Bisphenol-free tickets - Länstrafiken Jämtland. Market analysis Author: Justin Jeffs, Scandinavian Sustainability Consulting

Transcription

1 Bisphenol-free tickets - Länstrafiken Jämtland Market analysis Author: Justin Jeffs, Scandinavian Sustainability Consulting

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3 Table of Contents 1 INTRODUCTION PROJECT APPROACH AND RESOURCING MARKET ANALYSIS OBJECTIVES AND SCOPE LÄNSTRAFIKEN S REQUIREMENTS CURRENT STATE TARGET STATE AND FUNCTIONAL SPECIFICATIONS MARKET ANALYSIS THERMAL PRINTING TECHNOLOGY WHAT IS THERMAL PAPER? The Structure of Thermal Paper Choosing the Right Thermal Paper HISTORICAL DEVELOPMENT OF THERMAL PAPER THERMAL PAPER MARKET SIZE AND APPLICATIONS THE USE OF BISPHENOL A INDUSTRY STRUCTURE, TRENDS AND PROFITABILITY Industry Structure Industry Trends Industry Profitability THE REGULATORY ENVIRONMENT Regulation in the EU The US Regulatory Environment and the EPA Assessment MANUFACTURER/SUPPLIER INTERVIEWS Findings THE OUTLOOK FOR BISPHENOL-FREE PAPER PRODUCT ATTRACTIVENESS TO MANUFACTURERS BARRIERS TO DIFFUSION CONCLUSIONS AND RECOMMENDED NEXT STEPS...22

4 1 Introduction Although a large number of studies on the toxicity and hormonal activity of BPA in laboratory animals have been published, there have been considerable discrepancies in outcome among these studies with respect to both the nature of the effects observed as well as the levels at which they occur (WHO, 2010). In particular, the effects in some of the research studies were described at dose levels several orders of magnitude below those at which effects were reported in studies conducted in accordance with standard test guidelines. This has led to controversy within the scientific community about the safety of BPA and has resulted in various national authorities taking different risk management actions. The issue has also received much attention in the media, which has led to a concerned general public. During the fall of 2010 the Jegrelius Institute for Applied Green Chemistry (Jegrelius) analysed and found high levels of the suspected endocrine disrupting chemical Bisphenol A (BPA) in ordinary receipts. These results were in line with studies undertaken elsewhere and have had a major impact in Sweden and other countries and given rise to a need to find alternatives to receipts that contain BPA. The research found that those that handle receipts regularly, for example cashiers, may be exposed to almost twice as much bisphenol A as a normal person. The report concluded that there is a risk that this exposure may be a health hazard and thus the use of thermal paper that contains bisphenol A should be minimised. Analysis showed that Länstrafiken Jämtland (Länstrafiken), a regional transportation company owned by Jämtland County Council, also had high levels of BPA in their bus tickets. In view of the potential risk to its employees who handle large quantities of bus tickets, Länstrafiken decided to seek an alternative solution. Länstrafiken have recently replaced their old thermal paper with a new paper which does not contain BPA. It is currently unclear what replacement chemical(s) is included in this product or what the risks of this new paper may be. Furthermore, Länstrafiken have stated an intention to replace their ticketing machines on all buses from the Summer As such, a review of the current (or near to) market offerings has been requested in order that an informed decision can be made during this procurement. Länstrafiken and Jegrelius have now formed a cooperation to find a solution and have initiated a project entitled Bisfenolfria biljetter - Länstrafiken Jämtland. This project has four specific objectives: 1. To highlight and give an explanation for the conflicting views and information from industry, government, scientists and environmental organizations in the risk assessment of BPA. 2. To identify the technology front and the market for BPA-free thermal paper in general and identify specific products suitable for Länstrafiken s needs and situation. 3. To undertake a risk assessment of the substitute chemicals for BPA in the alternative products. 4. To build a body of material and knowledge with which to provide further assistance and cooperation to other companies seeking alternatives to BPA in their receipts. 1

5 2 Project Approach and Resourcing Jegrelius is responsible for project management and reporting. Lena Stigh and Tomas Östberg have been assigned by Jegrelius to lead the project and deliver the final report. Justin Jeffs of Scandinavian Sustainability Consulting has been assigned with responsibility for producing the market analysis. Activity Problem Description BPA Market Analysis Patent Search and Analysis Risk Assessment of Alternatives Final Report Responsibility Tomas Östberg Justin Jeffs Lena Stigh Lena Stigh/Tomas Östberg Lena Stigh A total of 55 hours have been allocated for the market analysis. 3 Market Analysis Objectives and Scope The objective of the market analysis is to understand the market potential to procure a suitable BPA-free product for Länstrafiken. The analysis is global in terms of the general market situation but has a focus on Sweden and Länstrafiken in respect of product procurement. The analysis has been undertaken in three stages: 1. A preliminary market analysis based on desk based research 2. Discussions with employees of Länstrafiken to understand the current state situation and future state desired/required situation. 3. Meetings with the major suppliers of thermal paper to the Swedish market to validate the market analysis findings and to understand what products are currently available or in the pipeline. No consideration has been paid to alternative ticketing solutions (eg; SMS, smart phones). Nor has consideration has been paid to the ticketing infrastructure currently used by Länstrifiken in light of the plans to change this in the Summer of Länstrafiken is a member of Svensk Kollektiv Trafik (SKL) and thus there is an opportunity to utilise the findings of this report as the basis for a wider project on behalf of other members of this organisation. No specific consideration has been given to the requirements of SKL in this report. 4 Länstrafiken s Requirements 4.1 Current State Länstrafiken s ticketing infrastructure is provided by FARA ASA, a supplier of IT solutions to the public transport sector in the Nordic countries. The thermal paper used by Länstrafiken was previously purchased from FARA but is now purchased from Schades AS, a Danish company whose core business is the production, sale and distribution of both plain and printed paper rolls, self-adhesive labels and food 2

6 wrap. Schades have production facilities in Denmark, France, Germany and the UK and provide products to a variety of industries including retail, financial institutions, lotteries, gaming and entertainment, ticketing, stationary, food and logistics. Schades sell more than 100 million POS rolls and 6 billion labels every year. Länstrafiken currently use Jujo s AP50KS-NP paper which is manufactured in Finland and converted by Schades. This is a non-topcoated paper developed for direct thermal printing and designed for use in cash registers, receipts, coupons and point of sale (POS). The paper is produced without phenol chemisty and has a ten year image stability and printability guarantee. Länstrafiken currently purchase circa 10,000 rolls each year. 4.2 Target State and Functional Specifications Länstrafiken wish to purchase a thermal paper which has a better environmental profile than the previously purchased paper which contained bisphenol A. A contract has recently been signed with FARA ASA to upgrade the existing ticketing infrastructure for Länstrafiken. This implementation is expected to be implemented by June Any replacement paper rolls therefore need to be compatible with this infrastructure. The volume of rolls purchased is expected to be unchanged from circa 10,000 per year. The paper rolls should be capable of being pre-printed on the reverse and do not need to be top-coated. 5 Market Analysis 5.1 Thermal Printing Technology There are two types of thermal printing: Thermal Transfer Direct Thermal Printing Thermal transfer printing is where a printer prints an image onto paper (or some other material) by melting a coating of ribbon so that it stays glued to the material on which the print is applied. It contrasts with direct thermal printing where no ribbon is present in the process. The main application is to produce barcode labels for product and shipping identification as the ribbons tend to wear out quickly with other applications. Direct thermal printing is the preferred technology for a wide variety of commercial applications including point of sale receipts, luggage tags, faxes, and labels. In the direct thermal printing process, a printed image is produced by selectively heating specific areas of coated thermal paper as it is passed over a thermal print head. The coating undergoes a colour change in the areas where it is heated, producing an image. This temperature-induced colour change is termed as thermochromism (MacLaren etal, 2003). 3

7 Figure: The direct thermal printing process (Source: Mitsubishi, 2010) 5.2 What is Thermal Paper? Thermal paper is a special fine paper that is impregnated with a chemical that changes colour when exposed to heat. It is used in thermal printers and particularly in cheap, lightweight devices such as adding machines, cash registers and credit card terminals. The surface of the paper is impregnated with a solid-state mixture of a dye and a suitable matrix. When the matrix is heated above its melting point the dye reacts with the developer, shifts to its coloured form, and the changed form is then conserved in metastable state when the matrix solidifies back quickly enough. Components of thermal paper include: Colour former Leuco dye that is light/coloured or colourless but will change to a dark colour with the addition of a proton which opens the lactone ring. Colour developer the weak acid that donates a proton to the colour former, changing it from light to dark. Modifier/sensitizer can reduce the melting point of the colour former & developer mix. Binders adhere the coating to the paper. The degree to which the colour-reagents (leuco colour former, acceptor) react is precisely controlled by special melting point regulators (sensitisers). In this way, various monochrome shades can be created depending on the amount of energy transferred. The thermal head in the thermal printer transfers the heat to the thermal paper. A thermal head consists of a multitude of miniature heating elements distributed along its printing width. Each of these tiny heating elements is electronically controlled to deliver the right amount of energy at the right time. In this way, the individual colour points are created which together form the final image text, graphs, bar codes, etc. A backing roll ensures that the thermal paper stays in constant contact with the thermal head. A thermal printer has considerably fewer moving parts than any other printer. 4

8 Figure: A chemical reaction occurs when heat is applied to the paper (Source: Source: EPA, 2010). Typically the coating will turn black when heated. But coatings that turn blue or red are sometimes used. While an open heat source such as a flame can discolour the paper, a fingernail swiped quickly across the paper will also generate enough heat from friction to produce a mark on such paper The Structure of Thermal Paper Thermal paper is made up of a base paper layer onto which various layers of chemical compounds are added. The layers typically include a protective topcoat, the reactive thermal coat, a foundation pre-coat and a protective backcoat. Figure: Cross Section of Top-Coated Thermal Paper. (Source: EPA, 2010) (i) Topcoat An optional additional topcoat can be applied to the thermal coat to protect the thermal paper from mechanical abrasion (e.g. through scratches), chemical influences (e.g. through oils, fats, varnishes or organic solvents) and other environmental influences (e.g. through high humidity or water). A topcoat on the front side of the thermal paper also extends the service life of the thermal head of the printer by reducing or eliminating the transfer of residue from the thermal coating on to the thermal print heads. A top coat can also focus the heat from the thermal print head on the active coating and provide better anchorage of flexographic printing inks applied to the thermal paper. (ii) Thermal Coat The thermal coat contains the reactive chemicals which react when heat is applied to produce the image on the paper. The composition of the thermal coat determines the sensitivity of the paper, the image density, the image preservation and the background density. 5

9 (iii) Pre-coat The pre-coat prevents heat conduction into the paper thus enabling the energy from the thermal head to concentrate in the thermal layer in order to produce high-resolution printing. This layer determines the sensitivity of the paper, the brightness and the image density and guarantees an even and smooth surface onto which the thermal coat is applied. (iv) Back-coat A back-coat is also optional but essential when the reverse side of the thermal paper is exposed to migrating adhesives (e.g. adhesives which are used in the production of self-adhesive labels) or plasticizers (e.g. from plastics like PVC). Furthermore, special back-coats prevent the paper from curling and enable the use of water-based solvents, inks and adhesives Choosing the Right Thermal Paper To ensure optimum printing results, it is essential that the paper is ideally matched to the application for which it is required and the printer employed. The results of printing may be very different depending on the printer used or the environment in which the product is used. It is thus always necessary to test the product compatibility under the typical printing conditions to achieve the best printout for the final use. Key factors to consider are the paper s sensitivity, ageing stability, printability and certification by the thermal printer manufacturers: (i) Dynamic and static sensitivity Sensitivity is the decisive factor in the selection of the correct paper. The dynamic sensitivity is particularly important in the choice of paper for certain printers. The faster a printer works, the shorter the time the paper is exposed to the elements of the thermal printing head. Therefore, a fast device requires paper with a higher dynamic sensitivity. If low sensitivity thermal papers are used, the heat applied is insufficient to create a printed result with the necessary density, which in turn reduces the long-term stability of the print. The static sensitivity defines the temperature at which the colour reaction in a thermal paper begins. The static sensitivity value is important when the papers used are employed in high-temperature environments such as for car park tickets. (ii) Aging Stability Developments in recent years mean that it is now possible to buy papers designed to meet different archiving requirements with the best papers offering upto 25 years without fading. (iii) Printability It is possible to buy paper that can be printed on the functional as well as on the reverse side. However, it is important to consider which printing method is used and ensure that it is compatible with the paper type. When printing the thermal layer, care must be taken that the machine settings are adapted to the paper and that the inks selected must always be compatible with the thermal layer, regardless of whether the thermal side or the reverse is being printed. 6

10 (iv) Certification by printer manufacturers The paper must be compatible with the thermal printing head used in the printer in order to guarantee a long service life for the thermal printer and its individual components while achieving a consistently good printed result. It is therefore important to match the grade of thermal paper to be used to the equipment. 5.3 Historical Development of Thermal Paper Thermal papers first came to market in the 1960 s. The first papers were developed by NCR Corporation and 3M. Despite the NCR paper being of inferior quality, whereby the image would fade rapidly, it took a leading market position over time due to its relative cheapness (Answers.com, 2010). The first thermal printing head was developed by Texas Instruments in 1965 and the first thermal printer, connected to a computer terminal, was launched on the market in During the 1970s Hewlett Packard began integrating thermal paper printers into its desktop computers and plotters. In the 1970s and early 1980s, Japanese producers (such as Ricoh, Jujo, and Kanzaki) using similar dyebased chemistry to that used by NCR, formed partnerships with barcode printer manufacturers (such as TEC, Sato, and others) and entered the emerging global bar code industry, primarily in supermarkets (Answers.com, 2010). U.S. producers such as Appleton (NCR's licensee), Nashua Corporation, Graphic Controls, and others fought to gain market share. Leading pressure-sensitive label producers such as Avery Dennison became major consumers of direct thermal paper for label applications. Sales in thermal paper really took off at the end of 1980 s with the launch of fax machines. This resulted in large investments in production capacity for fax papers. However, in the early 1990 s the fax market had peaked and began to decrease due to the penetration of laser and inkjet fax machines which did not suffer from the fading which was common with thermal paper (Fink etal, 2007). Thermal transfer, laser printing, electro-photography, and to a lesser extent, ink jet printing, began to take market share for industrial and warehouse barcode applications due to better durability. In an attempt to protect their investments in thermal paper production capacity, manufacturers were forced to seek new applications for direct thermal printing. An investment in improved performance and reliability, including image stability, printability and thermal resistance properties, has led to an increasing variety of applications. The rapid development in recent years of fast, quiet, reliable thermal printers has also allowed the speed and accuracy of the printing to improve. The result has been an overall growth in the market for thermal paper which has more than compensated for the drop in thermal fax paper. Today, direct thermal printing technology dominates ticket, tag and label printing and is showing steady growth and diversity. Point-of-sale (POS) is an ever-growing market for thermal printing. Applications include printing of bank statements and ATM receipts, receipts from credit card payments and ticketing for lottery, travel, leisure and sports events. The main uses in manufacturing applications are product labelling, inventory control, tracking, shipping and maintaining of work in progress. Airline luggage tags and boarding passes as well as medical charts have also become interesting markets for the thermal printing industry. 7

11 Direct thermal printing has maintained its market penetration and growth due its inherent benefits over other alternative methods of printing. These can be summarised as follows: fast printing and no changing of peripherals high image resolution very high reliability and durability small, compact printing units ideal for handheld devices easy handling in applications no additional consumables (e.g. toner or inks) low running costs low energy and maintenance low noise due to the "non-impact" printing process high functionality even under extreme environmental conditions no fouling of the print head excellent ink receptivity The traditional drawbacks of thermal paper, such as paper curling and fading of the printed image over time, are less of an issue today as the ability to add special layers has developed over the last five years. These layers also allow printing, most notably advertising, to be applied to the back of the paper. Finally, a range of thermal papers have security measures available to reduce counterfeiting. 5.4 Thermal Paper Market Size and Applications After 40 years, thermal printing continues to be a resilient, growing, diversified industry. The worldwide market for thermal paper in 2006 was approximately 845 thousand metric tons valued at $ billion at the producer level (Fink etal, 2007). The long term growth rate for thermal paper has been 10% per annum. Growth rates have been above average in developing countries with China s growth estimated at 15% p.a. (Fink etal, 2007). According to estimates in Europe, about half of thermal paper is used in pointof-sale receipts and nearly a third for self-adhesive labels used for things like deli-trays, shipping labels, and luggage tags (EU Risk Assessment, 2008). The European Thermal Paper Association has indicated the remainder is used for lottery tickets and FAX paper. Figure: Applications of thermal paper in Western Europe 2005/6 (source: EU Risk Assessment, 2008) 8

12 5.5 The Use of Bisphenol A Bisphenol A is one of the world's most widely used chemicals. Commercial production of BPA began in the 1950 s when large-scale uses for polycarbonate plastic and epoxy resins were developed. The global consumption of BPA in 2003 was estimated to be approximately 3 million metric tons (SRI Consulting, 2004). It is estimated that 1,150,000 tons per year were produced in the EU in 2005/2006 (European Chemicals Bureau, 2008). BPA is mainly used for products which are used in the chemical industry, construction, engineering, iron, metal, plastics and service industries. Of the total global volume produced, 71% is used in the production of polycarbonates (thermoplastic polymers) and 25% in the production of epoxy resins (European Chemicals Bureau, 2008). Polycarbonates are used for example in the manufacture of beverage bottles, baby bottles, cups, plates and mobile phones. Epoxy resins are used for adhesives, paints, varnishes and protective covers for cans to stop corrosion. Figure: Production and use of BPA in Western Europe 2005/6 (Source: European Chemicals Bureau, 2008 ) 9

13 Thermal paper benefits from the economies of scale created through the mass production and use of bisphenol in plastics and resins. It is estimated that 1,890 tonnes of BPA was used in thermal paper in the EU during the period 2005/6, which is 0.16% of total BPA use in Europe (European Chemicals Bureau, 2008). This was used to make 2.4x109 m2 of thermal paper, equivalent to approximately 168,000 tonnes of paper. BPA has been used in thermal paper since the 1960 s due to its known properties as a developer and the fact that it was widely available and believed to be safe (Toussaint, 2010). As thermal paper became more established, industry found other chemicals that also worked and in some applications were better suited. BPA has never got a toehold in higher-end applications due to its relatively low performance (eg; low tolerance to heat and light) but has remained the primary choice for lower-end applications such as supermarket and petrol station receipts because it is roughly half the price of alternatives. Even here some companies are currently using other chemicals. In spite of the volume of research in existence indicating the potential hazards of BPA, it remains a widely used developer in thermal printing due to its efficacy, availability, and low cost (Gregory, 1991). 5.6 Industry Structure, Trends and Profitability Industry Structure The boom in fax paper in the 1980 s led to a large scale investment in thermal paper manufacturing capacity. When the fax market began to peak and then decline in the early 1990 s there was significant overcapacity and fragmentation in the market, particularly in Europe (Lockie, 1998). This overcapacity forced European producers to look beyond their borders to sell surplus production. Overcapacity also led to poor profitability in the sector and subsequent market exits from paper convertors. Producer consolidation was made difficult due to the lack of small producers in the market. One major manufacturer, Arjo Wiggins of the UK, divested of Appleton following its acquisition in 2000, and subsequently exited the thermal paper market. Instead of consolidation, the industry embarked on a strategy of technology development and differentiation (Lockie, 1998). The result has been a wide range of specialist papers which are high performance, tailored products for a broad range of uses, built on a common technology requiring cheap peripherals. Simultaneously, the industry has invested in automation, production excellence and economies of scale to improve margins. This strategy has enabled the products to be attractive for a wider range of end-users including retail POS, travel, gaming, medical and financial services. There are three distinct layers to the supply chain for thermal paper, namely thermal paper manufacturing, converting and sales/distribution. 1. Manufacturing is defined as both paper production (often from purchased pulp) and finishing. It is undertaken in large, automated production plans. The manufacturing companies either own or license the patents for the different chemical formulations necessary to create the various finishes of thermal paper. 10

14 2. Converting consists of purchasing paper in jumbo rolls and then slitting them to commonly used sizes for various industries, for example in ATM machines or POS terminals. Converting also includes printing additional information on to the paper, such as advertising. 3. Trade consists of purchasing the ready-to-use roles from the convertors and redistributing them to end customers. Figure: Supply chain for thermal paper (Source: Author) The manufacturing market is now dominated by a small number of global firms who produce a wide range of paper products in addition to thermal paper. These include: Mitsubishi HiTec Paper August Koehler Jujo Thermal Ltd Appleton Kanzan Nashua A more detailed overview of the global manufacturers of thermal paper is included in Appendix 2. Other firms exist but these are largely sister companies to these manufacturers with a focus on specific markets. Most of the global firms have some form of Japanese influence with the exception of Koehler of Germany and Appleton of the US who have remained independent. There are significant barriers to entry in to the manufacturing market including a large capital investment in plant and machinery, the development or licensing of patents, the building of supply chains and the need for a large sales volume to achieve economies of scale. There are a limited number of convertors of thermal paper in the Swedish market. Two major convertors are Schades AS from Denmark, who currently supply Länstrafiken, and RollCo Nordic. Details of these companies are included in Appendix Industry Trends Despite the drop off in the 90 s for fax paper the worldwide thermal paper consumption is actually increasing and is forecast to continue increasing due to two key factors: Demand driven by economic growth 11

15 Technological developments A driving factor behind the success of thermal paper is the growth in global retail commerce. The increased use of bank cards in place of cash also increases the need for proof of purchase receipts, often a regulatory requirement. The low cost of direct thermal technology makes it especially attractive to developing markets. Furthermore, the reliability, low maintenance demands and the non-dependence on peripherals makes thermal printing attractive to these markets which typically lack a service and repair infrastructure (Lockie, 1998). Secondly, there is an exponential growth in the amount of information that is being printed. More and more receipts are being used as a vehicle for advertising. POS receipts are now typically double sided, allowing advertising to be placed on the reverse side, with the front side containing much more than just the details of the items purchased. These printing processes place extra demands on the thermal paper and thus the quality of the thermal paper is of increasing importance. Travel is a growth market for thermal paper. Self-service terminals are increasingly being installed at airports in particular, but also at other central arrival and departure terminals for rail, ferry and bus. Almost all of these devices are equipped with thermal printers for tickets, ticket envelopes and baggage tags. Likewise there is an increasing trend towards printed 2D barcodes as information carriers, away from magnetic strips (Mitsubishi, 2010). Direct thermal printing is becoming increasingly popular for portable, mobile applications thanks to the compact technology used. The increased use of portable POS terminals, in restaurants for example, is increasing the demand for thermal paper. The increase in the use of portable computers and smart phones which can connect to these devices will also provide a further market opportunity for thermal paper. One of the early problems with direct thermal printing was that the paper would fade and curl with time or when exposed to heat, light, moisture or chemicals. Recent developments in coatings, both front and back, have meant that thermal paper can now be bought with a guaranteed non-fade lifetime of upto 25 years. Thermal paper with resistance to chemical, moisture and temperature extremes is also widely available on the market. This durability has increased the range of uses for thermal paper to include, for example, guarantees, proof of purchase, legal documents, expense reports, tax records and medical records. Many types of tickets, especially travel tickets for public commuter traffic, are prone to counterfeiting. In Germany alone, damages of hundreds of millions of Euros were reported in 2007 (Mitsubishi, 2010). The thermal paper manufacturers have responded with products which contain a range of security options including watermarks in the paper, colour inlays, UV-fluorescent fibres and UV-fluorescent security features under the topcoat More recently, Ricoh have developed the first rewriteable thermal technology (Ricoh, 2010). This allows images to be created and deleted through the controlled application of heat. In this way, a single card can 12

16 be pre-printed with basic information and then reprinted with supplementary information specific to the user. Ticketing is a major potential application of this technology as the users travel period, zones, etc., can be changed without the need for the issuance of a new card. Mobile payment technology, enabled through smart phone technology, is increasingly being used for all types of transactions, including payments. According to research conducted by Yankee Group and made public at the Mobile World Congress 2011 in Barcelona, mobile transaction volumes are expected to grow at a very high rate, with the estimated total value of global mobile transactions rising from USD 162 billion in 2010 to USD 984 billion in 2014 (ThePaypers, 2010). Mobile banking is also set to become more mainstream. This trend will undoubtedly have an impact on the number of ATM transactions undertaken and could result in more paperless transactions in the future, thereby reducing the demand for thermal paper. The growth in digital cameras, and more recently high quality cameras built into phones, has had a significant impact on the printing industry and paper providers overall as fewer prints are now made (Fink etal, 2007). Similarly, alternative printing technologies such as Dye Diffusion Thermal Transfer (DDTT or D2T2), inkjet and electrophotographic printing are continuing to develop and are predicted to grow, particularly for professional and desktop printing. Inkjet is perhaps the closest rival to thermal printing. However due to the low cost of direct thermal printing relative to inkjet and the simple printing technology which avoids expensive peripherals, thermal printing is still the preferred choice Industry Profitability The thermal paper industry is dominated by a handful of large manufacturers. Historic oversupply in the manufacture of thermal paper has led to tough competition and depressed prices in the industry. Despite the specialisation in end products, margins are tight overall with profitability depending on the cost of raw materials and strong automation to achieve economies of scale in production. The high cost of plant and machinery necessitates large sales volumes for manufacturers. During the financial crisis of 2008 the demand for thermal paper dropped. Due to the large fixed cost base of manufacturers (a reflection of the high cost manufacturing infrastructure) it is difficult to reduce costs quickly and as such profitability suffered during this period. More recently demand for thermal paper has increased to pre-crisis levels across all markets and seems to have reverted back to the long term growth of 10% per year, led by growth in Asia and Russia (Jujo, 2010). The problematic oversupply versus demand, a factor of the market for many years, is also predicted to reach a more even balance in the coming years. The price outlook is one of increasing prices for thermal paper, typically more than 10% in 2010/11 across the industry (Jujo, 2010). This is primarily due to the increasing cost of all inputs, in particular freight, chemicals and especially for wood pulp which almost doubled in price in to reach a nine year high due to increased demand combined with supply shortages (Jujo, 2010). Further investments in production capacity are likely to be delayed for the time being thus tightening the spread between supply and demand further. Investments are however likely in further automation, optimisation and for product specialisation. 13

17 5.7 The Regulatory Environment As a substance Bisphenol A is not banned anywhere in the world. Extensive scientific testing and governmental reviews worldwide have concluded that human exposure to BPA is very low and within the safety limits set by government authorities. However, recent studies using novel low dose approaches and examining different endpoints describe subtle effects in laboratory animals at very low concentrations (EPA, 2010). Some of these low-dose studies are potentially of concern for the environment because the concentration levels identified with effects are similar to some current environmental levels to which sensitive aquatic organisms may be exposed. Regulatory authorities around the world reviewing these low-dose studies have generally concluded that they are insufficient for use in risk assessment because of a variety of flaws in some of the study designs, scientific uncertainty concerning the relevance to health of the reported effects, and the inability of other researchers to reproduce the effects in standardized studies (EPA, 2010). However, since the low-dose studies do raise questions and concerns, some countries have decided to restrict the use of BPA-based material in food contact products for small children (ages 0-3) as a precautionary measure while more data is gathered. Canada is the first country in the world that has classified BPA as a toxic substance. Bans are also in place in Australia, and a few US states Regulation in the EU In the EU s 2008 risk assessment for BPA (European Chemicals Bureau, 2008), analysis was undertaken of the potential health risks from exposure to BPA in the workplace, as consumers, from the environment and from combined exposures. The assessment concluded that there is at present no need for further information and/or testing and no need for risk reduction measures beyond those which are being applied already. This conclusion applies to the terrestrial and atmospheric compartments, and to secondary poisoning through the aquatic, terrestrial and marine food chains. In respect of thermal paper the report concluded that Other uses of bisphenol-a, such as in printing inks and thermal paper, are considered to result in negligible potential for consumer exposure in comparison with the other sources considered and therefore will not be addressed further in this assessment. Research undertaken by a host of European organisations including The Federal Institute for Risk Assessment (BfR) in Germany, The European Food Safety Authority (EFSA) and the British Environmental Agency have drawn the same conclusions as the EU risk assessment, namely that there is no risk to humans from current sources of exposure to BPA (Specialpapper, 2010). Despite this, France and Denmark have banned BPA in baby bottles. Denmark has taken this one step further and extended the prohibition to all food products for children up to three years old. Furthermore, a recent decision by the EU Commission now means that from March 2011 the manufacture of baby feeding bottles containing BPA in the EU will be outlawed, and from June 2011 the importation and sale of such bottles will be prohibited (ChemSec, 2010). In Sweden, the government recently approved the development and implementation of a national action plan to reduce the presence of toxins in the environment (Swedish Gov, 2010). The Swedish Chemicals 14

18 Agency (KEMI) has been tasked with developing and implementing this plan whereby hazardous toxins and chemicals are to be identified, restricted and phased out. Discussions between Jegrelius and KEMI have confirmed that Bisphenol A in thermal paper is currently outside of the scope of this initiative but that it could be considered for inclusion if a convincing argument is made The US Regulatory Environment and the EPA Assessment Companies in the USA don t have to report on the chemicals that they are using to the federal government, to manufacturers that use their products, or to the public (Schreder, 2010). The Toxic Substances Control Act (TSCA), which was passed in 1976, gives the Environmental Protection Agency (EPA) very limited ability to require safety testing of chemicals before they re used in commerce. Of approximately 80,000 chemicals used in commerce since 1976 only a few hundred have been tested while more than 62,000 were grandfathered without any requirement that they be tested or their safety assessed (Schreder, 2010). Manufacturers introducing chemicals after TSCA s passage must notify EPA of the new chemical, but don t have to test it for health and safety or ensure that the safest chemicals are used. Most human exposure to BPA comes from food packaging (Willhite etal, 2008). Food and food additives are regulated by the US Food and Drug Administration (FDA) and are specifically excluded from the definition of chemical substance under TSCA (EPA, 2010). In order to assess whether changes are necessary to the TSCA the FDA is undertaking research on the affects of exposure to BPA on humans. The FDA is also seeking to strengthen its oversight of BPA so the agency can respond quickly, if necessary, when more scientific evidence becomes available. In uses subject to FDA jurisdiction, public concern has led the industry to move towards non-bpa-based materials in products such as baby bottles, cups, spoons and adult drink bottles, and to explore alternatives in food can linings. Meanwhile, the U.S. Department of Health and Human Services (HHS) has provided interim recommendations on how parents and families can reduce exposures to BPA while additional studies are underway (EPA, 2010). In March 2010, the EPA released a BPA Action Plan (EPA, 2010). In the launch statement, the agency clearly indicated that it does not intend to initiate regulatory action under TSCA at this time on the basis of human health. The rationale behind this approach is that the exposure to BPA from sources which sit under the remit of the EPA are small compared to those sources under the remit of the FDA. The EPA is working with the FDA to support further research in the area of BPA exposure. The EPA is however considering two rulemaking actions on the basis of concern for potential risk to the environment from BPA: 1. Adding BPA to new Toxic Substances Control Act (TSCA) 5(b)(4) Concern List 2. Consider TSCA 4(a) rulemaking to develop data on environmental presence and effects The first assessment of the EPA s bisphenol A action plan will focus on finding safer alternatives to BPA used as a developer in thermal paper. The assessment, entitled Alternatives to BPA in Thermal Paper 15

19 Partnership started in July 2011 and is being led by the EPA s Design for the Environment project (EPA, 2010). The goal is to facilitate a movement towards safer alternative developers in thermal paper. The rationale behind looking at thermal paper is twofold. Firstly, the EPA believes that there are BPA alternatives readily available which may have a better environmental profile than BPA. Secondly, they point to the fact that thermal paper contains free-bpa (ie; it is not chemically bound) which can be easily released from the paper onto skin when handled. To implement its goal, a group of key stakeholders has been gathered to identify and develop information on alternatives to BPA in thermal paper. Members of the project include representatives from a wide range of stakeholders including manufacturers, convertors, chemical producers, retailers, green chemists, NGOs and US government officials (see Appendix 3 for a full list of project members). Industry involvement in the project is voluntary but to date includes representatives from the major global manufacturers. Both Canada and the EU are represented on the project, with Paolo Castello from the Joint Research Centre of the European Commission representing the EC. The content of the assessment will include evaluating the hazards associated with BPA and the viable, functional alternatives that act as developers for dyes in this application. Human health and environmental profiles for each chemical will be based on a review of literature in the public domain, structure-activity relationship modelling, and, in some cases, proprietary information shared by stakeholders. To date the working group have identified a list of seventeen chemicals, aside from BPA, which could be used instead of BPA, of which thirteen are currently in use to form thermal paper in the U.S., Europe, and Japan (see Appendix 4). The next milestone, due in April 2011, is to complete a draft evaluation of the ecological and human health hazards and environmental fate of BPA and alternative developers. The final report is due by December Manufacturer/Supplier Interviews In order to validate the findings from the market analysis and to identify suitable bisphenol-free papers, contact was made with five major manufacturers of thermal paper, two convertors and one supplier: Kanzan Jujo Mitsubishi Koehler Nashua RollCo Nordic (Convertor) Schades (Convertor) Point (supplier) It was intended that through meetings with these companies the project could gain input which would help Länstrafiken to understand the potential alternatives, allow Jegrelius to undertake a risk assessment on 16

20 the alternatives and to formulate a set of specifications for an ultimate procurement of bisphenol-free thermal paper Findings In short, the companies contacted either did not respond to direct requests for information or refused to give information via their convertors/country representatives. Positive meetings and exchanges of information were achieved via three companies who have relationships with the above manufacturers. These companies provided useful insight into the structure of the industry, the availability of bisphenolfree paper and the manufacturers positions on BPA-free paper. The following is a summary of findings from these meetings. The sources of individual comments have been kept confidential. (i) Availability of Bisphenol-free Paper Alternative chemicals have been available for many years and have replaced bisphenol in top-coated papers which are designed for premium products such as lottery and flight tickets which have higher performance demands. These higher priced products have thus been able to absorb the additional cost of the alternate chemicals. Due to recent customer demands and increased regulatory investigation manufacturers have invested significant time and money to develop lower cost non-top coated papers. There is now a variety of products available on the market although they are typically double the price of the bisphenol-free alternatives. (ii) Identifying the Chemical Developers Used Jujo, the Finnish manufacturer of the paper used by Länstrafiken today, have been unwilling to declare the chemical developer used in this paper. Other manufacturers have given the same response. A certificate and detailed specification sheet for Jujo s paper is included in Appendix 1. The certificate states that the paper meets all EU regulations regarding chemical contents. Schades also supplies this paper to other Swedish clients including Skånetrafiken, Kalmar Länstrafik, Jönköpings Länstrafik, ICA, COOP, H&M, Systembolaget and Ax Foods. Without the details of the chemicals used it is very difficult to undertake a risk assessment of these alternative papers. One option suggested is to test the papers using gas chromatography. Reviewing patents was felt to be a dead-end as manufacturers often do not use the chemicals stated in the patent. It is common knowledge that some manufacturers such as Appleton have moved to using bisphenol sulfonate (BPS), a close chemical relative of BPA. BPS has not been studied nearly as extensively as BPA but in-vitro studies indicate it may also disrupt hormones, with studies indicating it has some estrogenic and anti-androgenic properties (Kuruto-Niwa etal, 2005). A recent report suggests that BPS is also more resistant to breakdown in the environment than BPA (Danzl, 2009). It is too early to tell if the other papers which do not rely on phenol chemistry are any better as their chemical constituents are either unknown or have not been sufficiently risk assessed. (iii) The Incentive for Manufacturer s to Provide Alternatives Price pressures in recent years have resulted in low profitability and a high investment in automation. Manufacturers have a well-oiled machine in respect of their manufacturing and distribution supply chain and are unwilling to disrupt this. Furthermore, changes in the paper can cause problems elsewhere in the 17

21 supply chain, for example printer compatibility, thus requiring significant testing which increases time and cost. It was agreed that client and regulatory pressure are two key levers to force the industry to act. Regulation does not currently restrict the use of bisphenol in thermal paper. In respect of client demand, there is currently only a very small demand from convertors for the bisphenol-free alternatives as most customers still demand the lowest priced products. Manufacturers have therefore not made a significant effort to market these papers for fear of cannibalizing their market share in what is a fiercely competitive market. The current client and product profile of the manufacturers will to a certain extent determine how quickly they act in response to regulatory pressure/client pressure. Where manufacturers rely heavily on sales of non-top coated paper they are more exposed to regulatory/client demands for bisphenol-free paper as top-coated paper is already largely bisphenol-free. Overall it is expected that the market will take many years to move away from bisphenol, especially in developing markets. (iv) Client-Led Initiatives There is a perception that clients in both Sweden and Finland are taking the bisphenol discussion seriously. Meanwhile clients in Denmark, Norway and Germany are less interested in bisphenol-free paper. Examples of major retail clients who have changed to bisphenol-free paper are Lidl of Germany and a variety of Swedish clients including H&M, Ax Foods, COOP and Systembolaget. ICA of Sweden has stated that they will give their stores the option to purchase bisphenol-free paper rolls however it will not be mandated. Following a request from its major clients, including H&M, COOP, Ax Foods and Systembolaget, Schades recently organised a meeting attended by representatives from these companies in addition to representatives from The Swedish Chemicals Inspectorate (KEMI) and Jujo Paper. During this meeting the manufacturer of the developer was disclosed confidentially although the chemical constituents were not. KEMI have stated that they cannot demand to know the developer used providing that the manufacturer ensures compliance with EU regulations. KEMI are also not empowered to undertake a risk assessment of the developer used in place of BPA. ChemSec (The International Chemical Secretariat), based in Sweden, is bringing together their member companies to discuss the issue with a view to creating a platform for knowledge and cooperation amongst its members who include IKEA, B&Q (UK), Boots (UK) and REWE Group (Germany). (v) Conclusion It is possible for Länstrafiken to purchase an alternative to the current Jujo paper from Schades, Point and RollCo Nordic, although the comparison can only be made on price terms. Even paper certified by Nordic Swan contains BPA. Schades state that they have selected Jujo s paper as it is the cheapest for them to buy in of all the papers available on the market. 18

22 6 The Outlook for Bisphenol-free Paper In order to assess the outlook for the diffusion of bisphenol-free paper, an analysis of the relative attractiveness of the product and the barriers to diffusion has been undertaken. 6.1 Product Attractiveness to Manufacturers There are many factors to consider when evaluating the speed of diffusion for bisphenol-free thermal paper. At the manufacturing level, these factors may include ease of fabrication, compatibility with other components of a system, performance advantages, or the ability to earn a greater profit while at the same time meeting current and future expected regulations. At the user level product performance, compatibility with existing equipment and cost are the major considerations. The decision by manufacturers to undertake an investment in diffusing an alternative product will be determined by the attributes of the product to be diffused (Rogers, 2003). Furthermore, general risk factors may also have an influence, such as the possibility that economic development may influence the perceived economic risk that a potential adopter faces in the adoption of a technology. The factors which determine the speed of diffusion of a new innovation were identified by Rogers as relative advantage, compatibility, complexity, trialability and observability. These factors along with general risk factors have been evaluated from the perspective of thermal paper manufacturers to understand how motivated they may be to embark on such an investment: + denotes that the factor is positive in the manufacturer s eyes - denotes that the factor is negative in the manufacturer s eyes Attributes Factors Relative Advantage Allows companies to demonstrate their eco-credentials in the face of growing criticism and regulation The development of new patents can provide competitive advantage in a fiercely competitive market New market with high growth potential for new entrants Possible to charge a premium to existing products Most clients demand the lowest cost product Regulations do not restrict BPA Significant Investment has been made in the existing supply chain A potential zero-sum gain for existing manufacturers unless higher margins or greater market share can be achieved Compatibility BPA-free alternatives already available on the market and demanded by a growing number of clients Existing knowledge regarding thermal printing is still relevant Compatible with chemicals industry efforts to demonstrate eco- credentials in the face of concerns over growing waste, emissions and pollution Potential compatibility issue with printing equipment and inks Complexity R&D expenditure needed 19