges of developing a sustainable material recovery system can be too much for the RCP industry to handle alone. CEMPRE Brazil was formed in the 1990s by multi-national corporations (including Coca-Cola, Tetra Pak, Unilever and others) to build sustainable materials recovery. Based on its success, similar organizations have been established in Colombia, Mexico, Thailand, and Uruguay. They support waste picker cooperatives and municipalities to increase recycling by providing technical assistance, institutional capacity building, recycled materials markets information, advocacy, and more.

RCP industry trade groups: The RCP industry cannot always rely on government to play an active or supportive role to increase RCP recovery. In fact sometimes, lack of government capacity or poorly conceived policy can negatively impact RCP recovery. The mills, packers and brokers can protect and advance growth by acting together where they share common ground. Trade associations can establish market data and advocate for supportive national and local policies and regulations. By tracking industry and market data, it is possible to increase transparency, establish common standards and specifications, and identify and disseminate best practices.

SUMMARY

Paper recovery in developing and emerging countries is a next frontier for the RCP industry, especially in Asia and Latin America where consumer economies are growing rapidly and existing recycling infrastructure is limited. The challenges are multi-faceted – not just related to the “hardware” of facilities and transportation, but also the “software” of public attitudes, solid waste and recycling policy, municipal capacity, and inclusion of the informal sector that are unique to less developed countries – and these challenges can be surmounted. Paper recovery in less developed countries can be successful when undertaken in the broader context of modernization of waste collection, inclusion of waste disposal costs in decision making, inclusion of the informal sector in recovery systems, and opportunities for multi-stakeholder solutions.