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Between 1976 and 1995, deinked pulp (DIP) use in the U.S. grew at an annual compounded rate of 6.3%-from 933,000 tpy to more than 3 million tpy (Figure 1). More than 3.5 million tpy of deinked pulp is expected to be in use by 1999. Much of the capacity was predicated on an expected price premium for papers with recycled fiber content, driven by such issues as publishers' demand for papers that included recovered fiber, the U.S. federal government requirement for recycled content in the printing and writing papers it purchased, and consumers' preference for recycle-content products.
But markets that are created by altruistic motives-in this case, environmental-can be destroyed by economic reality. Such was the case for many market DIP producers. According to Robert Richards, director of fiber resources at Mead Corporation in Dayton, Ohio, "Some of the deinked market pulp capacity that went in during the 1990s assumed that magazine publishers would continue their demand for paper with recycled fiber content. DIP producers expected to sell their pulp to firms that made printing paper but did not have DIP capacity."
In many cases, small DIP facilities-sized for convenient regional supply and expected regional demand rather than for process economy-were built. Unfortunately, some were built with limited screening, cleaning, and flotation capability and little or no drying capacity. These deficiencies have proven to be economically substantial.
SHIFTING MARKETS. As paper prices skyrocketed during the mid-1990s, publishers quickly moved into cost control mode. The Clinton administration reduced its demand for recycled content in government-purchased printing and writing paper. And consumers clarified their expectations-recycled content was acceptable as long as there was no quality (i.e., appearance and functionality) or price difference compared with virgin fiber products. All of this was bad news for recycled products, which were often more expensive to produce than their virgin fiber counterparts.
FIGURE 1: Wastepaper utilization by U.S. paper & board mills.  When numerous producers began drawing from the secondary fiber stream and markets began to deteriorate, DIP producers were forced to reach further down into the wastepaper stream and search for new product outlets. Some producers found that they had insufficient cleaning capacity to make the move to lower-cost furnishes such as mixed office waste (MOW), an inability that has proven financially critical for non-integrated DIP producers. Instead, these facilities require high-quality-and high-cost (Figure 2)-recycled fiber to make quality-competitive DIP. And the price volatility of some of these furnishes has-during some periods-been similar to the price volatility of virgin pulps (Figure 3). Other producers found that without drying capacity, their wet-lap products limited them to regional markets.
The reality is that, at this point, there is substantially more DIP capacity than demand. Now, as the 1990s draw to a close, the investment landscape is littered with market DIP facilities that cannot operate profitably-and bondholders are wondering about the security of their investments.
A VICTIM OF ITS PAST. According to Nicky Rudd, vice president of engineering at BE&K (Birmingham, Ala.), "In the U.S., we attempted to create recycled fiber markets legislatively. But the paper industry has not convinced consumers to accept recycle-based printing and writing papers as equivalent to virgin fiber counterparts. For this reason, virgin market pulp and deinked market pulp have not typically been competing process inputs. While there are a few cases where virgin and deinked pulp were interchangeable, in most printing and writing applications, paper produced with deinked pulp has had a lower selling price."
FIGURE 2: Twelve-month trailing standard deviation of market prices. 
FIGURE 3: Market prices (U.S.) for major virgin and recycled furnishes. 
Rudd explains, "For printing and writing grades, virgin fiber typically runs cleaner and with greater operating efficiency. I don't think any firms are producing a recycle-based sheet with the same efficiency that is typical of a virgin fiber sheet. On the other hand, several newsprint producers do a very good job making recycled product and efficiencies that rival virgin mechanical pulp-based products. Similarly, linerboard producers have made products that are both cost- and quality-competitive."
The question seems to be one of experience. "Experience has been an important factor in the success of newsprint and containerboard," Rudd says, adding that this experience has helped recycle-content producers compete against virgin fiber. "We have learned to run recycle-based containerboard machines with the same efficiencies as virgin fiber-based machines and produce nearly equal quality products."
But there have been some successes using DIP in printing and writing grades. According to Mead's Richards, "We use recycled fiber to varying degrees in all of our mills. Our experience is that it runs well, as evidenced by the fact that we use recycled fiber in a number of grades including premium coated grades.
"The biggest challenge is balancing the customer's desire-but unwillingness to pay more-for recycled content against the higher cost of deinked market pulp. A lightweight coated paper producer might forego $200/ton pressurized stone groundwood to use $500/ton deinked pulp to meet customer specifications for recycle content but not earn any price premium for the effort."
COMPARABLE MATERIALS. "Of course, the hardwood pulp market is a bit fragmented-i.e., eucalyptus, northern hardwood, southern hardwood, etc.-which makes comparing the relative economics difficult without getting into a technical discussion of fiber morphology and its effect on papermaking," says Richards. "But, in our experience, today's best DIP producers-using mixed office waste as their raw material-produce a grade equal to any virgin fiber grade for printing and writing paper applications.
"In fact, I am amazed that the dirt count in some of these deinked pulps is lower-TAPPI dirt count of 3 or less-than we saw in virgin pulps just a few years ago. Brightnesses of 86 and above are common, with higher brightnesses commanding higher prices. These characteristics are adequate for most applications."
FIGURE 4: General effects of recycling of chemical pulps. 
Tom Woodward, manager of deinking and recycling for BetzDearborn in Jacksonville, Fla., explained in a past Pulp & Paper article (P&P, August 1996, p. 81) that recycled fiber is neither better nor worse than virgin fiber but simply different. "It is important to recognize that just about everything done to recovered paper, from collecting to printing, influences its behavior during papermaking," Woodward wrote. "The behavior of recycled fibers is dependent not only upon the fiber type and number of times it has been recycled (Figure 4), but its processing history. The pulping process, papermaking process, ultimate use, recycling unit operations, and the sequence of these unit operations all affect the fiber characteristics and influence the behavior of the resulting pulp."
In the case of chemical pulps, one of the principal differences between recycled fibers and virgin fibers is the nature of their fiber-to-fiber bonding. When chemical pulps are dried during the papermaking process, bonds form between cellulose microfibrils within fibers. These bonds are not broken when the resulting paper is reslushed during the recycling process. As a result, recycled chemical fibers tend to be stiffer and swell less during subsequent papermaking than virgin fibers. This leads to a decrease in interfiber bonding during subsequent papermaking processes and lower paper strength, according to Woodward.
To compensate for these changes, recycled fibers can be refined, but refining tends to increase fines content. The higher fraction of fines typically increases the amount of sizing required for the sheet and, in combination with dirt, stickies, plastics, and other carried-over contaminants, can increase the tendency of fabrics to foul, form deposits on rolls, and cause sheet picking.
According to David Null, vice president of pulp and paper energy development at Tracebel Power in Atlanta, Ga., "From a papermaker's point of view, using virgin hardwood market pulp or a combination of virgin hardwood and softwood pulps gives the papermaker more degrees of freedom-freeness, tear strength, tensile strength-than market DIP. Those producers that have process capabilities that allow them to take advantage of this freedom would probably prefer to exercise it.
"Market DIP is typically well-refined, giving it a bit less freeness than virgin market pulp. For the papermaker that needs a very free stock with long fibers, DIP may be inappropriate," explains Null. "On the other hand, in paper mills that are refiner limited, DIP might be preferred since it requires less refining. The determining factor becomes how closely the characteristics of the DIP pulp match the papermaker's specific needs. Where the match is not quite right, DIP may represent an operating constraint."
IMPROVING QUALITY. According to Mead's Richards, "The first deinked pulps were terrible. The original DIP producers were making pulp that was used for tissue in the 'away-from-home' market, and those pulps tended to be gray, dirty, full of contaminants. It really scared away quality-oriented paper producers."
And while the quality has improved substantially, Richards says papermakers remain skeptical about using DIP-presumed to be of low or inconsistent quality-in lieu of virgin hardwood market pulp. "The fact is we have some paper-producing customers that use as much as 100% DIP as the fiber furnish for their printing and writing sheet," Richards says.
"Papermakers remain concerned about stickies and other contaminants, but our customers that have used a lot of DIP tell us that they like the 30% softwood content that typically comes in the pulp," he says. "The softwood gives them tear strength, tensile strength, and good runnability."
"In fact," says Richards, "we've had several cases where mills making relatively high-quality printing and writing grades inadvertently substituted DIP for virgin hardwood market pulp without any difference on the paper machine or variation in sheet quality."
PRICING AND VOLATILITY. As for price, Richards indicates, "Over the long term, market DIP prices will have to be closely correlated with hardwood market pulp prices. We are not in an environment-nor do I foresee an environment-where firms or consumers will pay a premium for DIP. In the current market, DIP is priced lower than hardwood market pulp as an incentive to get people to use it."
He explains, "There was a time when DIP content could be marketed. But, with skyrocketing prices in 1995, the market changed dramatically. Large printing and writing paper purchasers reevaluated their demands for DIP content-and their willingness to pay premium prices for recycled content-in the context of quickly rising costs that could not be passed along to consumers."
Now, U.S. deinked market pulp capacity stands at about 2 million tpy, according to Richards, with actual working capacity closer to 1.45 million tpy. Captive capacity-including newsprint, tissue, packaging and printing and writing grades-is nearly 6 million tpy.
"Unfortunately, demand for printing and writing grade market DIP is between 400,000 tpy and 500,000 tpy," Richards concludes. "For those firms that built market DIP capacity expecting to earn premium prices, the demand is simply not there. No one is willing to pay the premium prices."
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