Recycle Florida TodayJanuary 2017 - Tampa

Recovered Paper Market Trends

Bill MoorePresidentMoore & Associates

Atlanta, GA

www.MARecycle.com

Moore

& Associates

Moore

& Associates

Moore & Associates –Paper Recycling Market Consultants

• Recovered Paper Market Experts

• Based in Atlanta, Global Practice

• Market Research

• Strategic and Tactical Business Assistance

• Pricing Analysis

• Recovered Paper Sales & Procurement Assistance

Moore

& Associates

Changes in the World Use of Paper & Board

• Recycling starts with paper and board production: we have to use it before it can be recovered

• Major global change in the graphic papers markets: newsprint, magazines, and printing/writing grades

• Production and use trends in the developed parts of the world (US, Western Europe, Japan) have been trending down for ten years now

• But the rest of the world use of these papers is about flat, with even some developing and emerging markets showing negative growth

Moore

& Associates

Paperboard Packaging Grades

• In contrast to the graphic papers sector, paper based packaging is growing well

• In the developed markets there is still growth, in the developing regions (includes China) some growth is the norm, and in frontier and emerging markets growth should be strong

• Containerboard and cartonboard expansion will almost all be based on recycled fiber

• Much of the capacity increases (especially in the developed regions, but not limited to there) will be from graphic paper machine conversions

• Expect pressure on OCC supply and to a lesser extent Mixed Paper

Moore

& Associates

US Mill Capacity Change By Grade(tons)

Major Grade 1995 2015 Change % Change

Market Pulp 14,527,830 11,891,147 -2,636,683 -18%

Newsprint 6,558,860 1,891,201 -4,667,659 -71%

Packaging 53,002,204 53,720,361 718,157 1%

Printing & Writing 27,627,131 15,258,957 -12,368,174 -45%

Specialties 3,125,315 3,810,032 684,717 22%

Tissue & Towel 6,994,597 8,520,719 1,526,122 22%

Total 111,835,937 95,092,417 -16,743,520 -15%

Moore

& Associates

North American Recovered Paper Collections(Million Tonnes)

Export share: 1990: 24%, 2000: 26%, 2010: 39%, 2016: 32%

Moore

& Associates

US Mixed Paper Market Issues

• Potential downside/bottom of the market cycle problems (or opportunities for buyers!) – over supply

• Quality – fiber length, mix, and non-paper contaminants: significant capital expenditures at the mill needed to use the grade and low yield

• Not a grade that was historically produced in large quantities, but residentially derived Mixed Paper changed that

• China purchases the largest amount of US collected Mixed Paper

• US mills with a few exceptions (Pratt being one of them) use minimal Mixed Paper

Moore

& Associates

ONP Supply/Newsprint Market Issues

• Structural continuing decline in newsprint use in all the world’s developed and developing economies. Even emerging and frontier economies use is sluggish and future growth limited.

• Declining newsprint supply; increased worldwide recycle mill capacity for use of ONP - but not for newsprint, primarily in cartonboard; rising recovery rates = upward price pressure, especially at low end of cycle

• North American and European containerboard machine conversions. More to come, other regions?

• Merging with Mixed Paper as a grade – price and quality/fiber composition

• True deinking quality ONP becomes a premium grade – limited supply, higher prices

Moore

& Associates

Producing Paper & Board in the US Using Recycled Fibers

• For the last several decades, recycled fiber has had a distinct cost advantage over virgin fibers for the production of newsprint, away from home tissue products, containerboard, and recycle paperboard. But not for printing/writing grades and high end packaging.

• Increasing recovered paper costs over the next ten years may change the cost advantage dynamic:

– Higher commodity cycle costs

– Lower quality, shorter fibers and non-fiber contaminants -lower yields, higher processing costs

Moore

& Associates

US Mill Demand Trends

• OCC demand remains strong due to growth in containerboard usage – conversion of newsprint/graphic paper machines to recycled containerboard

• ONP demand declining in the face of greatly reduced newsprint production and the shift toward virgin fiber based newsprint (shutdown of recycled capacity) – low quality ONP and higher cost to produce newsprint from recycled fiber

• Little new demand for Mixed Paper

• Recycle fiber growth as a percentage of furnish for the US (and global) tissue/towel industry has peaked – lower quality high grades, widely available tropical hardwood bleached pulps, and higher mill processing costs

Moore

& Associates

The PSI Guideline/Specification Changes

• The changes have not been without controversy

– Exporters/overseas buyers

– Where does ONP really fall

• RISI/PPW has begun reporting prices for #54 Mixed Paper and #56 Sorted Residential Paper prices, but not yet #58 Sorted Clean News

• They are still reporting the old Mixed Paper grade and #8 ONP – the pricing so far has been the same for Mixed Paper and SRP the same as #8 ONP

Moore

& Associates

Moore & Associates and Kessler Consulting Recovery Rates Study

• Why we did the study

– Measuring/reporting:

Too many methods = inconsistency & confusion

– NOT “speaking the same language”

– EPA’s methodology believed to have flaws

– EREF’s* approach offers better starting point

* Environmental Research and Education Foundation

Moore

& Associates

73.0

21.330.7

222.0

64.8

22.632.8

133.9

0.0

50.0

100.0

150.0

200.0

250.0

MaterialsRecovery

OrganicsRecovery

Waste toEnergy

Landfill

Mil

lio

n T

on

s

EREF EPA

EREF vs. EPA

Base year = 2013

EPA Recovery = 34.4%EREF Recovery =27.2%

Moore

& Associates

15% 15%

10%

15%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Community A Community B

Re

co

ve

ry R

ate

Residential MSW Commercial MSW C&D

Two Communities … Two Recovery Rates?

Moore

& Associates

Quality of Information

87%

13% 9%

13%

65%

43%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Residential ICI C&D

Perc

en

t o

f S

urv

eyed

Lo

cal

Go

vern

men

tal

Actual Estimate

Moore

& Associates

US Residential vs. Industrial/Commercial/Institutional (ICI) Recovery

Moore

& Associates

Demystifying Recovery Rates:Summary of Our Analysis

Materials Recovery

21%

Organics Recovery

6%

MSW Generation& Management

347.0mm Tons

Landfill & Waste-to-Energy

73%

Source: EREF

ICI 57%

Residential 43%

347.0mm Tons

Residential & ICI MSW Generation

Source: Moore & Assoc.

and KCI

Moore

& Associates

ICI = 234.8ons

77%(115.9mm Tons)

69%(136.8mm Tons)

4% (8.0mm Tons)

27%(52.7mm Tons)

Landfill & Waste-to-

Energy

ICI MSW (197.6mm Tons)

Residential MSW (149.5mm Tons)

9% (13.3mm Tons)Organics Recovery

Materials Recovery

14%

(20.3mm Tons)

Summary of Our Analysis

ICI 57%

Resi43%

• ICI accounts for 57% of all MSW generated, but 72% of materials recovery.• The recycling rate within the ICI segment is nearly double the residential rate. • Note: numbers may not add due to rounding.

Moore

& Associates

Long Term Average Annual US OCC Price

Moore

& Associates

OCC - Export Prices from the US, UK & Germany

Notes: USD per metric ton; UK Pound to USD – 1.25; German Euro to USD – 1.04

Moore

& Associates

Mixed Paper – Export Prices from the US and UK

Notes: USD per metric ton; UK Pound to USD – 1.25

Moore

& Associates

Long Term US Average Mixed Paper Price as a Percentage of OCC Price

Moore

& Associates

Longer Term US Average Domestic FOB ONP Price

Moore

& Associates

Longer Term US Average Mixed Paper Price as a Percentage of ONP Price

Moore

& Associates

Chinese Domestic Collections and Net Imports of Recovered Paper

Million Tonnes

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Moore

& Associates

Thank You for Your Attention