Changing trade routes
In recent years, export markets for most grades of recovered paper have shifted quite a bit.
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Changing trade routes

The last few years brought about changes in the world’s largest importers of recovered fiber.

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May 5, 2020

Ever since China implemented its National Sword policy and restrictions on scrap about three years ago, export markets for most grades of recovered paper generated in the U.S. have shifted quite a bit. 

“The most drastic change in the last 35 years of recycling business has been China’s import buying and then China’s backing out,” says Bill Moore, president of Atlanta-based Moore & Associates

With China reducing the amount of recovered fiber it imports, demand for that material has been steadily shifting elsewhere. Moore says U.S.-based mixed paper and old corrugated containers (OCC) have experienced the most “radical change” in export destinations compared with other recovered fiber grades.

Given China’s shift away from consuming U.S.-based recovered fiber, Moore predicts much more U.S.-based fiber will be consumed domestically moving forward. Yet, he adds, some growing players in other parts of the world have stepped up to consume recovered fiber. 

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Global markets for OCC

China is certainly decreasing the amount of OCC it imports as a result of government restrictions, but it remained the largest importer of OCC in 2019. That year, China consumed 8 million metric tons of imported OCC. 

This year, China is only projected to consume about 6.5 million metric tons of recovered paper total, and it’s supposed to stop all recovered paper imports in 2021.

As China backs out on OCC consumption, other nations—mostly in Southeast Asia—have been increasing the amount of OCC they import.

In addition to China, the following nations were the largest importers of OCC from the U.S. in 2018:

  • India – 1.92 million metric tons; 
  • Vietnam – 711,000 metric tons; 
  • South Korea – 652,000 metric tons; 
  • Indonesia- 648,000 metric tons; 
  • Taiwan – 599,000 metric tons; 
  • Mexico – 484,000 metric tons; and
  • Thailand – 352,000 metric tons.

Dan Gee, senior associate at Moore & Associates, adds that recycled pulp mills are being developed in Malaysia and Laos, prompting those nations to import more OCC. “In the next two to three years, they are going to continue to increase volume on OCC and probably some mixed paper in the production of recycled pulp,” he says.

Mixed paper markets

In the last couple of decades, mixed paper historically was able to find plenty of homes in China. But in the last couple of years, that nation stopped consuming imported mixed paper altogether. China’s mixed paper consumption peaked in 2009 when it imported 5.6 million metric tons from the U.S. alone. Contrast that with 2019 when that nation did not consume any U. S. mixed paper.

When China backed out as an importer of mixed paper, India started to fill that gap. In 2018, India consumed 1.2 million tons of mixed paper from the US. 

India’s consumption alone is not enough to fill the gap that China left in this segment of the market. Also, India’s government  announced plans to enforce quality restrictions on mixed paper that it accepts in late 2019. So, this year and looking ahead, India is expected to reduce the amount of mixed paper it imports.

“India got flooded with mixed paper, and then their government chose to enforce cleaner prohibitive standards in late 2019,” Gee says. “Only higher quality mixed paper can go to India now.”

With the COVID-19 outbreak in early 2020, India shut down its paper mill operations for almost one month, which halted some trade to that nation. Recently the paper mills and transportation sector have been granted exceptions by the Indian government to reopen.

Other Southeast Asian nations, including Indonesia, Malaysia, Laos, South Korea and Vietnam, also demand mixed paper.  

High grades

In general, deinking high grades (DHG) tend to find more demand within the U.S., and that has remained the case in recent decades, Moore says.

In 2018, the U.S. recovered 4.5 million tons of deinking materials, and only 1.1 million tons of that was exported. 

When it comes to export markets, Mexico has been one of the largest consumers of DHG material. Mexico consumed about 535,000 tons of DHG from the U.S. in 2018. India was the second-largest consumer of U.S.-based DHG materials at 168,000 tons, while Canada was the third-largest consumer at 164,000 tons that year.

“U.S., Canada and Mexico have a lot more recycled-fiber-based tissue capacity,” Moore explains, “whereas a lot of the world makes tissue out of virgin fiber. Almost all of China’s tissue is virgin fiber, so little DHG goes to China.”

News on newsprint

Old newsprint (ONP) boomed as an export grade in the 1990s and early 2000s. But in the past decade, demand for this material—and generation for that matter—has plummeted. 

“News has become a category that almost doesn’t exist anymore,” Moore says. 

Collection of ONP has been declining since 2003. The U.S. collected 10.4 million tons of ONP that year. But in 2018, the U.S. only collected 3.2 million tons of ONP. That year, China was the largest buyer of ONP—it purchased about 2 million tons from the U.S. that year. 

Future of export markets

Looking ahead to the rest of 2020 and 2021, Moore says much more domestic consumption is coming online for OCC and mixed paper. “That means our exports are going to go down as a percentage of the market,” he says. 

More domestic opportunity makes trading easier for recyclers and brokers in the U.S. trying to sell recovered fiber, Moore adds. 

With the onset of COVID-19 globally and the systematic lockdowns imposed by many countries, the import-export supply chain has been drastically disrupted. China and India’s trade has been heavily slowed, stranding huge quantities of empty export containers in both countries. China, being the first to “recover to a new normal” is now waiting for the rest of the world to recover enough to increase trade and order goods that have been delayed or canceled. Currently, China has stopped importing any recovered paper from the U.S., but this can change quickly. 

U.S. packaging and tissue mills are seeing strong orders in the short term while coping with the lower generation of recovered paper grades in light of the COVID-19 impacts. OCC and SOP grades are in short supply because of business closures, driving prices higher quickly.

“If there’s domestic demand for mixed paper in the U.S., and if the price is not substantially higher to go export, suppliers would much rather ship domestically,” Gee says. “It’s simpler, lower risk, and sellers don’t have to deal with the uncertainty of shipping ports, ocean container availability and schedules changes.”