The bottom line for most buyers backing off from recycled paper
is cost. Many (but by no means all) of the recycled sheets have
been priced higher than their virgin counterparts. Conservatree
interviewed paper manufacturers in 1997 to find out why. We found
that people at the mills had many different explanations for the
Several pointed out that most of the recycled pulp is bought on
the open market, which is a much more expensive option for an integrated
mill that has its own virgin pulp facility. Therefore, papers manufactured
with purchased pulp would cost more than virgin papers produced
from a company's own pulp.
John Morrison, vice president of marketing at Potlatch, said the
company dropped its previous 50% recycled, 10% postconsumer (50/10)
recycled content levels to simply 10% postconsumer on two of its
#1 coated papers because "it didn't make sense." The company
had been purchasing preconsumer pulp on the open market when it
had its own forest land that provided less expensive pulp.
Even companies that own a deinking pulp mill have higher expenses,
according to Terry Plummer, vice president of sales and marketing
at Boise Cascade. "The cost of deinking investments makes it hard
to bring down the price of recycled," he said, especially when they
are an incremental addition to an existing facility. Further, said
Plummer, "While recycled pulp mills were being built in the U.S.,
several large virgin pulp mills were being built in other countries,
producing very low-cost virgin pulp."
Most of the deinking plants, even those connected to a paper mill,
had expected to be able to sell some of their pulp on the open market.
When they were undercut by virgin pulp, the economics that were
supposed to balance out the costs of the deinking mills were thrown
Jack Plomgren, marketing manager for Union Camp's fine paper division,
pointed to structural issues that make virgin pulp more economical.
Referring to the paper industry, he said, "We are very efficient
at bringing trees to a mill and pulping them." But, he added in
comparison, "As a country, we are not as efficient in collecting
wastepaper from small offices, sorting it, and getting it to a mill
for deinking," resulting in price differentials at mills with virgin
pulping facilities. He also noted that, "The quality of waste is
impacting price," with the unexpectedly high amount of "stickies"
(many different types of adhesives) requiring mills to run higher,
cleaner (and therefore more expensive) grades of wastepaper than
their original projections.
Customers, too, play a role in higher prices for some recycled
papers. When prices are falling, lower recycled demand can create
higher price differentials between recycled and virgin papers. Distributors
will sell their older, higher-cost inventory before ordering again,
so customers may not be able to take advantage of lower-cost recycled
paper as quickly as they can get the lower-cost virgin paper.
How To Handle Price Premiums
Fortunately, text and cover, opaque, and some coated papers are
generally the same price, whether they are made with or without
recycled content. Randy Wolf, then executive director for the Recycled
Pulp & Paper Coalition, insisted that buyers can get competitive
pricing for recycled commodity grades, too, even for relatively
small quantities, if they are willing to be "squeaky wheels." As
an example, he had an employee call paper distributors to get pricing
for ten cases of recycled paper. When the costs came back higher
than comparable virgin papers, she called back to insist on a cheaper
price. She got it, but only after working her way through the sales
Not all buyers view the current price differentials negatively.
When asked whether he had seen buyers backing off from recycled,
Union Camp's Jack Plomgren noticed that, while that might be true
for some purchasers, "Other people realized that the percent of
premium was being reduced and chose to buy recycled." Clearly, these
buyers understand the importance of continued strong support to
the recycled paper market and view the reduction in price differentials
as an indication that their support is working.
Potlatch's John Morrison noted that one way that people dealt with
the paper pricing peaks in 1994-1996 was to reduce the amount of
paper they buy, through source reduction strategies. He thought
that will continue. "Publishers were reluctant to change page size
and page numbers but it turned out to be not as bad as they thought.
They may not go back." Magazine and catalog publishers, in particular,
are likely to continue to massage every possible opportunity to
make their paper dollar go farther, including continuing page size
reductions and decreasing the number of pages in their publications.
Wayne Pennock, marketing information manager at Moore Business
Forms, agreed that economic realities led their customers to search
out more opportunities to reduce paper purchases, and Moore adapted
to those changes. While customers' increased use of electronic forms
cut into Moore's traditional business of selling forms bond paper,
the company now sells its expertise by teaching people how to create
and use the electronic forms. Pennock also reported that customers
were increasingly using linerless labels, which peel off a roll
like tape instead of peeling off a backing that then is thrown away.
Moore also incorporated new presses so efficient that they cut printing
paper waste in half, thereby reducing the amount of paper Moore
bought for conversion. That saved money for Moore's customers as
Thus, when cost is a decisive factor in using recycled paper, buyers
develop creative strategies for bringing it into line.