Paper chemicals face positive outlook

On a roll

03 February 2010 18:28  [Source: ICB]

Despite its forests, North America is not the paper maker it once was. But globally, increased sustainability should lead to further growth

THE WORLD-WIDE outlook for the paper industry is turning positive. And with about 600lb (270kg) of chemicals consumed for every short ton of paper and paperboard produced, things are looking brighter for the paper chemical industry.

Paul Raymond, president of US-based Ashland Hercules Water Technologies calls the global outlook "solid," while Helsinki, Finland-based paper chemical provider Kemira notes that demand in the Far East, especially China, recovered well in late 2009.

"The improved demand has resulted in restarts of some idled pulp units," points out Petri Helsky, Kemira's paper segment president.

In 2008, world consumption of specialty paper chemicals was valued at around $16bn (€11.3bn), according to US-based SRI Consulting. Consumption of commodity chemicals for pulp and paper production was worth an additional $17bn.

Another consultancy, US-based Freedonia Group estimates the value of the US pulp and paper chemicals market at $7.7bn.

Last year, though, the industry took a hit. "The demand of different paper grades decreased significantly in 2009 compared to the previous year, especially in the so-called traditional markets of North America and Europe," says Helsky.

In those markets, paper demand dropped by about 10-25%, depending on the grade. Packaging and board demand recovered somewhat after the sharp drop in the first quarter of 2009, but Helsky expresses a sentiment many agree with: "Tissue papers are more immune to economic cycles."

CHANGING FACTORS
There have been regional variations, Ashland Hercules notes, but the US-based Technical Association of the Pulp and Paper Industry (TAPPI) pulls no punches.

"The North American pulp and paper industry has been in a capacity nosedive for more than a decade now," says Ken Patrick, TAPPI's senior editor for pulp and paper publications.

"The industry here has suffered from overcapacity coming out of the 1990s," he notes, with additional factors being high labor, energy and raw material costs, fiber supply disadvantages compared with South America and some parts of Asia; and environmental constraints, relative to South America and Asia, Eastern Europe - "and to some degree even in Western Europe and Scandinavia."

Printing out hard copies in offices will continue, notes Helsky, but less as finals for archiving, rather than drafts to be proofed. Meanwhile, "the trend to utilize electronic invoices will have some impact on the demand for fine papers in the longer run," the Kemira executive says.

The internet is affecting the newsprint market globally, points out Catarina Munck, communications manager of Sweden-based Eka Chemicals, a business unit of Netherlands-based specialty chemical producer AkzoNobel. "Mainly in North America and Europe ads are decreasing due to the internet," she says.

The US paper industry has contracted significantly in the past 10-15 years, in both capacity and number of players, says Patrick, with "considerable mergers and acquisitions within the industry."

In recent years, there has been a steady increase in the closure of pulp and paper mills in the North American region, according to US-based consultancy Frost & Sullivan. The consultancy notes that the decline in the paper production has led to the reduction in demand for paper and pulp chemicals.

TAPPI and Ashland concur. "Chemical use in the paper industry has obviously been heavily and almost proportionally impacted by the curtailments and capacity shutdowns in the past year especially, but progressively during the past decade or more," says TAPPI's Patrick.

The recession had a "direct effect on pulp and paper chemicals," says Raymond, with process chemicals designed to improve paper machine uptime and production rates taking a harder hit than functional chemicals.

"As end-markets have improved, however, the demand for more production on fewer machines has accelerated our sales of process chemicals," says Raymond. "Over the long term, the outlook for paper is very positive, including a tremendous amount of innovative work globally to further expand paper-based materials into major markets like packaging and construction."

"[Paper] is inherently a green-sourced material"   Paul Raymond, president of Ashland Hercules Water Technology

TAPPI projects very modest growth in the North American paper industry in 2010, compared with 2009, "which was an extremely poor year compared with 2008 and especially in years prior to that," says Patrick. He adds that there already have been significant price increases by paper producers in several grade areas, and this will continue as the industry recovers from the recession over the next few years.

Others are less sanguine. "It will take time before the market has recovered from this crisis," says Munck. "Europe and North America might not even come back to the same levels as before the crisis."

PFOA REMOVAL
Used in fast-food clamshells, microwave popcorn bags, pizza boxes, pet food bags and other consumer products that hold foodstuffs, fluorocarbon-based perfluorooctanoic acid (PFOA) has been the standard worldwide for imparting oil and grease resistance to paper.

But PFOA has been under regulatory review since mid-2008, and Belgium and Brazil-based producer TopChim expects the worst.

"We are working hard to get perfluorinated chemistry out of paper and board treatment, because those chemicals will be banned in the near future - not an easy job because of the excellent barrier performance of paperboard treated with perfluorinated chemistry," says TopChim spokesman Leo Vonck.

Recognizing the uncertain future of this chemistry, Ashland proactively launched a product with undetectable PFOA that the company says has been "highly successful" with its customers, says Raymond.

WATER & SUSTAINABILITY
As water has become more precious, the paper chemicals industry has found ways to improve usage, recycling and reusing it. According to TAPPI, mills have dramatically reduced water used in paper production by 30-35% from a decade ago.

Ashland Hercules projects that as this trend continues, process chemicals, including deposit control, polymer chemistries, and microbiological control technologies will be required to manage the changes in the paper machine system.

"The more closed cycles in the paper industry, the more demanding is the chemistry," notes Helsky.

Another driver for paper chemicals is sustainability. "This is a very broad term, but for the paper industry, it means reducing the environmental footprint," says Raymond. "Paper is in a unique position to drive this, since it is inherently a green-sourced, recyclable, and biodegradable material."

The paper industry generally has a very low carbon footprint, notes TAPPI. "In fact, the paper industry has the potential to develop, market, and supply significant carbon credits to other industries, especially as cap-and-trade legislation materializes and is implemented in the near future," points out Patrick.

Current sustainability trends, says Raymond, consist of increasing recycled content across all grades, making packages lightweight through strength and design improvements, and replacing plastic packaging with paper-based materials.

The last of these includes developing new chemistries decoupled from petroleum, as well as chemistries that can improve paper's ability to be recycled.

Other Ashland Hercules programs are designed to reduce carbon footprints and include development of higher solids products, as well as on-site production of paper chemicals.

While the paper and paper chemical industries have been historically under pressure from green groups, this has subsided in recent years, observes TAPPI. There have been no considerable environmental and/or chemical issues since the late 1990s, when the industry stopped using elemental chlorine-based bleaching and switched to the chlorine dioxide-based bleaching used now. Consequently, there are no real or pressing legislative pressures on the paper industry.

"Today, the paper industry is viewed somewhat as a producer of natural, sustainable products, and viewed by many as a potential, significant producer of biobased fuels and bioproducts that can directly replace those based on fossil petroleum feedstocks. From an environmental viewpoint, the paper industry's general posture has improved quite a bit in recent years," says Patrick.

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By: Ivan Lerner
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