Waste Paper Market under Global Pressure

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The global financial crisis is sending prices into free fall.
Developments on the international market are also having a very turbulent effect on the waste paper sector: order cancellations at paper mills, full warehouse space, production cutbacks and only sluggish exports are all putting a strain on the sector. The orders climate affecting manufacturers of card and paperboard as well as price pressure on their new products are leading to cuts in production and waste paper surpluses at factories and waste paper disposal companies.

The current financial and economic crisis is having a considerable impact on the international paper industry. Developments on the markets for paper, card and paperboard are characterised by heavily declining demand on the German, European and global markets. Extended downtime at numerous paper mills and a knock-on decline in demand for waste paper are the results here. The speed of market change was unprecedented and unpredictable for all involved in the value added chain, say the Federal Association for the German Disposal Industry (Bundesverband der Deutschen Entsorgungswirtschaft – BDE), the Federal Association for Secondary Raw Material and Waste Disposal (Bundesverband Sekundärrohstoffe und Entsorgung – bvse) and the German Pulp and Paper Association (Verband Deutscher Papierfabriken – VDP) in a joint press release.

Already in the first half of 2007 waste paper consumption in Germany had risen considerably over the previous half year. In the first half of 2008 the market remained stable: exactly the same amount of waste paper was consumed at paper mills as in the first half of 2007 (7.84 m tonnes) – but then the tide finally turned: the orders climate with manufacturers of card and paperboard worsened, price pressure on new products grew and waste paper stocks have been rising since. The developments on the paper markets have led to a drastic loss in value of the secondary raw material waste paper. This must under no circumstances be allowed to jeopardise the overall positive political developments in paper recycling and the value added chain, warn the associations.

Valuable Waste Paper

Waste paper has always been of value. Already early on waste paper was used for the production of new paper products. Nevertheless, waste paper was still largely thrown away up until the 80s. When it became clear that disposal site capacity would one day be exhausted the idea of recycling caught on. This realisation that you could reuse waste as a commodity or at least recycle it led to an economic boom in the sector: as raw materials depleted demand for the secondary raw materials rose enormously.

All this makes corrugated board packaging – for instance – a particularly ecological product that is recycled in Germany to virtually 100 %. Today more than 75 % of the paper used to manufacture corrugated board comes from recycled waste paper. As single-material packaging corrugated board is processed direct at the paper mill primarily as the base material for new packaging with no additional need for sorting and separation. Thanks to processing techniques that are particularly gentle on fibres the high quality of the recyclable material is maintained for repeated recycling. According to usage figures from the German Pulp and Paper Association (Verband Deutscher Papierfabriken – VDP) the recycling quota – supported by the import of waste paper – stands at over 100% when measured against the annual production of the German corrugated board industry.

The Waste Paper Crisis is Global

“Rarely have we been able to look back on a year where light and shade lay so close together,” says Chairman of the bvse specialist association for paper recycling, Hubert Neuhaus, summing up the situation. “Good waste paper business in the first half of the year and a market crash in the second half.” According to Neuhaus’ estimates there can be no doubt that 2009 “will offer more stormy weather than bright sunshine”. On the other hand, he is sure that these hard times, in particular, will show that waste paper professionals boast skill and experience. “It will become apparent that our business cannot be mastered by just anyone!” In the magazine programme Frontal 21 on Germany’s ZDF TV channel Hubert Neuhaus stressed: “It has taken on a new dimension. And if previously we were able to say the economy will recover and in three or four months it will pick up again – we cannot say this at the moment because we just don’t know.” The waste paper crisis is global.

The current financial crisis has an increasing impact on the real economy. Against the backdrop of worldwide recession global markets are posting clear drops in sales across a broad front; the drop in production affecting almost all sectors is curbing world demand for raw materials. At present this is still primarily affecting the sale of secondary raw materials – like waste paper. For years now almost as much waste paper has been used in the paper industry worldwide as cellulose, with waste paper increasingly replacing the primary fibre as a raw material. This has long since made waste paper a central resource in the paper industry.

In June of last year at the Waste Paper Congress of the Federal Association for the German Disposal Industry (Bundesverband der Deutschen Entsorgungswirtschaft – BDE) still found that Europe and Asia were the main customers of waste paper while the main suppliers were the USA, Europe and Japan. The demand for waste paper in Asia virtually tripled in the last 16 years while new paper production doubled in the same period. In 2006 40% of the total demand for waste paper came from Asia – at present customers like China and Indonesia have virtually stopped buying in the wake of the financial crisis.

A great crisis is also affecting the Swiss waste paper market, for instance. The waste paper trade has to pay to “get rid of” its goods at paper mills, said the Association for Steel, Metal and Paper Recycling Switzerland (Verband Stahl-, Metall- und Papierrecycling Schweiz – VSMR) at the end of the year. Already in November prices for mixed paper waste reached a low at which costs for transportation and processing could no longer be covered without additional charges being borne by suppliers. Even high-quality types are affected by the negative price trend. The financial crisis and economic reticence in view of the announced recession were also stated as reasons for the critical situation.

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