The Chinese ban on recovered paper imports: An international disruption

BY CARL HOUTMAN

Editor’s note: This article originally appeared in the November issue of TAPPI Journal, the association’s publication of peer-reviewed research, which is free to TAPPI members.

Mountains of paper grow on the docks of Hong Kong, waiting to enter China. Elderly paper collectors in Hong Kong lose income because they cannot find buyers for their baskets full of used boxes. A German shipper no longer accepts paper shipments bound for China. Old corrugated cardboard (OCC) prices in Arkansas drop by US$50/ton. From New Zealand to Great Britain, and everywhere in between, the disruption of fiber flow into China continues to shake the world of recovered paper.

In a document sent to the World Trade Organization (WTO), China indicated a desire to reduce the trash entering their country. In addition, China delayed issuing the required import licenses and caused everyone in the recovered paper business to adapt. Material transfer facilities around the world are looking for new buyers for their material. Outside of China, recycle plants are filling their warehouses with cheaper recovered paper and considering ways to store more paper. Chinese recycle mills are searching for fiber, and companies in China are struggling to find packaging and shipping materials.

CHINESE DEMAND SHIFTS
GLOBAL CAPACITY
Over the past decade, China’s hunger for fiber has driven large shifts in recycling capacity around the world. Sometimes called the “Chinese price support”, the country’s strong demand makes it difficult for mills outside the country to negotiate more favorable pricing. Recycle mills have to live on a thin margin between high recovered paper costs and low prices for their products. Many companies have responded by looking for fiber in “mixed waste” or closing mills.

Why has China taken these steps? In his address to the Chinese Communist Party Congress, President Xi placed particular emphasis on creating an “ecological civilization.” It is possible that Chinese officials in charge of import licenses are waiting to see what new policies the President will favor as he starts his new term. Even without presidential mandates, China is facing a trash disposal problem. Domestic production of residential waste has steadily increased over the past few years. This trend compounds the problems faced by the country’s recycling mills in disposing of the trash that
comes with imported recovered paper.

Bill Moore of Moore & Associates, an Atlanta-based paper recycling consultant, thinks that beyond this environmental push, there may be Chinese officials that don’t understand the difference between raw materials and trash, or that large Chinese mills are trying to put pressure on their smaller competitors.

A FUTURE IN LIMBO—FOR NOW
So, what is the future of the recovered paper business? China needs fiber and does not have sufficient domestic supply. Imports to China will start again, but when and under what conditions? In fact, there have been recent moves by China to relax the proposed recovered paper contaminant limit.

In the meantime, the temporary price reduction in recovered fiber elsewhere will help recycle mills fill their storage lots or warehouses. Perhaps these same mills will start looking at idled equipment and consider bringing recycling capacity back online. Finally, material transfer facilities will continue to look for other buyers by cultivating contacts in developing countries. They also will be reviewing their processes to look for ways to meet tighter restrictions on contamination.

This event has shown us, once again, that we live in an interconnected world and paper recycling plays an important role in the global economy.

Carl Houtman, Ph.D., is a member of the TAPPI Journal Editorial Board and a research chemical engineer with the U.S. Department of Agriculture’s Forest Products Laboratory in Madison, WI, USA. Email Houtman at choutman@fs.fed.us.

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