Recovered Paper Market Update

Brian Hawkinson, AF&PA

MassRecycle 2016 R3 Conference

March 29, 2016

Quincy, Mass.

About AF&PA

• Advances a sustainable pulp, paper,

packaging and wood products

manufacturing industry

• Fact-based public policy and marketplace

advocacy

2

AF&PA’s 2020 Sustainability Goals

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1. Paper Recovery Exceed 70%

2. Energy Efficiency Increase purchased energy efficiency

by at least 10%

3. GHG Emissions Reduce intensity by at least 15%

4. Forestry Increase certified fiber procurement

5. Safety Reduce incidence rate by 25%

6. Water Reduce use in mills by 12%

Recovered Fiber Markets

• Complex, dynamic, efficient

• Global demand

• Collection commitment by many parties • Municipalities

• Paper manufacturers

• Recycling companies

• Schools

• Businesses

• Millions of Americans

• Not served by regulations that restrict market-based collection or use

U.S. Recovery of Paper & Paper-based Packaging

• Overall: 65.4% (2014)

• Exceed 60% recovery past 6 years

• True environmental success story

• On track to meet Better Practices Better

Planet 2020 goal

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U.S. Paper Recovery Rate 1990-2014

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Actual

Trend

Source: AF&PA

Historical Paper Market Trends

Historical Paper Market Trends

0

5

10

15

20

25

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Mixed Grades

Newspapers

Corrugated

Pulp Substitutes

High Grade Deinking

U.S. Recovered Paper Consumption

by Major Grade 2004-2015 (million short tons)

Historical Paper Market Trends

8

0

5000

10000

15000

20000

25000

Th

ou

san

ds o

f S

ho

rt T

on

s

U.S. Consumption of Recovered Paper by End Use 2004-2014

Paperboard

Paper

Construction Paper & Board

Other

Global Demand for Recovered Paper (2015-2029)

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Source: RISI

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Global Recovered Fiber Demand vs. Paper and Paperboard Output

Demand

Output

Opportunities for Increased Recovery

• Grades

• Paperboard

• Office papers

• Sources

• Office buildings

• Smaller commercial/institutional

• Exurban communities

• New initiatives

• Education

Affect of Quality on End Markets

• Recovered Paper quality is marketplace issue

• Must meet production specifications: • Cost

• Availability

• Functionality

• Performance attributes of finished product

• Processing requirements vary by grade

• Mills procure fiber that best meets production

specifications

11

Government Policy Challenges

• Mixed-waste processing systems

• Extended Producer Responsibility

• Recycled content mandates

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“One-Bin Collection”

Challenge to Increasing Recovery

• Mixed waste processing systems (MWP)

• Concept

• Collect dry recyclable materials with wet & organic garbage

• Separate recyclables on processing line

• Residuals to WTE, RDF or landfill

• Increasing pressure on municipalities

• Cost management

• Meet diversion goals

Understanding MWP

• Research (2014)

• 5 currently operating MWP systems

• MWP systems vary

• Key findings

• Quality & quantity concerns justified

• Sometimes fail to separate fiber

• Usually produce lower quality fiber

• Recover lower percentage of fiber

• System type & participation drive quantity

Mixed Waste Processing Economic & Policy

Study (2015)

• Purpose

• Is there a market-based economic case?

• Inform future decisions regarding

engagement in objective manner.

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Project Overview

• Evaluated Single Stream (SS) & MWP

processing systems

• Economic analysis based on several scenarios

using a representative large city:

• 250,000 residential households

• 325,000 tons generated annually (refuse and recycling)

• Interviews with AF&PA members and MWP

system operators

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Key Findings

• Every Situation is Unique - No “one size fits all”

solution

• Net cost to operating both Single-Stream (SS)

and MWP systems

• SS systems focused on recovering more

recyclable materials

• MWP more focused on recovering metal &

plastic; less on paper

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Key Findings (cont’d)

• MWP requires greater capital investment

• Economics favor SS as recovery rates increase

• High-performing SS system more economically

viable than MWP

• MWP added to already successful SS presents

an option to achieve higher recycling rates

Extended Producer Responsibility

• AF&PA opposes for paper & packaging

• Markets for recovered paper are developed

• Broad consumer access to paper recycling

• Paper is recycled at a high rate

• Will not increase paper recovery

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Policy: Recycled Content Mandates

• AF&PA promotes open market access for all products

• Choice of fiber strikes balance among quality, cost, functionality and production performance

• Recycled content mandates: • Make markets for recovered fiber less efficient

• Prevent recovered fiber from going to highest value end use

• Raise cost of production for new paper products

• Narrow available choices for consumers

• Unlikely to drive increased paper recovery rate

Recycled Content Mandates

“Best Practices” for Sustaining Recovered

Paper Markets

• Free marketplace

• Collection

• Utilization

• System designed to meet end user

requirements

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Thank You

Brian Hawkinson

Executive Director, Recovered Fiber

AF&PA

202-463-2776

brian_hawkinson@afandpa.org

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Key Findings (cont’d)

•SS recycling recovers more recyclable materials that MW processing:

Source: AF&PA MW Processing Economic & Policy Study (2015) Burns & McDonnell