Recycled Paper Gains
For the first time, recycled paper prices are now at about the same level as virgin paper prices. But price isn't the only factor helping recycled paper gain market ground. Global economic cycles, the high price of lumber, government mandates, concern about future environmental regulations and consumer attitude are all playing a role in the growth of the recycled paper industry. Paper prices began climbing late in 1993, as the world economy slowly rose out of recession and paper companies were unable to increase pulp supply to meet new demands. In general, paper demand follows economic growth and recession very closely, with some seasonal demand (rising sharply near the end of every year). The last period of high prices was during the late 1980s; current prices are breaking those records. While pulp production is increasing, other factors also have contributed to higher prices, according to George Brabec of the Portland, Ore.-based Weyerhaeuser Paper Co. "There have been a lot of natural disasters recently in the United States, driving lumber prices up and making trees more valuable for lumber uses and less so for pulping," he explains. He also claims the cost of integrating recycled paper production into the market is keeping paper prices high. "This is a transition cycle to higher use of recycled fiber, not part of the seasonal or economic cycle," he says. Brabec says he believes the current increase is a one-time cost because all paper companies are in the same boat: They need more recycled paper-making machines, and they are passing some of the costs of the new or refurbished machines on to consumers. "The industry is going to make recycled paper," says Steve Apotheker, technical editor at Resource Recycling, a recycling industry magazine, "whether they know it or not or like it or not. The largest and the fastest paper machines are being changed to handle recycled fiber." According to Resource Recycling, the paper industry has spent $7.5 billion in the past six years on new paper recycling systems and mills and is planning to spend another $10 billion by the end of the decade. One of the most significant pushes toward recycled paper came from President Bill Clinton's 1993 executive order committing the federal government to purchase paper with at least 20 percent post-consumer recycled fiber. (Post consumer material is paper collected after use, as opposed to pre-consumer material that could be paper never shipped to market, such as factory scraps or trimmings.) Because of the immense purchasing power the federal government has in the paper market, paper companies have to provide recycled paper to compete for government contracts. City governments have followed Clinton's lead. New York, San Francisco, Chicago and Philadelphia have local ordinances stipulating that city governments purchase recycled paper when possible. Many of these ordinances include price preferences which allow municipalities to purchase recycled products even if they are not the cheapest bid on a contract. Brabec contends that regard for future environmental regulations has also coerced the paper companies into looking toward producing more recycled paper. "In the end, the environmental cost might make the difference," he says. "In Canada the open areas for foresting are pretty cleaned out, and regulations on fertilizers and other chemicals might change the price of virgin pulp." The next concern for recycled paper is raw materials. Several major paper manufacturers have announced plans for new factories to open during 1995, but there might not be enough collected paper to supply this new capacity. "Collection must improve," says Phil Bailey, director of market development for the National Recycling Coalition in Washington, D.C., "especially in small- to mid-size business and residential areas," where collection programs generally aren't strong. Bailey adds that residential recycling programs could be much more effective if people were more recycling-minded. The attitude of the consumer will ultimately decide the place of recycled products in the economy. Even with the support of government, recycled paper's success depends on consumers. Marilyn Jones of Consolidated Printing in Chicago says she believes consumer attitudes are changing in recycling's favor. "More people are asking for recycled stock," she says. "I don't think price has much to do with it."