China’s cascading effect

Features - Commodity Focus // Paper

China has pulled back on buying secondary fiber from the U.S., causing a stir and leading to plummeting prices.

March 9, 2018

A lot can happen in a year. This time last year, Recycling Today reported how pricing for recovered fiber had skyrocketed and records were set in five consecutive months, with old corrugated containers (OCC) and mixed paper seeing the most gains. Both recovered fiber grades had reached levels that were more than double what they were selling for that same time in 2016. One source said at the time that the price hikes were “explosive,” “crazy” and “risky.”

Recyclers are citing risky business a year later, but for reversed reasons: Prices for recovered fiber grades have plummeted.

“In order to preserve this flow of materials, we ask that China work with the United States to develop a multiyear transition period with attainable contamination levels for importers of recyclable materials.” – Sens. Dianne Feinstein and Ron Wyden in a letter to China’s ambassador

Mixed reactions

While the boom in early 2017 was a result of steady demand from China, that country has since pulled back on its buying of recovered paper shipped from the United States. This has created an oversupply of mixed paper in the U.S.

It also has severely affected pricing for this grade. According to Boston-based research firm RISI’s Feb. 5 PPW Yellow Sheet, pricing for mixed paper out of Chicago to China was $0 per ton FAS (free alongside ship, meaning the seller must deliver goods to a named port alongside a vessel the buyer designates).

OCC pricing in domestic markets has dropped for several consecutive months while falling dramatically for exports to China in February. OCC export pricing to China fell at least $30 per ton FAS that month, and sources say the decline is likely to continue.

U.S. mixed paper pricing averaged $16.94 per ton in February, for a $76.95 per ton price spread between that grade and OCC.

As a result, recyclers in the U.S. have been piling up thousands upon thousands of bales of mixed paper when possible and even landfilling and incinerating this material. Others have found alternative outlets, selling recovered fiber typically destined for China to India, Indonesia, Korea, Malaysia and Vietnam.

Several U.S. paper mills have been buying mixed paper loads that would have headed to China prior to the implementation of its import ban.

“We’re only buying the cleanest of the clean,” says a paper mill source who is buying mixed paper and other grades of recovered fiber. “We are demanding that MRFs (material recovery facilities) and brokers sell us only the highest quality paper that they can get because the market demands that right now. Any mixed paper below specification grade is simply not marketable, so any recovered fiber that has excess contamination, prohibitives or outthrows must be put in storage, go to landfill or [be] used as waste to energy.”

Another source who works on the East Coast adds, “We are losing tons to the landfill.”

Governmental involvement

The status of the recovered paper stock industry is tied to actions out of China. The country has historically and continues to be a major influencer on secondary paper markets in the United States. In mid-July 2017, China introduced its ban on certain scrap imports, including mixed paper, which went into effect Dec. 31. The country’s 0.5 percent contaminants rule on recyclables went into effect March 1. (Read more about China’s restrictions and their immediate effects in the sidebar “RISI’s review” on this page.)

The import ban and then China’s issuance of specifications for incoming material that are more stringent in terms of contamination than standards that are accepted globally has forced the closure of paper mills in the U.S. Others have idled, affecting jobs in both scenarios.

In January 2018, in two separate letters, three U.S. senators called on the U.S. president and China’s ambassador to “level the playing field” and address the strict new rules. One letter suggested that the two countries create a multiyear transition period with contamination levels that are at least achievable.

Sen. Tammy Baldwin sent a letter Jan. 25 to President Donald Trump encouraging him to “address China’s latest unfair trade practices swiftly.” She notes the U.S. exported $470 million in recovered materials to China in 2016.

“In my conversations with paper producers in Wisconsin, I have heard time and again the complaints about China meddling in the paper market. The Chinese government intervenes in almost every element of the paper market, from cheap government-backed financing, import controls, equipment purchases and subsidized energy,” Baldwin says.

In a separate letterto China’s ambassador Cui Tiankai dated Jan. 18, 2018, Sens. Dianne Feinstein and Ron Wyden highlight that China is the world’s largest producer of paper and plastic materials.

“The United States is a large contributor of recycled materials for Chinese production, exporting nearly 8 million tons in 2016 alone,” the senators write.

They continue, “In order to preserve this flow of materials, we ask that China work with the U.S. to develop a multiyear transition period with attainable contamination levels for importers of recyclable materials. American recyclers maintain some of the lowest contamination rates in the world, and are therefore capable of supporting China’s goal of sustainable, environmentally friendly manufacturing.”

*Average U.S. national price per short ton for material delivered FOB. Prices used with permission from PPI Pulp & Paper Week (incorporating Official Board Markets). Free trial available:

Anticipating change

While some recyclers in the United States point to the roll-out of single-stream collection as the main culprit behind high contamination levels in residential fiber streams, Europeans contend that source separated collection of recyclables is helping to raise recycling rates there.

The European Paper Recycling Council (EPRC) announced in early February that the paper recycling rate in Europe reached 72.5 percent in 2016. The council has a goal to achieve a 74 percent paper recycling rate across Europe by 2020.

The group credits the increased paper recycling rate to the country’s separate collection of paper for recycling.

“We continue to make progress in elevating Europe’s recycling rate, but we must not remain complacent. A renewed focus on separate collection of paper for recycling is even more crucial to ensuring that Europe remains a global leader on paper recycling,” says Ulrich Leberle, EPRC secretary and raw materials director at the Confederation of European Paper Industries (CEPI), Brussels. “This is even truer as quality issues have become more apparent in other regions over the past year.”

A MRF operator based on the U.S. East Coast says more help is needed from localities to promote what is acceptable and what isn’t in residential recycling streams.

“The waste haulers did a disservice to the recycling industry,” says the MRF operator. He explains how some people on the waste side encouraged the industry to accept numerous types of materials at the MRF, causing confusion for residents and resulting in more contamination.

“Recycling is less expensive than trash, and it’s because of automation, carts and volume. Now we’re dealing with the contamination issue,” the MRF operator says.

He adds that he (along with many other recyclers in the U.S.) is anticipating how China’s 0.5 percent limit will be enforced. The future of the recovered fiber industry hinges on it.

The author is associate editor of Recycling Today and can be contacted via email at