The need to overcome constant challenges and the importance of logistics were key points of discussion at the BIR Paper Division side session held in Gothenburg on June 1. In his opening remarks, divisional President Francisco Donoso of DOLAF Servicios Verdes SL in Spain said that, while the recovered paper sector continues to face challenges, it is also evolving and the “demand for sustainable raw materials and circular solutions has never been more important than now”.
Marc Ehrlich, CEO of Switzerland’s Vipa Group and Asa Demme, Maersk’s Head of Integrated Sales for the Swedish market, kicked off the meeting by delving into how shipping impacts the sector. As the former explained, the recovered paper sector is reliant on shipping lines at the “right pricing” to support the movement of paper.
“Many people often ask, why do you need to ship waste into Asia? First of all, it is not waste at all; it is a raw material for the paper industry,” he said. “Secondly, because if you produce product in Asia, you need the packaging in Asia, then you receive the product in Europe and in the United States. This is where you [then] have the waste of the packaging that you need to ship back to Asia for the next generation of product. And you do that in empty containers that the shipping lines have in excess in those places.”
While the current focus is on the Strait of Hormuz, there are 14 important straits and two very important canals in the world, according to Mr Ehrlich, with the Strait of Malaga carrying 80% of traffic. But the current concern with the Strait of Hormuz is that any tariff imposition would lead to a ripple effect “and all these straits will be thinking [of introducing] the same thing” - a move that would lead to “very huge issues”.
“The world keeps on being volatile and unpredictable,” Ms Demme added, which is why Maersk rethought its operations and launched a new ocean network last February - the East West network - in co-operation with Hapag-Lloyd. This cuts the number of ports at which each vessel calls to reduce the carry-through of any delays and to increase service reliability, which in turn helps customers to plan better.
While there have been “a lot of disruptions” in the last 15 years from geopolitical conflicts to port congestions to canal shutdowns, Ms Demme said around 80% of these have occurred within the last few years. “And the only thing we know is that they will continue to happen,” she added. The critical situation in the Middle East, and with the Strait of Hormuz in particular, is not just directly impacting the region but also creating “a lot of ripple effects on other trade flows”.
Of the 100 million barrels of oil consumed globally each day, 20 million travel through the Strait of Hormuz.
“That is why a closure of the Strait of Hormuz is having such a large impact across the globe and for the oil, and for the energy, and, of course, for us as a shipping [provider] on the bunker cost and also on the sourcing, because if we used to bunker up our vessels in this area, that cannot be done anymore, and then we need to find alternatives,” she explained.
Rising bunker costs overall are expected on ocean freight rates, but these have been stabilising. There has been an increase in rates for exports out of Asia, but on a lot of the backhaul, where it sees a lot of recovered paper,
“I would say it’s been quite stable, at least looking at Europe’s exports”, ventured Ms Demme.
In the longer term, the shipping company - which is responsible for moving around 20% of the world’s containerised cargo - expects a situation with higher supply than demand, but in the near term this growth is likely to be quite modest. It can also see large growth in intra-Asia container trade flows, “and I think we will see more of the intra flows based on regionalisation and similar, going forward”, she said.
Three words Ms Demme used to describe the current state of supply chains were: disrupted, divisive and defiant.
“And I think the reason I mention defiant is that we become more agile and we become more creative in situations like this,” she added.
In the question-and-answer session, Mr Donoso questioned the common argument that shipping recovered paper across the world comes at a CO cost. Mr Ehrlich replied that containers have to travel from Europe or the USA back to Asia - empty or filled. If the alternative proposal is to convert more recovered paper in Europe, this would then mean finished reels of corrugated would have to be shipped to Asia instead, which didn’t change the situation with CO. Ms Demme confirmed that containers have to be moved back to where they are needed and therefore moving recovered paper on backhaul routes is “a super important thing from a base cargo and equipment positioning perspective”.
Moving on to regulatory challenges, Emmanuel Katrakis - Director of Regulatory Affairs at Galloo and board member of Recycling Europe - urged the sector to register on the new EU Digital Waste Shipment System, known as DIWASS. This registration applies to all actors in the chain, including mills from countries outside the EU.
The new system was introduced under the revised Waste Shipment Regulation (EU) 2024/1157 and came into play on May 21 this year. With the transition period, the recovered paper sector has until 31 December 2026 to start using the system. But his advice was to act now.
A key point is that all actors must be registered in the system, including operators, transporters and competent authorities as well as recovery and disposal facilities. If any of these are not registered, the system will not work without the ability to select each actor from a drop-down menu.
DIWASS applies to shipments from non-EU countries to the EU; shipments within the EU; and shipments from the EU to non-EU countries. Therefore, all Asian mills who want to buy from Europe must register on DIWASS before the end of the year. “In six months, it won’t be possible anymore to export recovered paper outside the EU to a paper mill who is not registered within the DIWASS,” pointed out Mr Katrakis.
An audience member raised concerns that Asian mill customers might perceive DIWASS as an imposition and that many may not register, which would then reduce outlets. Mr Katrakis responded that DIWASS did not pose any audit obligations and that actors simply have to register on the online platform to put themselves on the system. He urged everyone to ensure their biggest customers did register:
“That is in our interest…and also in their interest to keep that business going.”
Another “headache” facing the sector, said Mr Katrakis, is that the new Waste Shipment Regulation has a requirement to electronically share the Annex VII form 48 hours before a shipment, which is “mission impossible” as the information needed is not usually available at that time. There has been strong lobbying against this and for a digital system to be able to support the sharing of immediate rather than advanced information.
Myles Cohen, board member of Vipa Group, then shared how corrugated boxes can be used as an economic indicator, with Alan Greenspan, former Chairman of the US Federal Reserve and renowned US investor Warren Buffett using this approach. Corrugated boxes transport 75-95% of everything manufactured in the USA and reflect consumer spending. Data analysis found that box levels started dropping before people realised that the 2008 financial crisis was starting and several months before commodity prices began to drop.
The second half of the meeting included market presentations from: Ranjit Baxi, President and Managing Director of UK-based J&H Sales International; Simone Scaramuzzi, Sales and Purchase Director at Italy’s LCI SRL; John Atehortua, Key Account Manager at Remondis Trade and Sales GmbH; and Mr Cohen.
Mr Baxi flagged that major infrastructure investment in India will benefit its importers and make it a stronger partner as material will travel faster and at less cost, with digital technologies supporting the efficient movement of freight. India, he said, has ambitions to be China’s ‘plus one’ in supplying the world.
Over in the USA, the recovered paper market was “all about OCC”, said Mr Cohen. But lightweighting, right-sizing and falling food sales have reduced the demand for corrugated. As a result, the USA has a recovered fibre surplus and exports are critical. First-quarter figures show that India, Vietnam, Thailand and Malaysia were its top export destinations, with India and South East Asia taking two-thirds of US recycled fibre.
Speaking on the European export market for the last six months, Mr Scaramuzzi said it “became increasingly driven by logistics rather than supply and demand”, with external factors such as the war in the Middle East and increased shipping costs having a huge impact. “The shipping costs, the freight costs, increased approximately 60% because of the war,” he said. Insurance costs went up 25-40%. Meanwhile, 20-30% higher energy costs increased the cost of collection, sorting, baling and mill operations. This compressed margins and drove customers to buy on a spot basis.
Mr Atehortua added that mills in Europe are choosing low inventory levels, buying what they need and producing to market demand. Mills are not running at full capacity, keeping pricing stable. As well as shipping costs, trucking rates have gone up around 30% - and sometimes suppliers expect buyers to bear this increase. But he believed current challenges are redefining success: “Whoever is the most streamlined, whoever has the best logistics partner, the best partner in terms of shipping, that’s the one who is going to be more successful,” he said. While he acknowledged the market is challenging,
Mr Atehortua said it is “also very enticing” and pushes the industry to “be creative, to be more effective…and that is maybe the positive”.
Before closing the meeting, Mr Donoso presented the Papyrus Award from the BIR Paper Division to Sabri Cimen, CEO of Turkish group Eren Holding, in recognition of its contribution to the industry. Eren Holding has an international reach and is the owner of UK-based Shotton Mill; this has received around £1 billion of investment - one of the largest private sector investments in the UK. The plant, focused on sustainability and efficiency, is due to start production at the end of the year and will have the capacity to produce 750,000 tonnes of 100% recycled containerboard and 67,000 tonnes of tissue.