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R&D Final Report: Paper

R&D Final Report: Paper Creating markets for recycled resources Paper Mill Feasibility Study for the Island

Creating markets for recycled resources

Paper Mill Feasibility Study for the Island of Ireland

WRAP Reference: PAP0024

Phase 1: Development and Assessment of Paper Mill Options

Prepared for North South Market Development Group and Waste & Resources Action Programme

Written by:

and Waste & Resources Action Programme Written by: Published by: The Waste & Resources Action Programme
and Waste & Resources Action Programme Written by: Published by: The Waste & Resources Action Programme
and Waste & Resources Action Programme Written by: Published by: The Waste & Resources Action Programme
and Waste & Resources Action Programme Written by: Published by: The Waste & Resources Action Programme

Published by:

The Waste & Resources Action Programme The Old Academy, 21 Horse Fair, Banbury, Oxon OX16 0AH Tel: 01295 819900 Fax: 01295 819911 www.wrap.org.uk WRAP Business Helpline: Freephone: 0808 100 2040

Published August 2006

Contents

GLOSSARY AND ABBREVIATIONS

4

EXECUTIVE SUMMARY

6

1.

APPROACH AND METHODOLOGY

16

1.1 Summary

16

1.2 Consumption of Paper Products

16

1.3 Sources, Volumes and Markets for Recovered Paper

17

1.4 Options to Utilise Recovered Paper

17

2. CONSUMPTION OF PAPER PRODUCTS

19

2.1

Summary

19

2.2

Economy and Demographics

20

2.3

Type and quantity of paper/paper products manufactured on the island of Ireland and subsequently consumed there.

20

2.3.1

Primary paper manufacturing

20

2.3.1

Secondary paper manufacturing

21

2.4

The type and quantity of paper/paper products imported into the island of Ireland and subsequently

consumed there.

21

2.4.1

ROI

21

2.4.1

NI

24

2.5

The origins of paper consumed in IOI including mill location, the mill capacity, mill furnish requirements

25

2.6

Current consumption in terms of product type, the grade of paper and the end use sector

27

2.7

Future consumption of paper and paper products in the IOI

28

2.7.1

Influencing factors

28

2.7.2

The implications for different product sectors

30

2.7.3

Projections for growth

31

2.8

Data reality check

33

3 ESTIMATION OF THE SOURCES, VOLUMES AND MARKETS FOR RECOVERED PAPER

34

3.1

Summary

34

3.2

The sources, grades and quantity of post consumer paper currently recovered in IOI.

34

3.2.1

Sources, grades and quantities of post consumer waste paper. ROI

34

3.2.3

Sources, grades and quantities of post consumer paper NI

37

3.2.4

Paper and board arisings in household waste

38

3.2.5

Paper and board recovery and recycling from households

38

3.2.6

Paper and board arisings in commercial and industrial (C&I) waste

38

3.2.7

Total waste paper arisings

39

3.2.8

Sources grades and quantities of post consumer paper IOI

40

3.3

The current markets into which recovered paper is being sold, the end use and geographical destination for the recovered paper, by grade.

40

3.3.1

Exports of recovered paper and board from ROI

40

3.3.2

Exports of recovered paper and board from NI

42

3.3.3

The price and the volatility of process paper recovered from the island achieves when sold to these markets

42

3.4

The Projections of RCP supply in IOI

44

3.4.1

OCC

44

3.4.2

ONP/OMG

46

3.4.3

Mixed

48

3.5

Scenario Development

49

3.5.1

OCC

49

3.5.2

ONP/OMG

50

3.5.3

Mixed unsorted

52

3.5.4

Conclusions

53

4. ASSESSMENT OF THE PAPERMILL OPTIONS TO UTILISE RECOVERED PAPER ON THE ISLAND

54

4.1

Summary

54

4.2

The opportunities for existing paper production facilities in IOI to increase their usage of recovered

paper

55

4.3

The Papermill options

56

4.4

Shortlist list of options

65

4.5

Recovered paper supply scenario analysis

67

4.5.1

RCP Prices

68

4.6

Extended Options.

69

4.7

Environmental Aspects

70

4.8

Business Support

70

4.8.1

Northern

Ireland

71

4.8.2

ROI

71

APPENDICES

73

Appendix 1. Questionnaire

74

Appendix 2. Sector Listing

80

Appendix 3. Interview Listing

82

Appendix 4. ROI Imports

83

Appendix 5. ROI Exports

97

Appendix 6. IOI Base Year Calculation

100

Appendix 7. Mill Models and Options Assessment

102

Appendix 8. Environmental Considerations.

119

Appendix 9. Support Instruments for Proposed Paper Mill

129

Appendix 10. References

137

for Proposed Paper Mill 129 Appendix 10. References 137 Paper Mill Feasibility Study for the Island

Paper Mill Feasibility Study for the Island of Ireland

3

Glossary and Abbreviations

Product

Converted Packaging and Paper. The conversion process usually involves taking paper raw material e.g. in the form of reels, then through a manufacturing process involving, for example, sheeting, cutting, laminating, impregnation, printing and packing, to produce product units which are fit for end use. Converting processes include the production of; cardboard boxes and cartons, tissue rolls, sheeted paper (e.g. copier), inkjet papers, plus technical papers.

Kraftliner and Kraft Paper. Paper made from wood using the kraft or sulphate chemical pulping process (see below). It may be bleached or unbleached and produces a strong paper which is used for wrapping and packaging. Kraftliner is used specifically in the production of cardboard boxes (called Packaging Containers in this work), acting as the liners (outer layers). When recovered paper is used this paper is called testliner. The rippled material or corrugating acting as filler between the two liners is called fluting.

Kraft Pulp. A wood pulp produced by chemical pulping of the wood, also called the sulphate process. This removes the lignin from the wood, leaving cellulose fibre used in high quality paper manufacture. The removed lignin, called black liquor, is used for energy production.

Mechanical Pulp. Pulp produced by the physical (as opposed to chemical) treatment of the wood to produce papermaking fibre. The process can be purely through the action of grinding the wood (groundwood), to pretreatments of heat (thermomechanical, TMP) and chemical (chemothermo mechanical pulp, CTMP). The remaining presence of lignin in the pulp causes yellowing through reaction with light. Papers made from this pulp include newsprint and magazines, are termed mechanical papers.

Mechanical Paper. Paper, the furnish of which contains a substantial proportion of mechanical pulp. These papers can be coated (coated mechanical) with a thin coating to improve printability, and called lightweight coated papers (LWC), used in magazine papers. Uncoated mechanical paper includes those where the surface is smoothed and prepared across large rollers, called calendars, again to improve printability, termed super calendered papers (SC). These are used in flyers, inserts and magazines.

Newsprint. Paper intended for the printing of newspapers. Mainly produced from recovered paper (through the recycling process) and also mechanical pulp.

Printing and Writing Paper (P&W). Paper grades which are used for books, commercial printing, copying, business forms, stationary and laser and digital printing. These are often categorised as coated woodfree and uncoated woodfree. Woodfree is a term which refers to papers using chemical (see Kraft) pulps – where woodfree means the lignin is removed. In uncoated form these can be copying paper and letterhead. Coatings refer to surface treatments and additives which enhance printability. These papers are found in advertising, commercial printing. Specialty Papers. A diverse group of products that are sold on their performance, technical or appearance attributes. Examples include: filtration products; security and banknotes; decorative papers; abrasives (e.g. sand paper); letterhead; tracing and greaseproof papers.

Testliner. Can be bleached and unbleached. The liner (outer layers) for corrugated container board (cardboard boxes) made principally from recycled fibre furnish. The virgin fibre alternative, kraftliner,

fibr e furnish. The virgin fibr e alternative, kraftliner, Paper Mill Feasibility Study for the Island

Paper Mill Feasibility Study for the Island of Ireland

4

has uses where contact is important, such as food packaging, and purity/cleanliness of the fibre furnish is necessary. Testliner and kraftliner can be bleached and coated for better printability and presentation.

Tissue Paper. Soft, lightweight paper, often creped, which is used for hygienic, household, institutional and health purposes. The fibre furnish can be virgin and/or recovered paper.

White Lined Chipboard (WLC). Typically a multi-ply structure (for example 5 layers) in which the top and back plies are made from bleached chemical pulp or deinked office waste. The middle ply can be a mixture of recovered paper types. This is used for packaging applications e.g. cereal board, and detergent board. (called Packaging Cartons in this work)

General

Converter. A firm that specialises in converting reels and sheets of paper and board into packaging or finished goods for sale to the public.

Consumption – (as defined by FAO – the Food and Agricultural Organisation of the United Nations) equals Production + Imports less Exports. In this work, production is the primary paper and packaging materials produced, imports are these materials brought in across the Republic of Ireland and Northern Ireland borders, and exports the reverse of this. In this work it was also necessary to recognise the secondary paper or that paper and packaging produced, brought in or exported as part of other products, e.g. shoe boxes and white goods packaging.

OCC( Old Corrugated Containers) - used printed or unprinted corrugated boxes and solid fibre board boxes.

Recovered Paper (RCP) Paper (all types) that has been previously manufactured and/or used and recovered for papermaking. This may involve cleaning and sorting.

Total Waste Paper Arisings. Waste paper and board materials derived from household and commercial sources, which are recovered for recycling, landfilled or sent to waste (e.g. tissue).

for recyc ling, landfilled or sent to waste (e.g. tissue). Paper Mill Feasibility Study for the

Paper Mill Feasibility Study for the Island of Ireland

5

Abbreviations and Acronyms

ADmt – air dried metric tonne

arc21 – name for 11 district councils in the Eastern Region sub-regional area of Northern Ireland

CC – County Council

C&I – commercial and industrial

CEPI – Confederation of European Paper Industries CSO – Central Statistics Office, Ireland EPA – Environmental Protection Agency, Ireland

EU – European Union

Eur, € -

Eurozone – the 12 countries of the original 15 who adopted the Euro FBB – folding boxboard

GB – Great Britain used to differentiate UK minus Northern Ireland

GDP – Gross Domestic Product

GJ - gigajoule

GNP – Gross national Product

Ha - hectare

IOI – Island of Ireland JPC – Jaakko Povry Consulting

KLS – Kraft liner substitute

Euro

km

– kilometres

M,

Mn - million

MRF – materials recovery facility MWh – mega watt hour MWe – mega watt electricity MWth – mega watt thermal

News and Mags - newspapers and magazines News and Pams – newspapers and magazines

NI – Northern Ireland

NWRWMG – North West Region Waste Management Group, Northern Ireland OCC – old corrugated containers OECD – Organisation for Economic Co-operation and Development ONP/OMG – old newspapers and magazines

pa – per annum

P&W. Printing and Writing papers – see glossary RCP – recovered paper ROI – Republic of Ireland RTP – returnable transit packaging SWaMP – Southern Waste Management Partnership, Northern Ireland

tpa – tonnes per annum

UK – United Kingdom including Northern Ireland

WLC – white lined chipboard

Currency conversion

All

prices have been converted to Euro. The following exchange rates were used based on average

for

March 2005 (Financial Times): $-£ 1.9, €-£ 1.4

Executive Summary

The North South Market Development Group (NSMDG) in conjunction with the Waste and Resources Action Programme (WRAP) have sponsored this project. The objective is to

(WRAP) have sponsored this project. The objective is to Paper Mill Feasibility Study for the Island

Paper Mill Feasibility Study for the Island of Ireland

6

determine the feasibility of situating a recovered paper based paper mill or mills in the island of Ireland (‘IOI’). The project combines the interests of both Ireland (‘ROI’) and Northern Ireland (‘NI’).

Jaakko Pöyry Consulting (‘JPC’) together with Pira International (‘PIRA’), Circa and Initiative Economic Development (‘IED’) have undertaken this work. This assessment is timely. The Regional Waste Management Plans in ROI and NI contain targets to increase the availability of recovered paper for use in indigenous industry or further export.

This work is nominated as Phase 1 and aims to provide the foundation for Phase 2, a possible detailed feasibility study for preferred mill options (s). Phase 1 contains the following key elements:

Review of consumption and demand for paper products

Estimation of the sources, volumes and markets for recovered paper

Assessment of the paper mill options to utilise recovered paper on the IOI.

Information obtained is evaluated to determine whether there is supply of recovered fibre and demand for paper products to sustain a new paper mill in the IOI. The assessment of mill options considers a number of factors to identify what type of mills(s) could potentially be viable. The results will be presented at an Industry Briefing Session to determine whether there is sufficient interest in carrying out a full feasibility study.

Methodology

To establish demand and supply data, the work has used a top down approach, beginning with high level statistics and progressing to more detailed levels until a robust dataset was achieved. This often involved commencing with government sources (e.g. EPA, Eurostat), then pursuing supply-demand dynamics through face-to-face interviews (22) across industry and involved organisations. These interviews have played a multiple role of; engaging sector participation in the work, on-the-ground interpretation of statistics, and also resolution of data and sector interpretation. The interviews included representation from across the whole supply chain in IOI.

There were data conflicts, sometimes between high level sources. This meant that data had to be verified from additional and root sources or through feedback from questionnaires and interviews. The data consistency was resolved by using:

Information from face-to-face interviews.

Iterative exploration of data divergences with high level sources

Iterative review with the industry to test for robustness and credibility

Where high level sources substantiated their data, this was used, and this reliance on their substantiation noted. In all cases, the integrity of the mill option assessment was paramount, to ensure that while debate continues the option conclusions were robust. It is important to note the sheer scale of world class paper mills and their RCP demand (see section 1.2) relative to the more limited IOI RCP supply. Therefore, imprecision in the RCP supply estimate will not detract from mill option assessment and its viability.

Projections of future paper demand and recovered paper (RCP) supply in IOI were prepared. The results were used as key inputs into the paper mill options in terms of RCP availability and local market fit. RCP supply scenarios were also prepared, to test the impact of success (or otherwise) of waste management and IOI RCP promotion programmes on the mill options.

The mill options were subjected to examination using an established toolkit which can model various mill configurations and relative competitiveness with the peer group delivering to a selected market.

with the peer group delivering to a selected market. Paper Mill Feasibility Study for the Island

Paper Mill Feasibility Study for the Island of Ireland

7

In almost all cases, this was London, to test the export robustness of the mill. Mill options were subjected to a feasibility test, with a profitability hurdle of 10% return on capital employed, over the business cycle.

Paper Products Consumption and Paper Arisings

The combined IOI population is small (5.6 million) but is economically active. GDP growth rates put IOI in amongst the highest achieving regions. However the small population base, as it relates to absolute paper consumption and the total paper arisings, is at the heart of the challenge to realise world scale paper mill facilities.

The current industry structure comprises 2 primary paper producers and over 180 secondary businesses (e.g. converting, printing, distribution). One major producer (Smurfit) has recently decided to close its production facility, based on an ageing asset. This current work, offers a potential renewal pathway for IOI paper manufacturing capability through installation of world class facilities.

Domestic paper and board production, plus paper and board imports, less exports, combine to give consumption of paper for NI and ROI. NI then exports 73450 tonnes of converted paper product, and ROI, 88374 tonnes. At the same time there are large amounts of secondary and converted paper products e.g. shoe boxes, packaging for white goods etc., arriving. The primary paper consumption plus net imports of these secondary and converted paper products gives total paper consumption. The components of this were analysed individually to produce an assessment for IOI, NI and ROI (see table below). These data establish the total markets available to mill options and also the fibre potential available.

to mill options and also the fibre potential available. Paper Mill Feasibility Study for the Island

Paper Mill Feasibility Study for the Island of Ireland

8

Total Paper Consumption (Tonnes), ROI, NI and IOI. 2003

 

ROI

NI

IOI

Production

800

19,000

19,800

Imports

584,301

193,470

777,771

Exports

400

16,150

16,550

Consumption. Primary paper

584,701

196,320

781,021

Net imports of secondary converted paper products

340,538

110,040

450,578

Total paper products

925,239

306,360

1,231,599

Total paper consumption was projected by major grade drawing on the social, economic and technological drivers of paper consumption. The outcome is one of growing paper consumption over the next decade, particularly in printing and writing (P&W – see glossary), which finds end uses in office paper, communication, printed materials and magazines. The largest consumption is found in packaging.

Total paper consumption by grade 2003-2013 (tonnes) in IOI - compared to capacity of world scale mills.

         

Mill

Grade

2003

2005

2008

2013

scale*

P&W: Uncoated mechanical

8,501

8,931

9,618

10,882

400,000

         

100-

P&W: Uncoated woodfree

83,712

90,542

101,848

123,914

160,000

         

100-

P&W: Coated woodfree

5,960

6,825

8,361

11,726

160,000

P&W: Coated mechanical

72,583

78,507

88,310

107,442

400,000

Kraft liner, testliner & oth. packaging

265,049

275,756

292,634

323,092

400,000

Speciality paper

38,355

40,298

43397

49,099

10-50,000

Converted packaging products

315,012

327,945

348,018

384,240

**250,000

Tissue and tissue products

82,548

85,546

90,250

99,642

15-50,000

Newsprint

216,691

221,045

227,743

227,743

400,000

Other paper products

143,188

148,248

157,322

173,695

 
 

1,231,5

1,283,6

1,367,5

1,511,4

 

Total Paper Products

99

43

01

75

*Mill scale. World scale facility to be competitive. Woodfree options represent current recovered paper based initiatives. Speciality papers demand would represent many different grades with small consumption levels e.g. labels, security, filters, abrasives, medical etc. **Packaging for cartons, and also including converting into cardboard boxes

The assessment has used world scale mills as the basis for facility design. The difference between mill scale and paper consumption is an indicator of the export required if such a mill was placed in IOI.

of the export required if such a mill was placed in IOI. Paper Mill Feasibility Study

Paper Mill Feasibility Study for the Island of Ireland

9

Only tissue is well matched to local consumption levels, where a mill with between 15,000 to 50,000 tons per annum capacity has potential to serve a tissue products market of over 80,000 tonnes. The rest show a world scale paper mill must be export oriented. This was used as the basis for feasibility testing – the ability to compete in export markets.

Sources, Volumes and Markets for Recovered Paper

The total paper consumption is the underlying source for post consumer waste paper in IOI. This has been estimated at 1,231,599 tonnes comprising 925,239 tonnes from ROI and 306,360 tonnes from NI. Post consumer waste has increased 5-9% from 2001 to 2003 in ROI. The large percentage increase noted for NI data between 2002 and 2003 is due to an improved estimate of 2003 waste paper arisings.

Post consumer waste arisings on IOI-2003 (tonnes). Data sourced from EPA and DoE

2005

 

ROI

% change

NI

% change

IOI

2001 804,414

   

238,994

 

1,043,408

2002 846,151

 

5

251,394

5

1,097,545

2003 925,239

 

9

306,360

22

1,231,599

The majority of recovered paper collected in the ROI and NI is exported. China and India are the fastest growing export destinations. Paper and board capacity in Asia is set to grow from 65 million tonnes (2000) to 120 million tonnes (2015), with China accounting for half of the capacity growth. Exports go from IOI, principally as mixed unsorted grades. The prospects for RCP export from IOI would appear strong, and further supported by IOI initiatives to improve RCP infrastructure.

Such demands will clearly impact the prices any potential mill in the IOI will have to pay, to compete for available raw materials. The close proximity of the IOI mill to the RCP supply and the presence of a reliable end use market would be to the advantage of the local mill. Furthermore, exports to Asia have a transport cost differential to meet.

Projections by main grade of RCP supply have been generated for ROI and NI. This has been achieved by reviewing the ‘influencing factors’ such as policy, environmental aspirations, paper demand and the waste supply chain. The projections show an almost 50% increase in supply potential over the next 10 years, driven strongly by IOI initiatives. The difference between RCP supply and total arisings is the waste paper sent to landfill, archived or lost e.g. tissue.

Future RCP supply projections by grade for the IOI through to 2015 (tonnes)

Year

OCC

News& Mags

Mixed

Total

2005

207,933

59,752

196,773

464,458

2007

222,397

84,913

254,895

562,205

2010

241,319

100,743

279,167

621,229

2015

260,555

105,882

307,426

673,863

Two scenarios were created (high and low cases) to evaluate the impact of under- or over-achieving in RCP supply programmes. These scenarios were then applied to the mill options to expose sensitivities, risk and the impact of failure to achieve IOI RCP targets. The subsequent analysis in

failure to achieve IOI RCP targets. The subsequent analysis in Paper Mill Feasibility Study for the

Paper Mill Feasibility Study for the Island of Ireland

10

Section 5 (of the main report), shows indeed that the mill options are dependent on achieving targets with the RCP programmes in IOI.

Paper Mill Options to Utilise Recovered Paper

The option process commenced with a total list of recovered paper based products. This included:

Packaging containers (cardboard boxes) - unbleached and white surfaced.

Packaging cartons e.g. detergent, cereals cartons

Tissue

Printing and Writing (P&W) – uncoated papers for communication, copy and printing

Newsprint

Magazines – super calendered (SC) papers.

After an initial screening to identify a short list, newsprint and magazines were rejected due to insufficient RCP supply availability, even in the ‘high’ case scenario. The assessment process then moved to mill modelling of the remaining candidates. The criteria applied in mill design were:

World scale. The facility should be recognised as world scale; capacity, process, configuration, inputs and outputs.

Product and market leadership – the option should focus on growth areas, import replacement (IOI and GB) or value niches for IOI and where local market leadership can be achieved. The technology should be such that the product specification can compete in export markets.

Cost competitiveness. The facility should be able to achieve 1 st or 2 nd quartile cost performance (lower half of all producers) and allow competitive exports to main markets in particular to GB.

Feasibility – can meet a 10% return on capital employed over the cycle.

Environmental fit – the facility meets regulations and directives.

The summary of this assessment is as follows:

and directives. The summary of this assessment is as follows: Paper Mill Feasibility Study for the

Paper Mill Feasibility Study for the Island of Ireland

11

 

Wood Scale

Product and Market Leadership (2005)

Cost Competitiveness

Feasibility

Conclusion

Packaging - Containers (cardboard boxes)

Output: 200-400,000 t/a was examined. Full scale would require ‘all’ potential OCC collected

 

New IOI facility can be in 1 st - 2 nd cost quartile, but would have a large impact on current installed capacity (already in excess), leading to capacity under-utilisation and price erosion

Fits well with local converting but profitability requirement challenged. Potential returns

<5%

A

new machine in IOI is

IOI market for kraftliner and testliner is 270,000t.

An IOI new facility would go straight to top 10 European producers – big impact on existing capacity

marginal. A supportive business climate would be required. Not a preferred option.

Packaging - Containers – as above but white surfaced

Output: 120-200,000 t was examined. Full scale would consume virtually all white high quality waste paper in IOI

Total market in Europe around 1 mn tonnes, so a new IOI machine would have high impact – almost all sales would be outside IOI

New IOI facility can be in 1 st - 2 nd cost quartile. Small but growing market – an IOI facility would have a large impact on current installed capacity

Specific but small volume fit with local converting. The new mill would easily take care of IOI consumption. Potential returns <5%

As above.

Tissue

Output: 15-50,000 t was examined. RCP supply is sufficient – but would still need all white high quality waste paper in IOI

IOI market is over 80,000 t (tissue and converted product). Mill output could have high IOI market share

Competitive in the IOI market as transport cost (imports) for these low weight, high volume

Fits well with local converting and could serve the IOI market. Can potentially achieve profitability targets.

Opportunity is for local producer, connected to local supermarkets, converters and distributors, to replace more costly imports.

would need to displace imported tissue

products can be prohibitive.

Packaging – Cartons

Output: 120-250,000 t was examined.

An IOI facility would go into top 10 producers in Europe. Imports into UK are around 700,000 t. IOI market is over 300,000 t (total all converted packaging)

New IOI facility can be in 1 st - 2 nd cost quartile, but would have a large impact on current installed capacity.

Fits very well with local converting and would easily take care of IOI consumption. Could achieve around 5-10% return.

IOI could be potentially attractive location. Market is IOI and GB. Would also need

Flexible in terms of furnish grade mix – fibre supply sufficient

a

positive business

 

development climate to

   

support investment.

Printing and Writing Papers (e.g. Office, Communication, Printers)

Output: 100-160,000 t was examined. Requirement: Up to 100,000 t/a ONP/OMG/ other white grades

A

new state-of-the-art facility

New IOI facility can be in 1 st - 2 nd cost quartile. Better performers would be found

Can achieve profitability targets, but highly exposed to competitors in export markets who base their business on local market advantages. RCP availability in white and high quality grades problematic.

Potential, but less attractive due to RCP resource and exposure of such a mill scale

would be amongst the

largest in Europe. IOI market

 

is

around 90,000 t.

 

in

European market context.

Limited in terms of high quality recovered office paper availability. Difficult option to realise

 

in closer proximity to RCP supplies and markets

 
in closer proximity to RCP supplies and markets   Paper Mill Feasibility Study for the Island

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12

The feasibility test favours products such as tissue and perhaps packaging cartons. The remainder are less attractive. The ranking is as follows:

Tissue – only the tissue mill option is well matched with local demand. Exports are potentially minimal. The other options are required to be export competitive with much of the product sold outside IOI.

Packaging Cartons. A potential good link to local converters and IOI packaging needs.

Printing and Writing papers. Requires high grade RCP collection. Exposed to existing and potential mills in GB and the Continent

Packaging Containers. Already large capacity in Europe.

Newsprint. Excluded as insufficient fibre

Magazines. Excluded as insufficient fibre

While the tissue option can stand on its own, the rest would likely require a supportive business climate through which investment and operating challenges can be addressed.

The impact of the scenarios (over- and under-performance in RCP supply initiatives in IOI) is presented below. The scenario RCP supply should be compared to the average fibre mix of the mill option. The ‘high’ case, tends to secure the RCP supply allowing both local paper production and export to take place. Even under the ‘high’ scenario there is insufficient RCP to double the paper mill capacity at a later date. However the ‘low’ case of RCP supply under-achievement, leads to 3 options failing with supply difficulties (Packaging Containers, Packaging Cartons and P&W Papers), leaving only tissue. A number require support and development to establish a high quality RCP source – white printer and office RCP.

Mill fibre requirement compared to scenarios (low, base, high) of RCP availability, Tonnes.

Supply

OCC Supply Low – NA Base – 262,581 High – 289,589

ONP/OMG Supply Low – 71,576 Base – 100,743 High – 220,572

Mixed Supply Low – 115,905 Base – 318,088 High – 362,199

Other RCP All RCP grades below are at max. possible

Scenarios

Mill Option

OCC required

ONP/OMG

Mixed required

Other RCP

required

required

Packaging -

237,000

0

196,000

0

Containers

Packaging -

59,000

70,000

98,000

18,000 White

Cartons

Printer, office

Tissue

0

56,000

0

19,000 as above

P&W

       

Uncoated

0

86,000

0

15,000 as above

Newsprint

0

>400,000

0

0

Magazine

0

>400,000

0

0

Recommendations and Further Actions

In essence this work is about identifying if a paper mill option exists which can substitute the RCP export opportunity, and thereby keep additional value within IOI (commercial

and thereby keep additional value within IOI (commercial Paper Mill Feasibility Study for the Island of

Paper Mill Feasibility Study for the Island of Ireland

13

component). The opportunity is also about creating a focal point for waste management and RCP infrastructural development (strategic component).

The IOI RCP streams are presently enjoying a growing export market, focusing on demand in places such as China. This is supplied largely in unsorted form, as this activity can be undertaken in the destination country, where lower cost labour is available. These export streams can exist in their own right. The issue therefore becomes, does a new paper mill facility in IOI offer additional advantage and benefit to IOI? The feasibility test shows that some with the characteristics of tissue (good local demand, well connected to converting, and transport cost dependent) have a potential role. Other options, while meeting a number of the feasibility tests, fall short in fully achieving the profitability target.

The second issue is why locate such a facility in IOI, when in a number of product cases, a better location (RCP supply, market proximity) would be GB or even the Continent? In this case the product match needs to have strong connection to IOI users, for example converters, who subsequently supply the IOI industry with packaging and paper needs. Electronics, food and consumer products are all large users of high value packaging, making Packaging Cartons a possible candidate. In addition, a good fit is obtained with products that have a high transport dependency, for example tissue with a low weight to volume ratio, or products which are required close to customer – design based, small lots, just-in-time (JIT) service, specialised on end-use etc. These again promote tissue and packaging cartons as the lead possibilities.

Optimisation of site (e.g. multiple site occupation), streamlined and world scale RCP flows, rewards from bio-energy production, can all assist in improving profitability by reducing total costs up to 10-15%. For example, tissue production and another option might be located in close proximity.

Triggering investment will likely require a supportive business environment which addresses the capital and operating burden, at least in the initial phases. A supportive business environment has allowed the construction of paper sector assets in other parts of Europe. Both ROI and NI have established enterprise organisations and links to support measures at EU and local level.

After this, other benefits (not quantified here) would flow: the rationalisation of RCP supply streams across IOI, a long term focal point for RCP streams in IOI (whether this is used as mill furnish or subsequently exported from the site) and high profile visibility to encourage increased recycling in IOI. It’s difficult to digest an outcome that for the very long term, the IOI would only export RCP raw material, with little or no local processing (and value capture).

with littl e or no local processing (and value capture). Paper Mill Feasibility Study for the

Paper Mill Feasibility Study for the Island of Ireland

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Next Steps

NSMDG to adopt the report.

NSMDG to drive the commitments to RCP supply development in IOI. The scenarios show that a number of mill options are lost if RCP supply initiatives under achieve their fullest potential.

NSMDG to take the essence of the report to respective agencies in IOI, seeking support and creating a project team to ensure ownership. The project team to build a funding package – there is sufficient indication that this can tip the balance in favour of investment.

NSMDG to promote an examination of potential sites and streamlining of planning processes.

NSMDG to promote the communication of the report and exposure to potential investors and industry. Build target list.

NSMDG to support industry and investors in Phase 2 Feasibility Examination. Phase 2 should be with industry and investor participation. Phase 2 would include:

5 RCP supply – micro planning of availability, quality, infrastructure, prices, scenarios

6 Site technical assessments made available – location, suitability, access, utilities

7 Detailed investment models according to specific investor product and market profile

8 Full financial analysis, including 10 year horizons with costs and prices

9 Risk analysis

10 Support and funding package detail

and prices 9 Risk analysis 10 Support and funding package detail Paper Mill Feasibility Study for

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1. Approach and methodology

1.1 Summary

To establish demand and supply data for the island of Ireland (IOI), the work used a top down approach, beginning with high level statistics and progressing to more detailed levels until a robust dataset was achieved. High level sources included for IOI; Eurostat and ROI Environment Protection Agency and industry. For Northern Ireland (NI) this included Department of Environment and industry. Northern Ireland data was often incorporated into UK information as a whole.

There were data conflicts, sometimes between high level sources. Those within the sector, like waste operators and paper producers or converters also expressed some concerns from time-to-time about data integrity. The data consistency was resolved by using:

Information from face-to-face interview

Iterative exploration of data divergences with high level sources

Iterative review with the industry to test for robustness and credibility

During the work, issues and debate arose concerning differences in costs of landfill between NI and ROI, the recent publicity surrounding illegal landfill and shipments, plus debate on data reporting. Substantiation from high level sources was sought. Sources were referenced in this work (see Appendix 10) to provide a data trail. In all cases, the integrity of the mill option assessment was paramount, to ensure that while debate continues the paper mill option conclusions were robust. To assist this, two recovered paper (RCP) supply scenarios were also constructed to show the impact on achieving collection targets (or not) on the possible mill options.

From a total list of mill options, a screening process was employed to reduce this to a candidate shortlist based on; RCP supply sufficiency, competitiveness, market opportunity and strategic fit with IOI. The shortlist was then subjected to further examination using an established toolkit which can model various mill configurations and relative competitiveness with the peer group. In almost all products, the mill output would exceed the local IOI market demand, and such projects would be required to compete in the export market. The options were assessed for this.

The total cost (including delivery and capital charge) calculated for the mill models, was compared to market prices in a feasibility test. This shows the return on investment resulting from a new mill facility. The hurdle applied was 10% return on capital employed over the business cycle.

1.2 Consumption of Paper Products

Primary and secondary sources of information were used to review consumption of paper products. Information on primary paper manufacturing was obtained from published CEPI statistics, trade journals, and through direct discussion with manufacturers in IOI. Information on companies involved in further paper processing (converting, corrugating, printing and publishing) was obtained through established paper industry directory Birkner which lists industry participants worldwide, and the company directory Kelly’s. These were categorised in a database to describe the supply chain. Further information was requested from each Company by questionnaire (Appendix 1). The Sector listing is provided in Appendix 2 and the interview listing in Appendix 3.

provided in Appendix 2 and the in terview listing in Appendix 3. Paper Mill Feasibility Study

Paper Mill Feasibility Study for the Island of Ireland

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Information on imports of paper products in ROI was obtained from published CEPI statistics, Eurostat and Irish Central Statistics Office, completed questionnaire returns, and direct discussion with companies within ROI.

Separate published data for NI paper and board imports are not available since these data are incorporated into the UK as a whole. Primary research from industry was used to provide estimates.

The results of this analysis are presented in Section 3 of this report.

1.3 Sources, Volumes and Markets for Recovered Paper

The Environmental Protection Agency (EPA) in ROI and Department of Environment (DoE) in NI were the principal sources of headline statistics relating to the sources and volumes of recovered paper (RCP) in the IOI.

Exports of RCP from ROI, by year and country of destination were obtained from Eurostat databases. These data were presented to, and discussed directly with selected waste operators, who together were responsible for handling over 233,300 tonnes of RCP available in ROI in 2004. Strategies to improve collection and end-use -markets for waste paper were discussed with Dublin City Council.

In NI, initiatives through restructuring of councils within partnerships: Arc 21 (see Acronyms); North

West Region Waste Management Group and Southern Waste Management Partnership and their Waste Management Plans, were obtained from the web site. Specific information relating to paper collection targets was obtained by interview with arc 21 (This covers 25% of NI and approximately 57% of its population). Information on the collection and sorting methods employed was obtained by discussion with Bryson House. Bryson House were awarded the contract to operate a kerbside collection scheme for dry recyclables and materials recovery facility (MRF) by arc 21.

RCP supply scenarios were developed for the principal waste grades, i.e. old corrugated containers (OCC), old newspapers and magazines (ONP/OMG) and mixed unsorted paper. These scenarios considered new policy initiatives, infrastructural changes to waste management and collection, growth rates and grade related factors. The scenarios were used to show impact on potential mill options, for example, how exposed the options were to success in realising policy initiatives.

The results of this analysis are presented in Section 4 of this report.

1.4 Options to Utilise Recovered Paper

Unlike previous studies undertaken in IOI, this work opens the full range of RCP based paper products to scrutiny. Other studies were limited in this regard, usually focusing on a single product. Options rejected in this work, do not mean that the corresponding RCP supply streams have no value,

as the export alternative is well established, and assumed to continue. In essence this work is about

identifying if a paper mill option exists which can substitute the export opportunity, and thereby keep additional value within IOI.

A mill modelling toolkit was employed to examine each possible product configuration. An

optimisation case was also undertaken, through combining products, to get full site utilisation. The starting position for each option has been a ‘world class’ facility, which reflects both the scale and

technology regarded as best practice. Mill configurations are based on achieving accepted environmental standards and best practice.

achieving accepted environmental standards and best practice. Paper Mill Feasibility Study for the Island of Ireland

Paper Mill Feasibility Study for the Island of Ireland

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All models are based on JPC research coming from its engineering and consulting experience. These models have been built up over a decade, and revalidated at each application. JPC tracks almost every paper machine in the world, recording the upgrades and changes in configuration as they are announced. Costs are based on local sources. These JPC models are in common use throughout the industry and are used to estimate competitiveness of current and hypothetical new mills. The public sourcing of information means that confidentialities are not broken. In this project the mill models have been applied in various ways:

To estimate the manufacturing, delivered and total cost (capital charges and profit margin) of new mills located in IOI. To test for robustness, products were assumed delivered to London markets, except for tissue which could be produced for home market consumption.

To estimate the manufacturing and delivered cost (to market) of competing paper machines, in order to position the IOI opportunities on cost curves.

To compare total cost (including a 10% return on capital employed) with current prices, to indicate feasibility of the new mill facility. This is a preliminary test to place the investment in context, and allow identification of likely feasible options worthy of detailed examination in a Phase 2.

The RCP raw material supply used in the mill models was that generated through section 2.2 above. This has also been presented as scenarios to indicate how achievement of targets in IOI can influence potential mill configurations. As part of exploring the full potential, the virgin fibre availability in IOI was also examined to determine if an additional paper line might be possible, and also if sufficient raw material for bio-energy exists. Coiltte and the Northern Ireland Forest Service provided data for this.

RCP delivered costs (to mill) have been provided by local industry. Usage of other inputs such as energy, chemicals and labour have been determined by the mill model, with local costs applied and confirmed by industry in IOI. Currency exchange rates used in the mill models are those at Q3 2004.

The total listing of potential RCP product grades included: packaging papers for containers like cardboard boxes (unbleached and white surfaced); packaging papers for cartons like food and detergents; tissue; magazine grades; newsprint, plus printing and writing papers (this includes copier, office and communication papers). The total list was reduced by screening through the following criteria:

RCP resource sufficiency – using the supply availability by 2007.

Competitiveness – timing relative to other mill announcements and the impact of a new world class facility on the current installed manufacturing base.

Market and growth – a market opportunity in IOI, GB and Continent sufficient to absorb the mill production.

Strategic fit – connectivity with IOI industry, ability to gain high local market share, attractiveness of an IOI mill for local product buyers.

Summary – Blue print feasibility – whether the option should be carried forward into further analysis, or rejected.

From this screening the resulting candidates are those with the best potential. This does not preclude others, but industrial investors would need to deal with the additional hurdles identified. The results of this analysis are presented in Section 5 of this report.

of this analysis are presented in Section 5 of this report. Paper Mill Feasibility Study for

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2. Consumption of paper products

2.1

Summary

The overall economic situation for both the ROI and NI is good and is forecasted to continue throughout 2005. The economic situation compares favourably on the global stage shown in Table 1. (Quarterly Economic Review-Department of Enterprise, Trade and Investment-www.detini.gov.uk). GDP growth and projections for 2005, from Economic and Social Research Institute for ROI are also shown for comparison (in brackets).

Table 1: Real annual GDP Growth (%). ESRI data for ROI are shown in ( )

 

2003

2004

2005

OECD

2.2

3.4

2.8

US

3.0

4.5

3.8

Eurozone

0.5

1.8

2.2

ROI

3.7 (3.7)

5.5 (5.6)

5.5 (5.7)

NI

2.5

3.0

3.0

UK

2.2

3.3

2.8

Source: www.detini.gov.uk and www.esri.ie

The combined population is small (5.6 million) but is economically active. In both countries the market place looks positive for future development. Such prospects provide for a growing consumption and demand for paper products in all the major end uses.

There are 181 companies listed in trade directories, involved in paper related activities in both the ROI and NI, ranging from corrugating, tissue, labels and printing and finishing operations. There are likely to be a large number of small non listed enterprises as well. Primary paper related manufacturers in IOI are restricted to just two operations both making moulded fibre products

Total paper and packaging used (including secondary paper which arrives in other forms such as shoe boxes, white goods packaging etc.) in IOI is approximately 1.2 million tonnes, of which almost half is packaging.

With limited home primary production the majority of consumption is based on imports. The largest grades are; packaging related, newsprint, tissue products plus printing and writing papers used principally in offices and printers.

Great Britain represents the largest exporter of paper and paper products to the ROI accounting for over 335,000 tonnes in 2003 (57% of the total).

Future projections estimate 7% growth p.a in coated printing and writing for direct mail and promotional material etc., 4% growth p.a in uncoated printing and writing for direct mail, promotional material and office use, plus 4% p.a in magazine grades. These are driven by growth in GDP which stimulates consumption and in turn such activities as advertising. The growth of the service economy in both ROI and NI will stimulate the demand for office papers.

both ROI and NI will stimulate the demand for office papers. Paper Mill Feasibility Study for

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2.2

Economy and Demographics

www. worldwide-tax.com/ireland) and NI,

a population of 1.7 million (www.dardni.gov.uk). There are 1,288,000 households (2002) in the ROI

The ROI has a population of 3.96 million (July 2004 est. -

plus a further 627,000 in NI. 40% of the ROI population live within 97 km of Dublin and 66% of the

NI population live within 50 km of Belfast.

Few countries in the world can boast the economic achievements that ROI has shown in recent years. The ROI economy is considered to have the most rapid growth of the EU and OECD states. Among the many factors that have contributed to this growth are: the dramatic reduction in Government expenses, collective labour agreements that encourage an increase in the labour force, considerable investment benefits for overseas investors, a dramatic reduction in tax as well as reliance on a young and skilled labour force. The average age of the working population in ROI is 30 compared to the average age of over 40 in the rest of Europe. Unemployment has improved from 12.5% in 1996 to only 4.6% in 2003.

The rate of GDP growth over these last years has remained stable, but has been over 8% per annum

in the years 1995-2002. The estimated per capita GDP for 2003 was approximately €22,000, a figure

similar to that of the European economic giants such as Germany, France and Holland.

The industrial sector contributes some 46% to the GDP and 80% to exports although it employs only 28% of the work force. The hi-tech manufacturing industry is particularly notable, mainly computers as well as chemical engineering and textile industries. These are important users of paper packaging materials for product transport and presentation.

The NI economy has been continuing to perform well against the backdrop of global recovery with unemployment at the lowest levels since records began. For the period Oct-Dec 2004 seasonally adjusted unemployment stood at 35000, 4.5% of the economically active. (www.dardni.gov.uk)

GDP growth in NI was 2.5% in 2003 and expected to increase to 3.0% for 2005. The per capita GDP was around €18800. Manufacturing exports from NI were estimated to be worth €5.9 billion in 2003/4, which represents an increase of 9.4% over the year. The electrical and optical equipment sector accounted for the largest share of exports (23.2%) followed by food, drink and tobacco (16.3%) and transport equipment (15.3%). All these are significant users of paper packaging.

In 2000, turnover for ‘paper, pulp and paper products’ (Nace 21) was €800 million euro in ROI, employing 4817 people, and €346 million euro in NI employing 2260 people. In the related ‘printing and production of recorded media’ (Nace 22), ROI turnover was €9,642 million employing 18743, and in NI, turnover was €416 million employing 4647 people (A North/South Analysis of Manufacturing and Growth and Productivity-Dr Eoin O’Malley and Professor Stephen Roper –InterTradeIreland report

2001).

2.3

Type and quantity of paper/paper products manufactured on the island of Ireland and subsequently consumed there.

2.3.1

Primary paper manufacturing

Smurfit’s Clonskeagh Mill closure means a loss of 45,000 tonnes of RCP processing into packaging grades. This means that recycling capacity (processing of recovered paper into a reel of paper or paper product) is now limited to two moulded fibre-manufacturing operations. The RCP earmarked for Clonskeagh will now go to other Smurfit operations in the UK and Spain. This particular closure

Smurfit operations in the UK and Spain. This particular closure Paper Mill Feasibility Study for the

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should not reflect on this work, as new world class facilities are being considered, and therefore the opportunity for IOI to regenerate its papermaking capability.

The two primary paper manufacturing sites are:

Huhtamaki-Lurgan, NI - manufactures 19,000 tonnes p.a. of moulded fibre products (mainly egg boxes) from 19,000 tonnes of recovered paper comprising, 2,850 tonnes-unprinted news, 2,850 tonnes printed news, 10,450 tonnes clean mixed waste and 2,850 tonnes of virgin paper [Andrew

Rothwell, Pendle Pace Ltd, personal communication-December 2004]. 85% of moulded pulp

product is exported (mainly to GB), with 15% consumed in IOI.

Erin Moulded Fibre, Birr, ROI – manufactures 800 tonnes p.a. of moulded fibre products (mainly agricultural products e.g. hanging baskets, plant pots) from printed news [Andrew Rothwell

personal communication-March 2005].

2.3.1 Secondary paper manufacturing

Data from trade directories, Birkner (2005) and Kelly’s (2005), provide information on 107 companies involved in paper converting/printing, corrugating, sack manufacture and paper merchants on the IOI. A further 74 companies (mainly printers) were located through internet search. Of the 181 companies, 75 are located in NI and 106 in ROI. The majority of companies are printers (70) followed by converters (51), paper merchants (43) with two companies involved in corrugating/sack manufacture. These companies, plus direct sales (for example to retailers) form the major route to market for paper consumption in IOI.

2.4 The type and quantity of paper/paper products imported into the island of Ireland and subsequently consumed there.

With only limited primary paper manufacture available in IOI, nearly all paper consumption is met by imports. To establish the type and quantity of paper/paper products imported into IOI, five main sources of published information were consulted:

CEPI-overall tonnage of paper imported into ROI

Eurostat data for ROI

Trade Statistics-Central Statistics Office-2003

Information received from questionnaire

Information from face to face interviews.

NI data are included in UK-wide statistics making it difficult to establish the type and quantity of imports. Data were requested from industry during the interview process and have been used to build up a picture of NI imports.

2.4.1 ROI

Eurostat data for 2003 indicates that ROI imported 584,301 tonnes of paper and paper products (Table 2). Some paper import is converted (envelopes, wallpaper, exercise books etc. -Trade Statistics Central Statistics Office Ireland 2003) and then exported, equivalent to 15% of imports (88,374 tonnes). Industry information and interview indicates that a significant proportion of imported packaging grades (in the form of reels) are converted in the ROI, but (as in one case) 65- 70% is then exported as secondary packaging with the goods.

Specific Eurostat information relating to imports by grade, origin and by year are shown in Appendix 4. These data indicate a stable but flat growth for printings and writings grades, a fact echoed by

flat growth for printings and writings grades, a fact echoed by Paper Mill Feasibility Study for

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sales offices for large paper companies based in Dublin. A similar pattern emerges for newsprint and packaging grades.

The interviews showed a positive sector, with specific challenges but mostly looking forward to growth. One major packaging converter indicated a marked reduction in demand for virgin-based kraft fibre products with some tonnage loss offset by increased use of recovered paper based liner and fluting. Despite an overall flat market, two paper sack manufacturers experienced strong growth with one company experiencing 100% growth over the last 5 years and forecast a similar rate of increase. Tissue imports recorded 30% growth between 1999 and 2003. New entrants, such as Leicester Paper Company, have established own brands with local supermarkets.

The interviews also provided a confirmation and exploration base of paper importation into ROI. The tonnage accounted for through interview was about 25% of the total Tables 2 and 3).

Table 2. ROI - imports (tonnes) by grade 2003 (Imports accounted for by industry interview and questionnaire are shown)

Grade

Import (tonnes)

 

Accounted imports

P&W: Uncoated mechanical

6,387

 

P&W: Uncoated woodfree

62,890

P&W: Coated woodfree

4,377

P&W: Coated mechanical

54,534

Kraft liner, testliner & other packaging paper

 

154,202

 

95,600 a

     

5,500 b

     

2,120 c

Speciality paper

28,816

 

Converted packaging products

 

91,573

 

Tissue and tissue products

62,014

 

20,000 d

Newsprint

87,116

 

Other paper products

32,393

 

Total

584,301

 

123,220

Table 3. Selected Company Data – Import Confirmation

Company

Total imports

 

Grade mix and tonnage

Country of origin

(tonnes)

 

Smurfit a

32,100

Brown kraftliner White kraftliner Recycled testliner & Fluting

 

Sweden

7,000

Finland, Sweden

56,500

UK, France

AB Converters b

2,000

Virgin sack kraft Virgin bleached kraft

 

Brazil

3,000

Finland

500

Virgin grease resistant

UK

JH Walsh Roscreac c

2,000

Kraft Paper

 

UK, Spain, France Belgium

120

Greaseproof

Georgia Pacific d

20,000

Mainly recycled fibre grades

 

UK

d 20,000 Mainly recycled fibre grades   UK Paper Mill Feasibility Study for the Island of

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ROI-source of imports by country in 2003

Eurostat data indicate that the UK (58%), Sweden (14%) then Germany (7%) were the largest exporters of paper/products to ROI in 2003 (Figure 1). The UK share of exports to ROI was 336,958 tonnes in 2003 - a small increase of almost 5% on 1999. Exports to ROI increased from Germany, Italy and Spain and decreased from France (46%), USA and Finland.

Figure 1. ROI - Source of import by country (%) - 2003 Imports to ROI
Figure 1. ROI - Source of import by country (%) - 2003
Imports to ROI by country - 2003
2%
Canada
2% 3%
3%
Finland
7%
France
2%
Germany
4%
Italy
3%
Netherlands
2%
Norw ay
Spain
Sw eden
58%
14%
UK
USA

Industry perspective

Primary information was sourced from 22 face-to-face interviews with industry and involved organisations. These were supplemented by questionnaire returns; 4 companies responded which yielded information on 6 manufacturing operations. The interviews and questionnaires were used to build understanding and to confirm the high level statistics on consumption and production. At the same time this was an important vehicle to engage the industry in the work. The responses included:

Questionnaire respondents

Respondents to the questionnaire were from packaging converters with defined areas of sales. JR Walsh Roscrea Ltd and AB Converters Ltd manufacture paper sacks and paper bags for retailers using entirely virgin kraft grades (sack kraft, bleached kraft and grease resistant). Smurfit Corrugated Ireland (SCC - part of Jefferson Smurfit Group) operate 14 manufacturing sites in IOI including 4 converting plants. Information was provided on the converting operations at SCC Dublin, Killeen (both in Dublin) and SCC Cork and SCC Lurgan that sell to manufacturing and food and agriculture, using both virgin kraft, and recycled testliner and fluting grade.

Virgin and recycled fibre use

JR Walsh Roscrea and AB Converters had experienced sales increases from between 5 and 20% pa over the past 5 years and forecast similar sales performances over the next 5 years respectively-all based on current virgin fibre sources. Conversely, Smurfit Corrugated Ireland noted a reduced demand for virgin packaging grades (down by between 20 and 26%) with usage expected to fall by between 5 and 20% over the next 10 years. Demand for recycled grades (testliner and fluting) grew by 8% over past 5 years with 4% further growth expected over the next 10 years.

5 years with 4% further growth expected over the next 10 years. Paper Mill Feasibility Study

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2.4.1

NI

Published information regarding the type and quantity or source of paper and paper products imported by NI is not available. Eurostat data for ROI were used as the basis of the estimation of the imports of paper and paper products by grade into NI (Table 4). Specific information on imports was obtained from interviews with industry (Table 5).

A key assumption in this estimate is that the import of paper in ROI compared to overall total use is the same in NI. The estimate basis is as follows:

Eurostat ROI import data by grade (584,301 tonnes in total), divided by;

ROI EPA data for total waste paper arisings (925,239 tonnes, section 4.1.1), multiplied by;

NI DoE data for total waste paper arisings (306,360 tonnes, section 4.1.2).

On this basis, NI imports are estimated at 193,470 tonnes. Individual grades tonnages were estimated using the same approach but with ROI Eurostat data for each grade.

Discussion with four companies in NI (Appendix 3) provided information that accounted for 89,000 tonnes of paper imports, with the remaining imports used by 71 other companies identified from trade directories (Appendix 2). The industry also indicated that over 60% of their converted production was exported from NI, to either ROI or GB.

Overall, the industry interviewed revealed a growing business based on imported paper products. Delta Print and Packaging Ltd plan to grow from £14 million to £22 million over the next few years. Newcel Paper Convertors also expressed an optimistic outlook experiencing strong growth in 2004 (38%) with higher than expected growth of 10-12% in the next few years.

Table 4. NI- imports (tonnes) by grade 2003. Imports accounted for by industry interview are shown

   

Accounted

Grade

Import (tonnes)

imports

P&W: Uncoated mechanical

2,114

 

P&W: Uncoated woodfree

20,823

P&W: Coated woodfree

1,584

P&W: Coated mechanical

18,050

25,000 a

Kraft liner, testliner & other packaging paper

50,934

45,000 b

Speciality paper

9,540

 

Converted packaging products

30,321

14,000 c

Tissue and tissue products

20,534

5,000 d

Newsprint

28,845

 

Other paper products

10,725

 

Total

193,470

89,000

paper products 10,725   Total 193,470 89,000 Paper Mill Feasibility Study for the Island of Ireland

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Table 5. NI Source of imports by country (%) – 2003

Company

Total

Grade mix and tonnage

Country of

imports

origin

(tonnes)

 

SCA Packaging a

45,000

31500

recycled fibre

 

based liner and fluting

UK aa

13500

virgin fibre grades

Sweden

Robert Horne b

25,000

Virtually all virgin fibre grades

UK, Germany,

Sweden and

 

Netherlands

Delta Print and Packaging c

14,000

9800 (White lined chip)

Austria, Italy,

Sweden

Newcel d

5,000

Mainly recycled fibre grades

UK, Europe, Far East, Venezuela, Turkey

aa -liner sourced from Smurfit Townsend Hook; fluting previously sourced from Smurfit Clonskeagh Mill now also likely to be sourced from Smurfit Townsend Hook

A significant proportion of converted paper is used in IOI, as follows:

Delta Print and Packaging exports 20% of products to ROI, with 50% going to GB, and 10% to other European countries. 20% is used within NI. Key markets are fast food (McDonalds, KFC), pharmaceutical, frozen food and retailers

SCA Warrenpoint exports 85% (38,250 tonnes) to ROI. Dell is the largest customer (25,000 tonnes); others include Baileys, Baxter Healthcase and Tesco

Robert Horne-all paper imports (25,000 tonnes) are sent to commercial printers-all consumed on IOI

Newcel-IOI main market.

2.5 The origins of paper consumed in IOI including mill location, the mill capacity, mill furnish requirements

The potential origins of paper consumed in IOI, including mill location, capacity and mill furnish requirement are shown in Table 6. Eurostat data confirm that the UK is by far the largest source of imports into ROI (these data need to be taken with caution since Eurostat data does not differentiate between manufacturing source and final country of dispatch). Paper supply to IOI is supported by sales offices (e.g. M-real, StoraEnso, UPM-Kymmene) and converting operations (Georgia Pacific- Ireland, SCA Warrenpoint and Smurfit), which serve the market using paper raw material produced in company facilities outside IOI (Table 6). While shown as an import, this is more a sales stream within a corporate supply chain. A new facility would need to displace this type of tonnage, plus that imported independently, by offering a competitive local alternative.

independently, by offering a competitive local alternative. Paper Mill Feasibility Study for the Island of Ireland

Paper Mill Feasibility Study for the Island of Ireland

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Table 6. Origins of key grades by country, mill and furnish

 

Country

Supplier

Mill

Furnish

Uncoated mechanical

Sweden

Stora Enso

Kvarnsveden

Virgin

Coated mechanical

UK

UPM

Caledonian

Virgin Virgin 75%, RCF 25%

Germany

UPM

Augsberg

Uncoated woodfree

UK

M-real

New Thames

RCF

UK

Tullis Russel

Markinch

Virgin

UK

IP, AW

Aberdeenshire

Virgin

Germany

UPM

Nordland Papier

Virgin

Coated woodfree

Sweden

Stora Enso

Grycksbo

Virgin

Netherlands

Sappi

Nijmegen

Virgin

UK

M-real

Sittingbourne

Virgin/RCF grade

Kraftliner, testliner & other packaging

UK

Smurfit

Townsend Hook

RCF

Sweden

SCA

Munksund

Virgin

USA

IP

Savannah

Virgin

Specialty paper

UK

Sappi

Nash

Virgin

UK

Arjo Wiggins

Stoneywood

Virgin

Converted packaging products

UK

DS Smith

Various locations

RCF

UK

SCA

Various locations

RCF/Virgin

Tissue and tissue products

UK

GP

Llangynwyd

Virgin>50%/RCF<50%

UK

LPC

Leicester

RCF/Virgin

Newsprint

UK

UPM

Shotton

RCF Virgin RCF<30%/Virgin >70%

Canada

Abitibi

Clermont

Norway

Norske Skog

Skogn

Notes:

UPM-United Paper Mills, IP-International Paper AW-Arjo Wiggins, SCA-Svenska Cellulosa Aktiebolaget GP-Georgia Pacific, LPC-Leicester Paper Company RCF-recycled fibre

International players in IOI

Significantly, a number of international paper companies, including Smurfit, Georgia Pacific, StoraEnso, M-real and UPM-Kymmene are represented in IOI either as sales or converting operations. Limited data was obtained from these companies regarding the volumes of imports they control and the source of these imports by manufacturing site. However, Eurostat data for imports to ROI by grade and country of origin enabled the identification of most probable mills and recycled furnish content. The key RCF grades that could potentially contain recycled furnish entering ROI amounted to 364,098 tonnes (66% of total imports) based on the following:

packaging grades - up to 245,975 tonnes-potentially all RCF-based

newsprint – 87,116 tonnes-potentially all can be RCF based

tissue and tissue products – 31,007 tonnes (based on assumed 50% RCF content).

Virgin fibre-based grades form a significant source of imports (184,203 tonnes) to ROI for pharmaceutical and food packaging applications and printings and writings.

Specific import data for NI was gained form direct interview with industry. Based on the spread of businesses within IOI and their activity, it is not expected that the ratio of grades imported into NI will differ widely from ROI.

ratio of grades imported into NI will differ widely from ROI. Paper Mill Feasibility Study for

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2.6

Current consumption in terms of product type, the grade of paper and the end use sector

Paper supply chain

Industry trade directories estimate that 181 businesses are involved in paper converting, printing, corrugating, sack manufacture and paper sales in IOI (Appendix 2), within which ROI had a turnover of €10442m, and in NI a turnover of €762 million (Table 7).

Table 7. Paper activity supply in IOI as indicated by the number of businesses

 

Primary

Converting

Printing

Corrugating

Corrugating/

Paper

Total

manufacturers

sack

merchants

NI

1 16

 

37

4

0

17

75

ROI

1 35

 

33

9

2

26

106

Total

2 51

 

70

13

2

43

181

Primary manufacturing is limited to moulding for egg boxes and agricultural products. Eighty five percent (85%) of the egg boxes are exported to markets in mainland UK with 15% consumed by IOI. Significantly, Huhtamaki Lurgan is the only UK egg box manufacturer and supplies 16,150 tonnes per annum of product to retailers and egg producers based in mainland UK.

Consumption

Total paper consumption is the sum of domestic paper and board production, paper and board imports minus exports. Paper imported into the IOI is from two sources, a) paper/card for converting into paper products or as a final product, b) packaging around goods imported into the country, know as secondary paper e.g. shoe boxes, packaging for white goods. No data on secondary paper is recorded therefore compositional data from the EPA was used as the baseline for total paper consumed. This data estimated that 925,239 tonnes of paper was either recycled or disposed of in the ROI in 2003 (EPA, 2005). Table 8 illustrates how this total can be divided up into the various paper sources, with secondary paper assumed to be total consumption minus known consumption. These data enable the total markets available to mill options to be estimated and also the potential fibre available for recovery. Total paper may even be slightly higher as the EPA waste data will not include most tissue papers, archived and posted papers. Taking into account the limitations of waste composition analysis results, these figures represent the best available data.

ROI production is limited to 800 tonnes at Erin Moulded Fibre. Imports at 584,301 tonnes represent a significant proportion of total consumption, while 400 (estimated) tonnes of Erin Moulded Fibre production is itself exported. ROI consumption is therefore estimated at 584,701. There are 88,374 tonnes (15% of volume of imports) converted into products (envelopes, wallpaper, exercise books etc) and subsequently exported with a value of €205 million (Trade Statistics-Central Statistics Office Ireland-2003). 18,000 tonnes of this is exported to UK (Trade Statistics-Central Statistics Office Ireland-2003) of which (based on population) 513 tonnes is estimated as exported directly to NI.

For NI, it is estimated that 193,470 tonnes of paper/paper product are imported, which together with 19,000 tonnes of indigenous production, less exports, give consumption for NI 196,320 tonnes.

These elements, plus the net imports of secondary paper products, give the total paper consumption in IOI (Table 8). These data establish the total fibre supply needs of IOI, the markets available to mill options and also the fibre potential available to the mill options (paper that can be collected and recycled). This is the basis for the projection in Section 3.6

recycled). This is the basis fo r the projection in Section 3.6 Paper Mill Feasibility Study

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Table 8. Total Paper Consumption (Tonnes), ROI, NI and IOI. 2003

 

ROI

NI

IOI

Production a

800

19,000

19,800

Imports

584,301

193,470

777,771

Exports b

400

16,150

16,550

Consumption c

584,701

196,320

781,021

Net imports of secondary converted paper products d

340,538

110,040

450,578

Total paper products e

925,239

306,360

1,231,599

Notes

a. Erin Moulded Fibre 800 tonnes; Huhtamaki Lurgan 19,000 tonnes

b. ROI exports obtained from Trade Statistics-Central Statistics Office Ireland-2003; NI export

data obtained from industry interviews. Primary paper products.

c. Consumption (primary paper and board products) = Production + Imports – Exports

d. Net imports of secondary converted paper – the residual between total paper and primary

paper consumption estimates.

e. Total Paper Products. This is consumption of primary paper product plus secondary and

converted paper. This also forms the basis for the potential fibre base for the mill options and

corresponds to the total paper arisings - the total waste paper and board materials derived from household and commercial sources, which are either recovered for recycling or landfilled (EPA data 2005). Source data was EPA 2005 and NI DoE 2005 .

2.7 Future consumption of paper and paper products in the IOI

Using the data obtained from the research, the future consumption for the various paper grades has been estimated for ROI, NI and IOI. In assessing this, a number of factors and drivers likely to influence consumption have been considered. These factors relate to issues surrounding the future consumption patterns for paper products in the key end use areas of printing and packaging.

PIRA has undertaken a number of studies examining the issues and drivers that may impact these important sectors and reference has been made to such work in developing the future projections. Reference has also been made to key economic and social factors that relate to both ROI and NI.

2.7.1 Influencing factors

Living standards

The ROI is now in the first level of the wealthiest countries for the first time. It is ranked 4 th (source: The Times Business Section Wed Jan 12 2005 p50)

Real GDP growth of the ROI was 3.5% in 2003; 5.5% in 2004 and expected to be 5.5% in

2005. Forecasts through to 2008 show similar levels (source: www.detini .gov.uk; Social

Research Institute figures)

The UK including NI is now in 11 th place of the league of living standards (up from 17 th in 1999) (source: The Times Business Section Wed Jan 12 2005 p50).

Real GDP growth for NI was 2.5% in 2003; 3.0% in 2004 and expected to be 3.0% in 2005

was 2.5% in 2003; 3. 0% in 2004 and expected to be 3.0% in 2005 Paper

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28

Such GDP growth compares very favourably with the Eurozone and other global players (see Table 1)

The improvement in living standards as indicated by such economic measures will improve the overall economic activity in IOI and stimulate new demand and employment. Such demand will filter through to paper related products e.g. increase in office papers, more advertising via direct mail, increased magazine sales etc.

Demographics

In the developed world there has been an overall growth in older people and a decline in the younger age groups notably the under fifteen year olds. While the UK including NI is following this overall trend, it is not as marked in ROI. Despite this, the number of older people (65+) has increased by third over the period 1971-2000, but only constitute 11.1% of the population. In contrast the number of under fifteen year olds has declined by 12% over the period 1991-2002

The importance of this changing demographic pattern is that such population shifts will drive changes in marketing, product and pack formats and distribution systems.

Women at work

Over 49% of women are now employed in the ROI as compared to 30% in 1985

Data for the UK including NI is similar, at just above 50%

Such increases influence the overall family affluence and create changes in family eating habits

Women in work have also changed the frequency and mode of shopping to fit a more complex daily schedule

Women overall are more sophisticated consumers, more health conscious and more environmentally concerned

Changes in families and households

Statistical data for both the ROI and the UK including NI shows that there are more single parents and one person households. It has been estimated that by 2016, 2 out of 5 will be a single person.

Families are smaller and more numerous

There are more dual income families

The changing family unit, pressures on time and an overall more mobile lifestyle has meant considerable changes in eating styles

These changes in family and household structure have implications for packaging in particular which is needed to service ‘lifestyle’ changes. This results in volume increases through smaller but more numerous packaging formats

There will be a rise in home shopping via the Internet or TV as time pressures and convenience factors increase the advantages of this form of shopping for many. Such moves will increase transit related packaging e.g. corrugated

Consumer changes

There will be increase consumption in convenience based foods

Consumers will become more sophisticated and at the same time retailers will seek to mass customise products to appeal to such customers

Green consumerism likely to rise which favours paper based products

Good functionality will be a key requirement.

products • Good functionality will be a key requirement. Paper Mill Feasibility Study for the Island

Paper Mill Feasibility Study for the Island of Ireland

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2.7.2

The implications for different product sectors

With this rapidly changing world such influences will have implications for the major paper based products used in packaging and printing.

Implications for packaging

The greater consumption of snack food and food-on-the-go will lead to a variety of new packaging formats. Paper based products are favoured in a number of areas and environmentally related issues are particularly driving their use in fast food chains, etc.

The changing nature of households will see the greater need for single portion packs and smaller packs. This will lead to a disproportionately higher generation of waste.

Changes in demographics will necessitate new pack formats with, for example, larger print and easier opening formats

There will be a continuing trend towards lower basis weight and down gauging of paper packaging board in line with trends to reduce costs and to meet legislation related to packaging waste minimisation.

Implications for print

Paper-print based products will continue to decline as they are displaced by electronic media

There will be the continual migration of print to non production environments resulting in the continued growth in cut sheet papers

The volume of print production is strongly linked to advertising expenditure, which in turn often reflects GDP. The projected growth in GDP should provide a good basis for increased consumption of printed related products, for example direct mail, magazines, etc.

Increases in the service sector in ROI (employee numbers rose 20% over the period 1999- 2001) will lead to increases in cut size office papers (predominately A4 uncoated printing and writing grades)

There will be similar increases expected in Northern Ireland, which will be linked to the growth in the economy and standard of living. Differentials between NI and the rest of the UK are diminishing

Implications for tissue

The tissue sector can be considered to be more directly related to customer needs and perceptions than other grades

Demands for the more niche, higher premium products will increase with standards of living and this will increase with the projected growth in GDP

Cost issues, however, dominate consumer choice and there is a trend towards favouring ‘own brands’, etc.

The changes in demographic patterns resulting in an increase in an older population will increase the need for disposable products

These implications for the different end uses will influence growth rates for the different paper grades. Therefore growth rates for each of the key paper grades used in these end use sectors were sourced from a range of publications (Future of Corrugated Board Packaging for the European Market (Pira Market Report 2003), Future of Print II (Pira Market Report 2004), Paperloop, CAP Ventures, etc). Each figure was then viewed in light of the local market conditions prevailing and any known

light of the local market conditions prevailing and any known Paper Mill Feasibility Study for the

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technology changes and a growth figure derived. Such figures are broad brush and do not take into account differences within grades, they do however provide direction for each grade overall.

Based on these influences and implications the percentage changes that might be expected for each paper grade are shown in Table 9.

Table 9. Growth assumptions by grade for IOI

Grade

Growth % pa

Uncoated mechanical

2.5

Uncoated woodfree

4

Coated woodfree

7

Coated mechanical

4

Kraft, testliner, etc

2

Speciality

2.5

Converted packaging

2

Tissue

1.8 to 2008; 2 to 2013

Newsprint

1 to 2008; 0 to 2013

Other

2

Notes While demand of packaging grades is closely linked to economic growth and consumer expenditure on food, beverages and other packaged items, this is being offset in tonnage terms by progression to lighter weights and down gauging of the fluting in corrugated boxes currently used in many applications. It has been predicted that similar down gauging will eventually occur with the liners. Demand for many of the premium tissue grades is strongly linked with consumer spend. However while economic conditions are favourable for this, much of the tissue purchases are dictated by cost (Tissue Report www.euromonitor.com/disposable_paper_products_in_ Ireland). Grades linked to advertising, promotion etc i.e. magazines; printing and writing, are showing attractive growth rates linked to the good economic pointers in both ROI and NI Printing and writing used primarily as cut sheet for office and business use is growing with a) the growth in businesses and the service economy and b) with the development in inkjet/laser printing technologies

2.7.3 Projections for growth

In projecting the likely future consumption by grade, data from the various sources referenced in the study were used. The major source was Eurostat import data for ROI (Table 2) and estimated imports for NI (Table 4). These were adjusted in line with known additions or circumstances. Specifically

the newsprint value for the ROI of 87,116 tonnes was increased to 162,800 tonnes to take into account imported printed news

kraftliner etc for ROI was increased to take into account the 45,000 tonnes no longer produced by Smurfit

converted packaging products was increased to take into account the imports of secondary and converted products

figures for NI were based on ROI consumption patterns for the each grade, then extrapolated.

The projections for future consumption for the ROI, NI and the IOI are shown in Tables 10 to 12 respectively. These projections are based on consumption which includes net imported secondary paper product - for total paper consumption in primary and secondary form.

- for total paper consumption in primary and secondary form. Paper Mill Feasibility Study for the

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Table 10. Future consumption, ROI (tonnes)

Grade

2003

2005

2008

2013

P&W: Uncoated mechanical

6,387

6,710

7,226

8,176

P&W: Uncoated woodfree

62,889

68,020

76,514

93,091

P&W: Coated woodfree

4,376

5,011

6,139

8,610

P&W: Coated mechanical

54,533

58,984

66,349

80,724

Kraft liner, testliner & other packaging paper

199,203

207,250

219,935

242,826

Speciality paper

28,815

30,275

32,603

36,887

Converted packaging products

236,612

246,378

261,458

288,671

Tissue and tissue products

62,014

64,266

67,800

74,856

Newsprint

162,801

166,072

171,104

171,104

Other paper products

107,609

111,956

118,809

131,174

 

925,23

 

1,027,9

1,136,1

9

964,922

37

19

Table 11. Future consumption, NI (tonnes)

Grade

2003

2005

2008

2013

P&W: Uncoated mechanical

2,114

2,221

2,392

2,706

P&W: Uncoated woodfree

20,823

22,522

25,334

30,823

P&W: Coated woodfree

1,584

1,814

2,222

3,116

P&W: Coated mechanical

18,050

19,523

21,961

26,718

Kraft liner, testliner & other packaging paper

65,846

68,506

72,699

80,266

Speciality paper

9,540

10,023

10,794

12,212

Converted packaging products

78,400

81,567

86,560

95,569

Tissue and tissue products

20,534

21,280

22,450

24,786

Newsprint

53,890

54,973

56,639

56,639

Other paper products

35,579

36,292

38,513

42,521

       

375,35

306,360

318,721

339,564

6

Table 12: Future consumption, IOI (tonnes)

Grade

2003

2005

2008