Responsible Partnership

Industry expert stresses the importance of all players in the supply chain including shipping lines and the recycling industry working together as “responsible partners” to move “essential raw material” supporting carbon savings and climate change targets.


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In-Depth Features
 
July 28 2021
 
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2020 was a challenging year for the paper recycling industry. Last year, Covid-19 struck the world and raged across continents, affecting one and all. “It was the first time that something like this has ever happened in our lives,” said Hrishikesh Vora, CEO of Adler Paper, in his opening address at the International Recycling Week held recently. “And if we thought 2020 was tough, 2021 has turned out to be even more difficult.” Last year, the sector battled shipping lines, ports, local transport, worker migration and lockdowns, and they didn’t know what was going to happen, he commented.

“But we fought through many difficulties and have come out of it stronger. Just when we thought this year would be better, we’ve had lockdown “part 2” and that has also wreaked havoc across all industries,” said Vora. He credited MRAI for supporting the recycling industry on various fronts. “I am hopeful that our industry collectively will stand strong, and will join hands and support each other and come through 2021 stronger.”

 

In an age when reduction of carbon footprint is a top priority for all industries worldwide, the long-standing supply chain of recovered fibre should not be disturbed by any of the supply chain partners, said Ranjit Baxi, Managing Director, International Recycling Ltd., Founding President, Global Recycling Foundation and former President, BIR, during his speech at the conference. Addressing the critical topic of freight challenges and solutions, he highlighted the importance of all members of the supply chain including the supplier of recovered fibre, manufacturer or the consumer of these materials, and freight operators at exporting country, sea freight and haulage at destination, working together for the growth of the industry.

 Baxi said in the four decades that he has been in the business, he has never come across a period like today, due to the pandemic, the demand and supply cycle, reduced collections, increasing demand or whatever the reason, “we are now noticing a paradigm shift in our business from where we were to where we are and where we are likely to be going.” From a sea freight point of view, he said he was weighing the option of leaving the recyclables for use in his own country or region as opposed to exporting.

 In his view, “exporting is becoming a big challenge in terms of increasing sea freight.” He said the rates are reducing a bit, “but if I compare it to 18 months ago, from Europe to China or Asia, the freight rates were in the region of 600-700 dollars, we moved up to as much as 3000 dollars and now we are close to 2000 dollars.” This is still “excessively high” for their product to accommodate such sea freights as in many cases the value of the goods is so low that the freight rates tend to be much higher. “If you look a decade back, the value of mixed paper was low and the value of freight was higher. It’s like sea freight is the driver of the business and not the value of the goods. But today it’s a different scenario because across the board (paper, metals, etc) the value of goods have increased, so the sea freight is not comparatively more than the value of goods. But they are still much higher for the business to contend,” he noted.

 He agreed that the industry has recently been going through a period where the price of pulp, etc. has been reaching unusually high levels, “but this will and shall come down some time soon. And they will come down and therefore the sea freight will also hopefully have to make equal adjustment.” While exporting is very important, “because the recycling industry is saving close to a billion tons of CO2 emission, the sustainability story is only possible when the shipping lines and the recycling industry work together as partners,” he added.

“This is a responsible partnership. The shipping lines are playing a very important part in our industry as a major supply chain partner, also making it possible for us to deliver a green sustainable planet, helping us meet the climate change goals. So shipping lines must also bear this responsibility of theirs in mind and not excessively quadruple the sea freight at a time which are completely hindering the business,” Baxi emphasised, adding that the market today is facing a challenge as to whether the recovered fibre should be consumed locally in the local paper mills or should we be exporting.

 “Europe generates around 5 to 7 million tons of surplus recovered fibre per annum for which we need a home,” said Baxi. Considering it is an export market, the commodity needs to be shipped in containers, so the sea freight plays an important part in the partnership, he noted.

The question is whether it would be sustainable for recovered fibre to be exported or to be retained and kept in the local regions.

He said the affordable sea freight situation has changed and Europe’s Green Deal policies that the EU is working on could bring an end to export of recyclables including paper and other commodities, which could in turn pose a major problem for the shipping industry. The shipping lines are aware of the importance of recovered fibre to fill the large ships they have built. “I remember talking to a chairman of a shipping line, and he said, ‘Recovered fiber helps us to fill the base cargo of our containerships so we can carry other cargoes on which we make the money.”

Ships have become larger over the years, “and that concept has not changed,” said Baxi. So, shipping lines are very important members of our partnership “and must not dislodge the export business by making it so expensive.”

Though imports in China have gone down, they have been able to find alternate markets and there has been new demand for fibre with new capacities coming up within Europe in Italy, Spain, Germany and so on, he stated, also pointing out that new capacities are coming up in Vietnam, Indonesia and other markets. But eventually, if they are not able to export, due to regulatory reasons “or because of the shipping lines making it so difficult for us to export, our cargoes will remain within Europe, and therefore the shipping lines will be missing this very important cargo as part of their product mix that they are exporting on their ships across the world,” Baxi emphasised. Demand for paper is going to increase one way or the other and it is important to maintain the balance between supply and demand, he said.

With this increasing and decreasing “yo-yo pricing” for freight, it is not possible for exporters to plan ahead and for the shipping lines to be assured of the volume of recovered fibre for those containers, Baxi remarked, also stressing that it was important for shipping lines and recycling industry to work together as “responsible partners” and plan the business together in terms of helping to move “an essential raw material” supporting carbon savings and climate change targets. “My message to the shipping industry and the recycling industry is: Let’s please work together; let’s be responsible partners and let’s work together as a team,” he said.

 In a separate presentation, Jori Ringman, Director General of the Confederation of European Paper Industries (CEPI), expressed optimism for the containerboard and corrugated box sectors. Various trends are prompting producers to increase capacity, said Ringman, including environmental consciousness and circular economy movements that are creating a shift in the use plastic for certain applications, as well as the trend in changing shopping habits. He cited a 2019 study (Material Economics), which indicated that “in Europe alone 4.5 million tons of plastic packaging could be replaced by paper and board without any loss of functionality.”

 In addition, certain policy developments in European Union such as the Green Deal will help accelerate the growth of the sector, Ringman stated. They are expecting further regulations to be announced later in the year. Next steps in this policy, will look into packaging, sustainable products and circular economy, he said. In his view, the pulp and paper industry “is going through a deep transformation” and the massive investments in the new recycling capacity and evolving technology will enable growth of the industry. “The longterm trends are on our side. The policy will accelerate the change that is needed, and the industry is proactive and is investing to make things happen,” concluded Ringman.