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Q & A WITH ZELLERBACH’
S NATIONAL DIRECTOR OF MARKET DEVELOPMENT,
MR. DOUG KYLE
Q: A f ew year s ago
there was a shortage of paper which drove the price of paper up
dramatically. Do you foresee that happening again?
A: The paper industry
can be very volatile. The factors that caused the dramatic increase
in paper prices and the general lack of availability are not as
apparent today as they were then.
A. THEN:
- Prices had been depressed for 5 years
or more
- Market place had been struggling and
started to turn. Asia began to be a player.
- Mills were losing money
- New mill capacity still short of demand
(especially in uncoated free sheet)
B. RESULT:
- When demand started to increase, mills
tried to recover losses very quickly
- Prices shot up overnight. The (print)
market responded by buying (more paper) to curb impact of new
(price) levels which artificially drove demand (up) creating shortages
(of paper).
- Inventories built up dramatically
- Market softened and it went the other
way just as fast. The difference was that there was now lots of
inventory in large printers’ backrooms. This impacted many
printers financially, driving them out of business or forcing
acquisitions.
C. NOW:
- More awareness of actual demand. Industry
measures inventories in the pipeline today.
- Much more capacity on-line (GP, Fort
James, IP, Willamette, Boise have all added significant capacity).
- Mills have recovered and although
prices are still low, they are moving up at a more moderate pace.
- Dramatic swings may still happen,
but they will be much more realistic and less severe.
Q: What are the current
trends with recycled papers? Do you forsee a day when all paper
will be recycled?
A: Recycled paper demand
has come a long way. About 5 years ago, recycled paper was in big
demand. All mills converted many of their lines to recycled content.
The paper industry was under the mandate to utilize 40% recovered
materials in their process—all that has been achieved, and
then some. The problem then and now is that the cost of waste paper
recovery translates to higher paper costs.
In addition, the quality of the paper
is reduced. Most people have not accepted the lower quality/higher
price scenario; consequently, recycled paper is struggling. In fact,
many recycled conversion centers are closing because of overall
lack of demand. Most newsprint is recycled today; text & cover
is recycled for the most part; and almost all grades of paper have
recycled paper products. The biggest emphasis now is on post-consumer
waste.
The current trends in paper and the environment
center around the use of bleaches in the manufacturing process.
President Clinton recently signed a bill called the "Cluster
rules." This ruling forces paper makers to go to a chlorine-free
based process. This impacts the effluent process into rivers. So
you will see terms like ECF and CF on paper grades (elemental chlorine
free and chlorine free).
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