Paper: the next evolution

Although the word paper comes from the word ‘papyrus’ - the sheets of marsh grass used by the Egyptians 5,000 years ago - the origins of paper as we know it today can be traced back to the Han Dynasty (207BC-9AD) in China.

Early papermakers experimented with a wide variety of materials such as mulberry, fishnets, old rags and hemp waste. As the art of papermaking crept out of China, the methods and materials used in production also changed.

Paper underwent a series of evolutions as papyrus went out of fashion in the 9^th century in response to demand for smoother parchment. Though animal skin was used to make parchment in Europe, this was an expensive material and the paper and printing industry underwent a rapid development when moveable type was invented in the 15^th century.

Spurred on by the growing printing industry, paper producers moved through a series of materials - cotton, linen, straw, even cabbage and wasp nests - before finally settling on wood. Huge growth in paper demand required mass production, which eventually became a thriving industry in Europe and North America.



The origin of fillers

In a quest for the perfect blend of cost and quality, paper producers have added various minerals such as kaolin, calcium carbonate and titanium dioxide (TiO₂) to their products and an entire industry has grown up around mineral fillers for paper.

The age of digital technology, however, has reversed this growing trend, and demand in these thriving regions has seen a decline. Paper demand is falling annually in North America and Europe, and will continue to do so for the foreseeable future, while both demand and production in Asia grows. This has left some paper manufacturers and filler suppliers in declining regions in a difficult position, and in search for alternative long-term solutions.

According to D.J. Monagle, senior VP and MD of the precipitated calcium carbonate (PCC) business at Minerals Technologies, this is not necessarily bad news for filler mineral producers, but it perhaps means that it’s time for paper production to undergo another evolution.

“Filler levels are becoming increasingly important,” Monagle told IM. “It’s all driven economically. PCC is less expensive than pulp, so you can replace pulp with PCC up to a certain percentage.”

“Right now the average filler level is about 20% in North America and Europe, and the more you increase that percentage, the more the papermaker saves. That’s the driver here,” he added.

Monagle explains that just because papermakers have continued to use wood pulp in production, this doesn’t mean that paper production hasn’t undergone changes in recent history, as both filler levels and materials have changed.

“In the past in North America, someone might make a piece of copy paper with clay at roughly 12-14% filler levels. We then converted that industry [to PCC] and immediately rose to 15% filler levels, then to 20% filler levels, and in some cases 23-24%,” he said.

“Now you’ve probably got a brighter piece of paper, which translates to quality. It’s less dense, and you can use a little bit less fibre still and make it smoother. Higher levels of opacity will also add to the quality,” he added.

Natural selection

PCC is the most common filler choice for US paper producers. Figures from Minerals Technologies indicate PCC accounts for 75-90% of fillers in uncoated wood-free paper production. Also according to independent consultant Ian Wilson, the choice of filler mineral depends largely on the geographic location of the individual paper manufacturer.

“The choice is somewhat dependent on where you are in the world. In the US the main filler mineral was kaolin supplied from Georgia, US,” Wilson explained to IM.

“However, as paper makers moved from an acid system to an alkaline system, calcium carbonate became the main filler in the US replacing kaolin,” he said.

The switch in the processing route was partly a decision based on cost, enabling paper producers to use lower cost filler materials while at the same time having the advantage of being more environmentally friendly.

This was significant for the kaolin industry because it saw the use of the mineral fall. The paper grade, or beneficiated, kaolin market has changed since the 1980s because of this switch - as the alkali-based process was gradually introduced in Europe and then North America, paper makers gravitated away from paper-grade kaolin to carbonate substitutes.

In 1980, 87% of the paper market used kaolin but, by 2010, 65% of the market used ground calcium carbonate (GCC).

“In the US the main filler pigment is PCC. This is mainly due to the presence of high quality limestone suitable for making PCC,” Wilson said.

He added that the development of the satellite plant also influenced the choice of PCC for papermakers.

“The marble deposits in the US are present in some areas but logistics are not good and paper mills have preferred to have a satellite facility. SMI [Speciality Minerals Inc.] is the leading company for PCC satellite plants and other plants,” he explains.

Other regions have also made filler choices based on the availability of raw materials.

“In China and Western Europe there are abundant sources of marble, calcium carbonate, which have high brightness and low abrasion. So, here the filler GCC is mainly based on marble, and in some cases on chalk and limestone,” Wilson told IM.

“Talc is still used as a filler especially in some countries, such as Finland, where there are talc deposits. Again kaolin is still sold as a filler but has been replaced mainly by GCC and PCC,” he added.

Choosing PCC

According to Minerals Technologies, public estimates are that 85% of fillers that go into paper are made up of calcium carbonate, comprised of both PCC and GCC. This includes both fillers and coatings, and is used in products such as packaging, printing and writing grades and tissue.

Of that 85%, Monagle says that the majority used is GCC, making up about 80%. Much of this goes into coated paper grades.

“As a ball park let’s say there’s around 35m tonnes of minerals into paper, 18-20m of that is coating minerals and powders, and 16m or so is the filler application,” he told IM.

Focusing on uncoated wood-free paper grades, where PCC has the greatest impact, Monagle explains that of the estimated 11m tonnes of mineral fillers used in uncoated grades, PCC is most definitely the dominant choice for paper producers.

“In places like North America and Europe, PCC accounts for around 75-90% of the mineral that goes into paper. In Asia, it’s still developing so you’ve got other minerals and carbonates, but basically PCC is 10-15% of what’s going into there,” he told IM.

With such low use of PCC in Asia, and China in particular, it’s hardly surprising that Minerals Technologies sees the region as such a growth opportunity for PCC.

Rick Honey, vice president of investor relations for Minerals Technologies, explains that one major difference between PCC and GCC is particle size distribution.

“It allows us to bulk this sheet of paper. It’s almost like putting ping pong balls into a beaker instead of putting sand and rock into a beaker where the sand packs, and that’s one of the major things that paper makers like,” he told IM.

Monagle adds that this allows papermakers to add bulk to their product as well as offering other quality advantages.

“People can then sell as a lower weight paper that performs properly which is a key advantage, and it adds better paper qualities like opacity and smoothness. Particle size distribution and the shape allow the paper maker a lot of flexibility, which just doesn’t happen with the other naturally formed pigment,” he said.

Intelligent design

In terms of coatings for paper, the material in question needs to be at a very high solids level containing very little water, which is why, Monagle explains, GCC is ideal for coating applications.

But PCC offers other advantages, which contribute to its popular selection as a filler mineral in uncoated paper.

“On the performance side we’re able to design the shape of the particle. We’re not taking a rock and grinding it and separating it and working on the particle size, we’re also changing the shape, the density, the way that pigment behaves when it goes into the paper process and gets crushed,” he told IM.

“In those developed regions where the paper maker has concentrated both on improving quality and reducing costs, PCC has been the predominant answer because of both the technology and the business model,” he added.

Another advantage is the development of the PCC satellite plant. The plant is built on site, removing any transportation costs and delivers the pigment at relatively low solids. Removing the transportation costs has enabled Minerals Technologies to concentrate on developing a better functional filler in paper.

“PCC becomes a very economic choice, but then there’s also a performance advantage that goes beyond just the dollar per tonne figure,” Monagle said.

Survival of the fittest

A problem for filler mineral producers and papermakers alike, has been the decline in paper demand across all developed regions. According to Alejandro Mata, economist for European forest products at RISI Inc., this decline is being seen in North America, Western Europe, and even in Japan.

Mata explains that lower demand can be observed at different rates across various paper products, and paper production is falling in line with these declines.

“Yes production is also falling. If you look at specific grades you see different things. The steepest decline though has been in newsprint. You can imagine the decline in demand has been quite significant; obviously capacity will need to follow,” he told IM.

“In other product groups we don’t see that much capacity reduction compared to the demand declines. Producers are more or less following what happens on the demand side, but there’s no disconnection in this case in the North American markets. They are even a bit better than Europeans in trying to balance the supply and demand forces a bit more,” Mata said.

He added that in stark contrast, countries within Asia, such as China and India, are still growing rapidly both in terms of supply and demand, and China has overtaken US production in various grades.

“When it comes to uncoated wood-free grades, China is already some years ahead of the US. But, on coated wood-free grades the US is ahead. When it comes to newsprint the US leads, although I don’t think that will last for too long considering the declines that you’re seeing in the North American market,” Mata told IM.

According to Wilson, figures show that China is now the leading producer worldwide of paper and board, and has overtaken the US in terms of consumption.

“In 2011 paper and board production in China, the number one producer, was 99.3m tonnes and in the US, the second biggest producer globally, was 75m tonnes,” he told IM.

This increase is also reflected in consumption, which in 2011 in China was 97.3m tonnes and in the US was 72.3m tonnes for paper and board. Wilson adds that the US is still ahead of China in its pulp production, which in 2011 was 49.7m tonnes compared with Chinese production of 19.5m tonnes.

Growth in Asia

Asia then, specifically China and India, represents a great growth opportunity for companies like Minerals Technologies, not least because demand and paper production continues to increase, but also because many producers are using a variety of mineral fillers in paper.

“So there’s terrific growth in Asia in general and I would say for us what we’ve been seeing is that growth of the industry is a refreshment of the industry. Thailand and India have been growing for us as well, and there is a shift from some GCCs, talcs and clays to the bringing in of some PCCs,” Monagle told IM.

Developed markets such as North America and Europe are at the higher end of the spectrum in terms of the percentage of filler mineral that goes into paper, but, Monagle explains, in Asia there are opportunities to also increase filler levels.

In India for example, papermakers use a combination of GCCs, talcs and clays, at low levels of around 12%. These levels can be increased to 15-16%, and in replacing other materials with PCC, 20% filler levels, as seen in developed regions.

“One of the other things that the Chinese government has been doing is they’re shutting down the smaller production facilities and when these larger facilities get established,” Monagle told IM.

“It’s a managed growth - out with the old in with the new, which provides some incremental capacity improvement. Those new machines provide a business model, the ability to put a new PCC plant right into the new operation. It’s something that becomes very economical for them,” he added.

Opportunities in developed regions

It may seem then, with China’s increases and dropping figures in the US and Europe, that Asia would be the obvious target for filler mineral producers, but Monagle says there are still opportunities in developed regions with the development of new technologies.

Monagle explains that using conventional technology, North America and Europe have reached their maximum filler levels.

The company produces standard PCC at 55 of its satellite plants globally, however, it has also developed a new type of filler technology, Fullfill, which has been enhanced to offer paper producers further advantages, including increasing filler levels further to up to 25%.

“What Fullfill allows us to do is, let’s say you have a paper maker running along at 20% filler level, we can help them make that same sheet of paper with the Fullfill technology, and now all of a sudden he can use up to 25% filler,” Monagle told IM.

“The change for him is that he goes up incrementally 3 or 5% filler level. The change to us though, if you do the math, is about a 15-25% increase in the demand of the filler,” he added

Minerals Technologies believes then that it can grow PCC in declining markets like North America because of these new technology developments. Higher filler levels for existing papermakers also makes sense because it comes at a low investment cost.

“The investment for papermakers is minor. And when I say minor I mean very small, and it’s an investment that works for us. I think that there’s a matter of prioritisation in the things that they’re doing but we’ve gotten great interest from our customers in Fullfill in these established regions,” Monagle explained.

Hope in a decline

Increasing filler levels from 10% to 20%, and then up to 25%, will not only help support demand for fillers, but will help to offset the declines that are being seen in North American and European regions in paper demand.

“That increase of pigment consumption will be helping offset the general decline of the industry in these printing and writing grades in NA and Europe, so there’s a general equation for PCC in these established regions, despite a decline of the years in the demand of those regions,” he added.

Minerals Technologies also produces GCC, but it sells this to other industries, and has opted instead to focus on developing the perfect filler, which will help ease the plight of papermakers. The company’s overwhelming emphasis is that PCC is improving and becoming more refined, with a vision to increase filler levels to 50%.

“That’s where we would like to take that platform. We’re also experimenting with other minerals, we just haven’t found anything yet that is profoundly better than PCC for the papermaker,” Monagle told IM.

Environmental considerations

Increasing filler levels also allows paper producers to address the growing pressure felt by most industries to be more environmentally friendly. Upping PCC in paper offers producers a cost advantage in that the mineral filler is less expensive than fibre, but also reduces expenses as the filler is easier to dry than fibre is, thus further reducing energy consumption and costs.

“When you’re talking about sustainability it’s basically energy consumption, water consumption and fibre consumption. PCC is helping to a large extent with two of those things - helping with the cost and reducing the energy consumption as well as reducing the fibre consumption,” Monagle told IM.

Mata told IM that: “There’s always a pressure to become ‘more green’. There’s an ongoing battle between the sustainability side of paper versus the sustainability side of all the digital media and the new technologies. Some people think that digital media is much more environmentally friendly than paper, some people thing that paper is much more environmentally friendly than digital.”

He adds that while there are always pros and cons regarding the sustainability of the paper and digital industries, the importance of papermakers to stress the environmentally friendly aspects of the industry - such as its re-usability - is growing, especially in light of new legislation.

“There’s a lot of pressure, especially from legislation, that is coming to pass right now and in the future relating to energy consumption, but also related to CO₂ emissions, and that’s one of the big topics in the industry,” Mata said.

This is another area where increasing PCC levels can help improve.

Monagle explains that: “Something which is helpful in China is that our business model takes lime from the outside world - that’s what we ultimately convert into our PCC - and we take the CO₂ that is being put out from boilers or kilns. So the PCC particle is also being seen as something that helps with CO₂ control in China.”

The future of paper production

But even with cost reduction and energy cutting options in place, capacities in developing regions have been shutting down. Options previously available to producers in the graphic paper industries to move into other products are also becoming less plentiful.

When demand began to decline for paper makers and profits started to fall, producers opted to covert to other products such as packaging and speciality grades. However these markets are now, too, becoming overcrowded.

“So that means not only the capacity growth that you see naturally on those packaging and speciality grades are saturating the market, but all the graphic paper producers that are trying to define and find better market segments are also overcrowding those segments,” Mata told IM.

“Right now it’s not an easy decision whether or not to move anymore. So even though you have better margins and you have slightly better market balances, that is probably also changing right now,” he added.

Minerals Technologies believes that consolidation will continue, at least temporarily.

“If you look at the macro trends, we believe there will be further rationalisation of these printing and writing papers, the packaging applications will still probably grow because it seems to be a sustainable model for the world that these fibre based packaging works,” Monagle told IM.

“But in printing and writing papers we think there will be further reductions which is part of why we think our technology is important just looking at the pigment side of the business. We believe we’re capable of growing in these declining markets,” he added.

Producers are still converting graphic paper facilities to speciality and packaging products as the supply and demand balances are tighter in these markets, and margins and profitability levels are higher, but this is leading to more issues elsewhere.

According to Mata, the biggest problem faced by the industry is the growing overcapacity, and producers should be taking steps to reduce output. Nevertheless, the decision to do so is fraught with uncertainty and the risk of losing market share.

“Overcapacity is having an impact on several things such as the operating rates on the industry, which are declining, and in turn impacting pricing levels. This is an issue affecting not just papermakers, but everyone within the paper and communications industry. So everything is more or less interlinked, and everything is in the end translated into poor profitability for producers,” Mata said.

“Cutting capacity is a tricky decision to make, but it’s a decision at the end especially right now producers are being pushed into, and we’ve already started seeing the financial results of the different companies are suffering in profitability,” he added.

Mata is, however, convinced that paper producers have a future.

“I do believe paper will always be around not just in Europe but all over the world, the industry will not disappear. We are still using paper quite a lot and there are some regions that are still increasing the amount of paper they use every day.”

He forecasts that there will always be demand for paper in Europe, and that the decline will stop in the future: “When that will happen, we’re not sure, and how much paper will be left we are not sure yet, or in which shape, but there will be paper.”