The hard facts: recyclers need to help the U.S. paper industry survive in a competitive world, according to SP Newsprint's Dr. James Burke - Paper Consumer Focus

Recycling Today, Nov, 2002

The strength of the U.S. dollar has killed export opportunities for most of our grades of paper and paperboard. The dollar is unrealistically strong and it is just now starting to adjust a little bit.

The industry in total has been--I'll try to be polite and use the word mistreated--by various misguided environmental movements. I'm not going to get into detail about that.

The short-term things that have happened to us have been a dramatic slowdown in the economy, although the economy recovered in the first quarter. Coupled with that, particularly for print-on-paper people, there has been a dramatic slowdown in the advertising market, and we have not really seen that correct itself yet. I think the first and most positive sign I have seen has been the pre-season selling of network television for [the fall of 2003]. We hope that's a forbearer of better things to come in all types of advertising.

That's your customer. As you can see, times are difficult. I can't discuss pricing for products such as newsprint, but I'm sure you can draw the correct conclusion based on the market conditions described.

QUALITY STANDARDS

Now let's talk quality for a moment. First, even though I've said some not very encouraging things, I think we've got to assume that paper products will be around for a long time. Even newsprint, a commodity print-on-paper communication media, will survive under the right conditions.

And of course survival depends on the value proposition the product offers. What this means is, basically, good quality at a competitive price to deliver a message. Print on paper will compete for advertising dollars based on its value proposition, vis-a-vis television, cable, radio, the Internet and I'm sure there are a couple of things out there lurking that we haven't even identified yet.

Now what do I need as a newsprint supplier to help my customers, the newsprint publishers or printers, to compete? Obviously I have to supply them high-quality newsprint, capable of good reproduction at a reasonable cost. And to do that, what do I need from my raw material suppliers? I need good quality fiber at a reasonable cost.

Let's take a look at recycled fiber use in newsprint. In 1980, 1.5 million tons of recycled fiber were used in newsprint production. By 2000, there was approximately 6.5 million tons used in newsprint production. That figure is probably on the high side because there is now recovered fiber used in other grades that are first cousins to newsprint; things that we call groundwood specialties and some of those other types of grades. The pure newsprint consumption of recycled fiber is probably down around 5 million tons.

That consumption in North American newsprint mills could potentially increase--and I don't have that figure for the potential in 2010 because it all depends on a lot of things. I think as most of you are aware, it required hundreds of million dollars of capital investment to increase recycled fiber usage from 1.5 million to 6.5 million tons. And it will require substantially more investment to increase usage further from that.