January 2011
Over The Wire Tissue Edition
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SCA Tissue Tightens Ties with Recycled Fiber Suppliers

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As the material required to make toilet paper and napkins grows increasingly scarce, SCA, Sweden, is expanding its ties with suppliers. As explained in a Wall Street Journal (WSJ) article this past week, SCA, which has $14.5 billion of annual sales, uses recovered fiber to produce napkins, toilet paper, and hand towels it sells to offices, restaurants, and schools in the U.S. But it faces tighter supply, in part because of less paper waste but also because of competition for the fiber from Chinese paper companies, according to the WSJ.

SCA thus is putting more money into a program that advises recycling centers and provides funding to upgrade equipment. The company hopes the steps will allow it to get about 50% of its recovered fiber supply from recycling centers in the program later this year, up from 30% now. This year SCA also plans to add recycling centers in more cities, WSJ notes.

SCA began its program by forming relationships with a handful of recycling-center owners located near its U.S. manufacturing facilities, including those in Atlanta, Ga., Chicago, Ill., and Birmingham, Ala. The company provides the recycling centers with financial backing to buy upgraded equipment and offers consultation on operations and marketing. In return, the recycling centers sell recovered fiber exclusively to SCA. The recycling centers may sell varieties of recovered paper that SCA doesn't need to other manufacturers.

Last fall, SCA increased its investment in a Chicago recycling plant so that it could bring in additional equipment that compresses the paper into bales. SCA is putting together a "multicity arrangement" with other recycling centers, declining to specify where. "We're organically growing existing partnerships and adding new ones," says David Knight, director of fiber procurement for SCA's Americas division, which contributes $2.1 billion of the Stockholm-based parent's annual sales.

WSJ points out that for SCA, close ties with recycling-center owners has meant it can encourage investment in sophisticated equipment upgrades that enable recyclers to process more "dirty" paper, or materials that are more difficult to recycle such as books, envelopes with plastic windows, and paper with heavy graphics.

The recovered paper that SCA needs demands a higher grade of office paper than the sort that typical recycling plants process. Since there are plenty of willing buyers on the open market for lower grades of recovered fiber, few recycling plants have an incentive to take the necessary steps to meet SCA's specifications, such as sorting out brown paperboards. But with SCA as the designated buyer, locked in with contracts typically lasting several years, recyclers have been willing to make needed upgrades.



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