Select Committee on Environment, Transport and Regional Affairs Minutes of Evidence

Examination of witnesses (Questions 398 - 419)




  398.  Gentlemen, may I welcome you to the Committee and ask you first of all to introduce yourselves for the record?
  (Mr Bateman)  Thank you, Mr Chairman. I am a director of The Paper Federation. John Goodall is chairman of BPB Paper Board, the largest plasterboard manufacturer in Europe. Alan McKendrick is chief executive of Ayelsford Newsprint Ltd, itself the largest manufacturer of recycled newsprint in the United Kingdom.

Chairman:  Thank you very much. Mr Olner?

Mr Olner

  399.  I wonder whether the Paper Federation could perhaps give the Committee their views on what they think is the true concept of sustainability in the context of waste management?
  (Mr Bateman)  First of all, Mr Chairman, we would say that products have to be made in a sustainable way and with waste minimised in their production and subsequent use, and when one is recovering waste from those products they should be used as often as possible by recycling before then ultimately becoming waste when they must be disposed of in a manner which is economic and environmentally sound.

  400.  Can you perhaps elaborate on the sustainable bit of it? People have a very difficult job grasping what sustainability means.
  (Mr Bateman)  In the context of paper sustainability means that the fibre is drawn from sustainable sources in the first place and these are forests that are grown specifically for the generation of fibre, for wood products and for paper, and they are grown again and again and again so that there is no depletion, and then from the sustainable point of view, once you have the products, that is recycling as much as you possibly can prior to the ultimate disposal as those fibres become worthless, by initially generating power or by putting them into landfill.

  401.  Would you agree with the statement that the demand for paper products usually rises with GDP?
  (Mr Bateman)  That is true.


  402.  Would it not be a good idea to change that and to reverse that process?
  (Mr Bateman)  You could put that as a good idea, Mr Chairman, but I think that you have to recognise that the provision of paper products is really answering the needs of society. Paper is fundamental to the development of society. Economies of course will be driven throughout the entire process, and, for example, I do not doubt you can recall when The Times was thick enough to stand up on its own, but progressively The Times has been reduced in thickness——

  403.  And content.
  (Mr Bateman)  —— and is now relatively flimsy. That is an example where there have been economies on the way but nevertheless society as a whole demands more and more paper for every part of its needs, graphic papers, packaging, for education purposes, books, and so on. We could go on—the list is almost endless—and one has to recognise that that is the result of the demand of society. We are here to respond to that.

  404.  So the Paper Federation are in a very good niche monopoly market?
  (Mr Bateman)  You could say that if society is continuing to demand paper.

  405.  Could I ask you if there is any driver within the Paper Federation to reduce the amount of paper that is used? Obviously it will be counter productive to what you are seeking to achieve?
  (Mr Bateman)  You mean, are we going out and asking the public to use less paper?

  406.  Or use products perhaps packaged with less paper.
  (Mr Goodall)  If I can take that, Mr Chairman, I think that that second point is a good point and it was touched on earlier. There is no doubt that as technology advances the use of recycled fibre does allow us to improve product packaging presentation and through that process progressed, reduce the weight of packaging, and that is a trend that has continued throughout the last decade and is accelerating now. It becomes more difficult as you re-use the fibres. As Bryan Bateman said earlier, ultimately those fibres become of no use to the industry and therefore they find their way ultimately into an incinerator or landfill facility. However, basically technology is now advancing so that we can do this with lightweight packaging through more use of recycled fibre.

  407.  How can you strike a balance between market forces and statutory requirements in achieving a sustainable waste management strategy?
  (Mr Goodall)  Mr Chairman, I think that the industry and the market wants to operate unimpeded, but in the process it obviously is an international market and we always have to take on board the actions of international forces that influence national markets, and in that process we as an industry are looking always at managing cost. I think that where there is a link and a balance to be struck between the market and the legislation would be in the area of environmental cost and in particular landfill. As demand for packaging has increased, more finds its way into landfill, and while wood fibre is of the utmost importance to the industry the greater access to wood fibre via recycling enables us greatly to improve our overall position.

Christine Butler

  408.  What potential is there for recycling of paper to increase beyond present rates?
  (Mr Bateman)  Currently the recovery rate for paper in the United Kingdom is 41 per cent, Mr Chairman. That compares with 50 per cent in Europe as a whole, and I should say that we are the largest recycler in the United Kingdom of any material. Really the way to increase the recovery of wastepaper in the United Kingdom is very simply that we have to put more manufacturing plant down in the United Kingdom to make more paper products in the United Kingdom. We currently import roughly half of what the United Kingdom uses in terms of paper products. Therefore, frankly, if we put more plant down in the United Kingdom then one would use more waste paper. To illustrate that point, the industry has invested in the past ten years or so over £5 billion in putting new paper manufacturing plant in the United Kingdom, and much of that has been in the recycling of paper.

  409.  What are the barriers to greater recycling of paper? There is an argument that to go to a large percentage, 100 per cent, recycling, to continue with recycling there may be difficulties with the end product and its use, and also we are looking at the recycling credit scheme as well, so does that need improvement so that we have two ways of doing this?
  (Mr Goodall)  If I may take the larger picture and address that first, Mr Chairman, certainly the industry is very capital intensive. I can quote a colleague at an industry conference saying that the stock markets had an all time record: a surprisingly youthful party, and somebody forget to invite the paper industry! In investing in traditional recycling facilities we are at this moment in time not recovering the cost of capital and therefore there is a commercial issue that we have to address. I think that in looking at the infrastructure of the recycling industry, however, particularly against the background of the new legislation, there is an important role there for all participants in the sector to get together to look at issues such as the recycling facilities in the local authority area as a means of improvement.

  410.  Yes, but how? What are you suggesting?
  (Mr Goodall)  First of all, Mr Chairman, I think that there is a determination on the part of the paper industry to make the new packaging legislation work. Having said that—and Bryan Bateman has outlined to the Committee the importance of recycling within the paper industry—we are five times better than glass and something like 15 times better than plastic. The difficulty in the legislation and the Guidance Note, as was outlined in earlier evidence, is that the industry has a problem in that other material streams can benefit from recovery in paper and cross subsidy in the distribution of the packaging recovery notes, and that to us is an inherent danger for us to continue on this increasing recycling ambition that we have. The opportunity for non-obligated companies to use paper as a means of securing packaging recovery notes and then trading in those notes, will ultimately result in those with packaging obligations having to go out into the market to pay inflated prices for packaging recovery notes to meet their obligations, is seen as a major threat to the industry. Certainly in this area there is a need to review legislation to support the overall targets without using one material stream to support the recovery rates in other streams.


  411.  If I may just go back to the question, you are saying that the industry is not profitable at the moment. Is that because of foreign imports or because of your problems?
  (Mr Goodall)  The industry is profitable. The point that I made, Mr Chairman, is that the industry is not able to recover the cost of capital. My colleague, Alan McKendrick, might be able to give you a more up to date position. If you take a 100,000 tonne new mill it will cost £100 million of investment to bring that into commission. The current profitability of industry would not justify that investment. Therefore, we need to look at all the factors influencing that, particularly in the major decisions that companies have to make.

  412.  Mr McKendrick?
  (Mr McKendrick)  Thank you, Mr Chairman. I think that we clearly are operating in a global market and the one thing that we cannot determine is what the overall price of our product is. It is traded across borders. Therefore, the inherent costs of the business have to be kept low. Now the United Kingdom is actually potentially in a very good position because we actually use about three million tonnes of newspapers and magazines each year and there is only one million tonnes that is in fact recycled.[1] That means that there is a potential certainly to increase that. Now of that one million tonnes there is probably about 90-odd per cent of recycled content in newsprint manufactured in the United Kingdom and that is very significant. As Bryan Bateman said earlier, Mr Chairman, the real investment in the paper industry, particularly in the graphic side of that and packaging, has been in the use of recycled fibre and it has been a real regeneration of an industry in the United Kingdom in the last five years.

  413.  What I am puzzled about is that when the Committee looked at this topic about five years ago it was claimed that when your new mill came on to stream to deal with recycled paper the problems, the ups and down, in the waste paper market would be to a large extent solved, but as far as I can see they are worse now than they were five years ago?
  (Mr McKendrick)  Mr Chairman, that is not my experience. When our mill came on there was a slight effect, but that was a world wide price spike generally because of activity in south east Asia and even waste paper moves across boundaries. Since that time waste paper prices have actually stabilised and I think that quite a number of local authorities now are benefiting from longer term partnerships and that is what I think local authorities are looking for in the future.

  414.  But you have given very good long term contracts to local authorities and have rather put out the waste collecting by voluntary organisations and other people in the chain, have you not?
  (Mr McKendrick)  I think that there are still quite a number of charities that get a significant contributions to their funds from waste paper recycling. It is not universal, of course, and as my colleague, John Goodall said, transport is an issue and we have got to make sure that we utilised the raw material local to mills and local to the usage.

Christine Butler

  415.  Can I ask you now about a common problem especially for local authorities who have to deal with all the planning obviously, that is, the stability of the market for the recycled paper. The prices have been fluctuating dramatically over the past few years. They are having difficulties with their contractors and so on as a result of that. What do you think may be done?
  (Mr McKendrick)  Mr Chairman, the fluctuation in price is I think actually an over-statement. There was a large price spike but that, as I said, was a world price spike and not just a local one. The reality is that if there is an investment in manufacturing, then that material will be pulled out of the supply stream, but the great difficulty is to get these two things in balance. As John Goodall said, we are talking about large capital investments. I think that the real challenge for local authorities and for the industry is to ensure that the collection schemes are started up, and started up in a cost effective way. The local authorities have a major problem there because the start up of the collection scheme is expensive. To start up a doorstep collection scheme takes a lot of money and a lot of courage, I think, from local authorities at the moment. There are many good examples now of sharing best practice and there have been quite a number of studies done to say that some local authorities are cost effective and others have tried things that have not been quite as cost effective. I think that organisations like LARAC and the Local Government Association are starting to share best practice. There are initiatives going on in London to make sure that we get the best possible low cost collection schemes in the capital by innovative means, not just taking it as a waste collection, but actually a recycling collection, a different concept. I think that these initiatives and the sharing of these experiences are the things that local authorities would benefit from.

Dr Whitehead

  416.  My understanding is that you are saying that if you were able to invest in a further new mill that would attract a great deal more recycled paper into the newsprint stream and secondly it would offset imports of paper?
  (Mr Bateman)  Yes.

  417.  But that you have not got the money to invest in that mill as an industry?
  (Mr McKendrick)  Mr Chairman, I think that it is interesting that most of the investment in UK paper manufacture in recent years has been foreign money, and that, of course, is a very good thing for UK plc. However, investors look across the world and say, where is the best return to be achieved, and these are the decisions that are being made all the time—what is the security, what is the risk involved in investing in this industry at this time.

  418.  But, just so we can get a feel of this, how short of the money is the industry? Let us say that Government came up with a large wad of notes and said, here we are, invest this in the mill, and you have got to put the rest of the money in, what percentage would that represent? What would be the incentive required in order to make that change in recycled paper manufacture possible?
  (Mr McKendrick)  When you look across Europe—and I am talking about the newsprint mills which generally cost about £250 million—the last mill in France got a grant of about 200 million, 220 million French francs.

  419.  So that is the sort of range?
  (Mr Bateman)  There is a new newsprint mill proposed in Germany and my information is that it will receive a grant of £100 million.[2] The last newsprint mill that was put in place in the United Kingdom was Alan McKendrick's, and that received £20 million.

1   Note by witness: Production of newsprint in the UK currently amounts to just over one million tonnes. Back

2   Witness correction: The figure should be 100 million Deutschmark. Back

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