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Paper Mill Feasibility Study for the
Island of Ireland - Summary
Phase 1: Development and Assessment of
Paper Mill Options
Prepared for North South Market Development Group and
Waste & Resources Action Programme
WRAP Reference: PAP0024
Written by:
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
Date (published)
ISBN: 1-84405-288-5
R&D Report: Paper
Creating markets for recycled resources
Contents
INTRODUCTION
3
Methodology
3
Paper Products Consumption
4
Sources, Volumes and Markets for Recovered Paper
5
Paper Mill Options to Utilise Recovered Paper
7
Conclusion
10
Recommendations and Further Actions
10
Paper Mill Feasibility Study for the Island of Ireland - Summary
2
Introduction
The North South Market Development Group (NSMDG) in conjunction with the Waste
and Resources Action Programme (WRAP) has sponsored this project. The objective is
to 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 for 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
Paper Mill Feasibility Study for the Island of Ireland - Summary
3
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 recovered paper (RCP) demand
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 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. 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. There were no grants or incentives included in
the feasibility test.
Paper Products Consumption
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 RCP supply, is at the heart of the challenge
to realise world scale paper mill facilities.
The current industry structure in the IOI comprises 2 primary paper producers and over 180
secondary businesses or converting (e.g. processed into cartons, boxes, copier paper, plus
printing and distribution).
Domestic paper production, plus paper imports, less exports, combines to give consumption
of paper for NI and ROI. 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
paper consumption plus net imports of these secondary and converted paper products gives
consumption of all paper products (see table below). These data establish the total markets
available to mill options and also the fibre potential available.
Total Paper Consumption (Tonnes), ROI, NI and IOI. 2003
ROI
NI
IOI
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
Production
Paper Mill Feasibility Study for the Island of Ireland - Summary
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Consumption of all paper products 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), 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.
Grade
2003
2005
2008
2013
Mill scale*
P&W: Magazines, Flyers, Inserts
81,084
87,438
97,928
118,324
400,000
P&W: Office Papers,
communications, printed materials
89,672
97,367
110,209
135,640
100-160,000
265,049
275,756
292,634
323,092
400,000
38,355
40,298
43397
49,099
10-50,000
315,012
327,945
348,018
384,240
***250,000
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
1,231,599
1,283,643
1,367,501
1,511,475
Packaging Papers and Board
Speciality paper**
Converted packaging products
Tissue and tissue products
*Mill scale. World scale facility to be competitive. Scale represents current recovered paper-based
initiatives.
**Speciality papers represents many different grades with small consumption levels e.g. labels,
security, filters, abrasives, medical etc.
***Carton board mill scale
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. 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. Carton board leading to carton and box converting might also
be considered. 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 consumed in IOI 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. It is estimated
that at least a third (477,872 tonnes) of this is currently recovered for recycling.
Paper Mill Feasibility Study for the Island of Ireland - Summary
5
Post-consumer waste paper arisings on IOI-2003 (tonnes). Data sourced from
EPA and DoENI 2005
ROI
% change
NI
% change
238,994
IOI
2001
804,414
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 production 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 an 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.
The difference between RCP supply and total arisings is the waste paper sent to landfill,
archived or lost e.g. tissue. Projections by main grade of RCP supply have been generated
for ROI and NI. These grades are OCC (old corrugated containers e.g. cardboard boxes),
ONP/OMG (old newspapers and magazines) and mixed unsorted waste paper. 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.
Future RCP supply projections by grade for the IOI through to 2015 (tonnes)
Year
OCC
News& Mags
Mixed
Total
2003
217,469
51,117
209,286
477,872
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 overachieving 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 shows indeed that the mill options are dependent on achieving targets
with the RCP programmes in IOI.
Paper Mill Feasibility Study for the Island of Ireland - Summary
6
Paper Mill Options to Utilise Recovered Paper
The option process commenced with a total list of recovered paper-based products. This
included:
•
•
•
•
•
•
Packaging containers or cardboard boxes, including white surfaced containers
Packaging cartons, for example detergent, cereals, foods
Tissue
Printing and Writing (P&W) – papers for communication, copy and printing
Newsprint
Magazines
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 Great Britain) 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 1st or 2nd quartile cost
performance (lower half of all competing producers) and allow competitive exports to
main markets in particular to Great Britain.
Feasibility – can meet a 10% return on capital employed over the cycle. No grants or
incentives included.
Environmental fit – the facility meets regulations and directives.
Paper Mill Feasibility Study for the Island of Ireland - Summary
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The summary of this assessment is as follows:
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
IOI market for kraftliner and
testliner is 270,000t.
New IOI facility can be in 1st2nd 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
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 1st2nd 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
– would need to displace
imported tissue
Competitive in the IOI
market as transport cost
(imports) for these low
weight, high volume
products can be prohibitive.
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.
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 1st2nd 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
a positive business
development climate to
support investment.
A new state-of-the-art facility
would be amongst the
largest in Europe. IOI market
is around 90,000 t.
New IOI facility can be in 1st2nd cost quartile. Better
performers would be found
in closer proximity to RCP
supplies and markets
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
in European market context.
Flexible in terms of furnish
grade mix – fibre supply
sufficient
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
An IOI new facility would go
straight to top 10 European
producers – big impact on
existing capacity
Limited in terms of high
quality recovered office
paper availability. Difficult
option to realise
Paper Mill Feasibility Study for the Island of Ireland - Summary
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The feasibility test favours products such as tissue and perhaps 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.
• 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 Great Britain 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 by 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
Scenarios
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
Mill Option
OCC required
ONP/OMG
required
Mixed required
Other RCP
required
Packaging Containers
237,000
0
196,000
0
Packaging Cartons
59,000
70,000
98,000
18,000 White
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
Paper Mill Feasibility Study for the Island of Ireland - Summary
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Conclusion
This study indicates that, overall, a tissue mill is likely to present the best opportunity in
IOI since:
• Recovered paper of a sufficient quantity and quality as a feedstock for the mill could be
sourced from IOI
• There is a ready, local market for tissue paper
• There are no existing tissue mills on IOI
• The financial modelling suggests a mill of a capacity of 30,000 or 50,000 tonnes per
annum could be financially viable
The other mill options are likely to require a supportive business climate to address certain
investment and operating challenges. A packaging cartons mill is the next ‘best fit’ with
IOI due to presence of local converting operations.
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 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 Great Britain 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-intime (JIT) service, specialised on end-use etc. These again promote tissue and
packaging cartons as the lead possibilities.
Paper Mill Feasibility Study for the Island of Ireland - Summary
10
•
Analysis of the supply scenarios shows it is important for investment in the
collection of paper and commitment to Government targets to continue. A general
underperformance of targets will eliminate some options, while high performance
opens the way for multiple options (for example through site sharing) and reduced
exposure to the RCP export market.
•
A sensitivity analysis on RCP prices, shows that the stronger mill options can
continue up to price levels at which exports may fall away, being too expensive for
paper mills overseas.
•
Triggering investment will likely require a supportive business environment which
addresses the capital and operating burden, at least in the initial phases.
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%. 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.
•
The investor community can include those from all parts of the production chain:
producers who wish to play a leading role in the IOI by taking a strong market
share; secondary producers such as converters who wish to participate in a local
and competitive supply chain; waste paper operators who wish to access further
dividend and return from their RCP businesses; exporters of RCP who wish to
secure steady supply chains, and last; industrial, financial and venture capital
investors with interest in waste management.
•
After this, other benefits (not quantified here) could stem from the development of
a new paper mill. These include the rationalisation of RCP supply streams across
IOI, a long term focal point for RCP streams in IOI (whether this is used as mill raw
material or subsequently exported from the site) and high profile visibility to
encourage increased recycling in IOI. The combined effect of these benefits is
reduced market risk and efficiencies in the supply chain.
Paper Mill Feasibility Study for the Island of Ireland - Summary
11