The incident, which happened at a German de-inking mill that produces high-quality office paper, involved liquid toner materials at less than 3% of the raw recycling waste - a limit which was thought to be safe.
According to Ingede, the mill operates the most sophisticated de-inking process in Europe, but even still the film produced with Indigo print created small flakes in control samples of the graphic paper the mill manufactures.
The investigation to discover the source resulted in seven 20-tonne reels being dumped until the team identified overprint material from an Indigo-using photobook printer as the cause.
Ingede's Axel Fischer said: "Liquid toner print will now be seen as unusable for de-inking. From now on it's junk."
HP released a statement saying that it was investigating the incident and added that a pilot-scale test at Western Michigan University had confirmed de-inkability of 5% HP Indigo print within a standard waste material batch and under standard de-inking conditions.
Francois Martin, marketing director, EMEA Graphic Solutions Business, HP, said: "When the facts are fully understood, we will be in a position to comment in more detail, but it should be noted that many paper recyclers are successfully using HP Indigo-printed papers in their process today.
"Additionally, HP-internal and third-party studies have shown that papers printed with HP ElectroInk version 4.0 are recyclable based on typical two-loop de-inking processes."
However, Fischer said that Indigo print was now only good for corrugated and that all the mills he had spoken to had unanimously agreed to stop taking Indigo print.
"Our member mills will no longer accept Indigo print for de-inking. That's it, now we know better. There will be no more refunds for this," he said.
He added that mills were currently paying more than €100 (£85) per tonne for waste paper that can be recycled into quality graphic papers, but Indigo print would no longer qualify.
The announcement intensifies the fractious relationship between the two, which had appeared to have thawed more recently when both sides said they would welcome a "genuine scientific cooperation".
Ingede comprises european paper and de-inking companies including Norske Skog, Stora Enso and UPM.
Ingede declares Indigo print 'unusable'
De-inking association Ingede has said that the de-inking mills of its associate members will no longer accept HP Indigo liquid toner print for de-inking after the material caused more than a hundred tonnes of paper to be dumped.
