An upward southbound trend

An upward southbound trend

Yury Bulgakov of Switzerland-based Vipa Lausanne S.A. says the Latin American paper industry has shown a hunger for imported fiber.

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April 28, 2021

Yury Bulgakov has been commissioned by Switzerland-based recycling and trading firm Vipa Lausanne S.A. to connect recovered fiber generated in scrap-surplus regions with paper mill buyers in Central and South America.

Bulgakov, who serves as Vipa’s regional director of Latin America and Scandinavia, was optimistic when interviewed by Recycling Today in 2019 that this trading pattern held promise and said he was meeting with early successes for Vipa.

About 17 months later, Recycling Today again visited with Bulgakov, who says that despite (or in some cases because of) the pandemic, United States- and Europe-to-Latin America trading patterns in recovered fiber have strengthened, creating opportunities for Vipa to serve a vibrant paper mill sector in that region.

Recycling Today: What has it been like trying to trade recovered paper to Latin America in the past year, looking at 2020 as a whole?

Yury Bulgakov (YB): In a few words—when this year is compared to [the] year before it—we’ve grown our volumes three times. This is incredible. The pandemic time for us was definitely an opportunity to grow. Because of the right people in place, the right process in the company and the right context that we [started] just before the pandemic happened, that gave us a huge opportunity to grow. While businesses complain that it’s so bad (i.e., there’s no scrap), for us it was a totally different story.

In 2020 and in 2021, in March of this year, we achieved a record as a company. Vipa has grown 33 percent year over year. It’s incredible. For the last five years I’ve been with Vipa, it has been growing.

When we met in Chicago in November 2019, that year, we started the offices: two offices in the United States—Los Angeles and Boston. Now we have an office in Texas, so we have three offices, which cover the eastern, western and southern U.S.

Then we figured out how do I, situated in Russia, communicate with the U.S. and with my people in Latin America. Zoom is a help, and we established good processes. The U.S. team has been very focused on getting volumes for Vipa, which we diverted partly from India. We took it to Latin America because the last year for us was the year when we grew our sales there. We went to every single mill in every country to offer the material.

I was all the last year having Zoom calls with every supplier—Haiti, Honduras, Guatemala—all these countries. We were there, the faces of my colleagues were in front of suppliers all the time [to] build a huge trust with those suppliers as well.

I’ve done this same approach as I did with my U.S. team. I consider my supplier as my colleague. That gave us an incredible opportunity for growth. That’s why we see 300 percent year over year growth.

RT: Is Vipa’s Latin American recovered paper business mostly brokered from Russia?

YB: The amount of scrap paper generated globally went down. Collection reduced everywhere, and Russia was not an exception. However, the amount we exported from Russia, I think, in 2020 was by far the record. But in 2021, this year, it’s reduced. Collection died here. But 2020 was an absolute record. We did 28,000 tons last year out of Russia. Most of that cargo went to Latin America. But we’ve been hiring all kinds of vessels—use all the available containers. It was a very nice time.

We also, last year, we did something really unique, I believe. We brought material from Japan to Latin America. I don’t think anyone else had been doing that before, but we did that. I think we did some African shipments to Latin America too.

The biggest volumes were shipped, from largest to smallest, to Ecuador, Colombia, Chile and I want to say Mexico—but Mexico is getting bigger now. It was not too big [for us] last year. I think Mexico still was bigger than Paraguay. But we opened up some nice countries as well in 2020. For instance, Vipa never did business to Paraguay or Brazil, but we did last year. It’s a new channel Vipa started. I’m sure my competition was doing it, but what I am also sure is that 2020 was a very bad year for some competitors.

We focus on bringing value to customers and bringing material they need. The big problem of last year, and I believe why some competitors lost position in the market, is because the price changed. Collection was going down, and demand was going up because everyone needed paper rolls. Considering collection was going down and was happening in the market, traders agreed with the paper mills on the volume, say 1,000 tons at $200. Then the next day, supply was not available to the trader at this volume because of such a fast-growing trend of the price. So, considering most of the suppliers are in survival mode, some of them had to disrespect agreements with traders to go for the higher price.

I still had to buy to maintain my personal image and the image of my company. Some negative yields were there; but, considering we grew the volume in big numbers, it was still a very big plus.

So, we grew three times and we made good relationships with suppliers—that was key. If you don’t have a good relationship with suppliers, then you’re done. You can’t supply to paper mills.

RT: Are there challenges selling recovered paper to Latin America? A lot of nations in Latin America are strong in virgin pulp, so how do you sell to nations that have a good supply of pulp?

YB: Paper mills use specific paper, require specific boxes, perhaps fruit boxes or tobacco boxes. For that, people need pulp. For the last five to 10 years, though, many paper mills have been reconfigured to work on recycled fiber.

Actually, last year everyone needed old corrugated containers (OCC). Everyone needed double-lined kraft corrugated containers (DLK). Everyone needed sorted office paper (SOP) because, for some reason, people needed more toilet paper. OCC and DLK are required for box production. And, you know, internet companies like Amazon did a lot of shipments to people at home ordering goods. I think that’s why paper mills are benefiting. In 2020 they had to survive via a lot of expensive OCC. But right now, they’re selling their boxes made out of OCC., and selling [them] at such a high price. I don’t follow prices for paper rolls, but if I’m not mistaken it’s several hundred dollars.

I think, in general, paper is in very big demand as an industry. Everybody needs paper now, for writing, for boxes, for tissue.

Of course, part is produced with [virgin] pulp. But that’s a totally different product. Tissue made of virgin pulp I think is way more expensive than tissue made of recycled paper.

I believe in 2020, when some families came to the supermarket and looked at the shelf, I don’t think they wanted to buy expensive tissue produced out of [virgin] pulp. If they buy, they buy for a convenient price for them, which is recycled-content, not super white. In 2020 and now, it’s in big demand.

RT: What is demand for recovered paper like among Latin American mills lately? Do they mostly want OCC, SOP and mixed paper? What are OCC markets like in Latin America?

YB: I think there is a huge imbalance between demand and supply. Demand is way bigger than supply. I believe that was also the case in much of 2020. Because the price has reached such a high level right now, I think the paper mills, just because of uncertainty, they were buying so much material the first quarter of this year that I believe they will stop as of May. Just because paper mills wanted to be on the safe side, they bought more and more and filled or even expanded their warehouses. Most of my customers told me early this year that they bought double of what their warehouse can keep. Then, they put OCC in fields by the factory. They’ve been doing this since December or November [2020] for sure—building up. That’s why the demand was so much higher.

Collection was actually so much lower, so the supply was less. Now, everything is going to change. As of May, paper mills [in the region] will reduce their hunger for scrap paper. I don’t believe it will be realized in one month, but demand in May will reduce significantly. Still, the supply will not be bigger than demand until the COVID-19 limitations are removed in many countries. Puerto Rico and the Dominican Republic are tourist destinations, but since tourists are not there, the collection volume in the Dominican Republic is very little, even compared to Puerto Rico. As soon as people start to travel, the amount of scrap generated will be bigger, especially in Latin America—it’s a place for tourism.

RT: What about SOP markets in Latin America?

YB: Demand for SOP is definitely very strong in Colombia, and it’s very strong in Mexico. It’s even strong in Ecuador. As for Chile, there is a tissue mill I have approached, but as far as I know, they are buying everything locally. But in places like Colombia, Ecuador, El Salvador and Guatemala, the demand is there for SOP. In Mexico, mills like those of Kimberly-Clark keep buying.

With people going to the offices less, the collection of SOP is down. It’s logical that there is supply-side weakness, and demand for tissue made with SOP is very high.

RT: Are any mills in Latin America expanding capacity to consume recovered paper?

YB: I don’t know about new mills. I’ve been so focused on the trading business, but when I talk to my customers in Latin America, none of them are saying they are expanding the machines or performing an upgrade. There could be in Brazil, but we just started business with that nation.

RT: What is shipping to Latin America like lately? How are you working around logistics challenges?

YB: We have grown at Vipa, which means we are good with every single shipping line as a company. We have departments that are staying in contact with shipping companies–Zoom meetings constantly with them. Every moment in time, we didn’t allow them to think about someone else.

If you don’t have a good relationship with logistics companies, then you are weak with shipping lines in certain places. We drove that idea to every specialist we have here to develop this relationship every single day. We’re good with shipping lines, but I can’t say it came without challenges. Of course, we have no containers at times. We miss bookings. A line cancels a vessel. We have additional storage costs. We pass through every single difficult moment we’ve had because we have good relationships with shipping lines on every level.

The main story is that sea freight traffic has been growing. The containers are not there, especially this year. There was Chinese New Year and no containers traveled from China to Latin America. The Suez Canal was blocked for one week, so no vessels in and no containers back via that route.

This year started out as very, very challenging because of this. Now, [the[ price of logistics is just going up so much, including via contingency surcharges.