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ISRI CONVENTION: China Remains Pivotal in Paper

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Economic revival in China is a key to scrap paper demand in North America.

May 8, 2009

When analyzing recovered fiber demand in North America, box making and scrap paper demand statistics from North America have long been considered critical.


At the Paper Spotlight session at the 2009 ISRI Annual Convention in late April, however, presenter Bill Moore first looked at such figures from China when presenting his 2009 overview.


Moore, a paper industry consultant from Moore & Associates, Atlanta, noted that China’s consumption of recovered paper has zoomed from about 4 million tons in 1990 to nearly 50 million tons in 2008. “China buys wherever there is recovered paper in the world,” he remarked.


North American shippers of recovered fiber suffered from a sudden drop in demand from Chinese mills in the second half of 2008. Moore is seeing signs that the demand is slowly returning. “We’re seeing that China’s domestic economy is starting to recover rather quickly,” he commented.


When reviewing paper mill capacity in different parts of the world, China was again the shining star for its 16 million new tons of capacity put in place from 2005 to 2009. Europe has added 3 million tons of capacity as well, but Moore is skeptical whether it was needed. “Europe is overbuilding,” he declared. “They’re heading for trouble because they’re still building mills when they don’t need capacity.”


North America, meanwhile, has added very little new capacity this decade and its mills are actually projected by Moore to consume less recovered fiber in 2012 than they did in 2004.


The OCC (old corrugated containers) grade continues to be the grade most heavily purchased by Chinese mills, according to Moore.


China, though, also helped turn mixed paper into “a growth grade” from 1997 to 2007. When Chinese demand halted in late 2008, so did the demand for and pricing of mixed paper. “It fell hard,” said Moore. “It’s an export grade, and especially a Chinese grade.”


The grade’s future will be tied to the ability of operators of single-stream MRFs to render it usable by mills, said Moore. “When you get 2-to-3 percent plastic, you can’t get much lower [quality] than that before you have something unusable.”


Tissue mills will remain a viable source of domestic demand in North America, Moore noted, while a “greener” consumer culture may also help the market for recycled-content printing papers used by magazine publishers.


When asked about the “black liquor” tax credit that may be helping wood chips re-gain market share, Moore said, “From where I sit, there hasn’t been a widespread movement away from OCC because of this.”


He also remarked that the subsidy was an “unintended consequence” of a law that will expire (or will have this perceived “loophole” closed) at the end of this calendar year.


The 2009 ISRI Annual Convention took place April 26-30 at the Mandalay Bay Resort in Las Vegas.


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