PPRCE 2018: Asia’s uncertain future

PPRCE 2018: Asia’s uncertain future

Panelists examine the future of paper and plastics scrap trade with Asia.

Subscribe
November 9, 2018
DeAnne Toto

Pictured above, from left: Moderator Brian Taylor of the Recycling Today Media Group and
speakers Lydia Burchnall of Cycle Link UK,
Renhui Li of TL Import Export Handels GmbH
and Farah Hamirani of Paper Chase International

The volume of China’s recovered fiber and plastic scrap imports have changed dramatically within the last year. Speakers during the session An Uncertain Future in Asia at the Paper & Plastics Recycling Conference Europe shared the impact of these changes on their businesses as well as their forecasts for scrap trade with Asia going forward. 

“I don’t need to tell you that it’s been a turbulent year and a year of change,” said Lydia Burchnall, purchasing manager for the Cycle Link UK subsidiary of Hong Kong-based Cycle Link International Holdings Ltd., the buying arm for Chinese paper manufacturer Shanying International Holdings Co. Ltd. “Risks have been high, and no one wants to take risks.”

She explained that a two-tier market for old corrugated containers (OCC) has developed within Europe, with a higher quality grade destined for export to China and a lower quality grade that goes to non-China markets.

“The pool of fiber that can go to China has reduced significantly,” Burchnall said, adding that that country’s policies have changed the trade of recovered fiber around the world.

She described the recovered paper market from 2012 to 2016 has having been stable with seasonal price changes. However, in 2017 China introduced its mixed paper ban and changes to its customs inspection procedures and import quotas, disrupting that stability and leading to extreme fluctuations in 2018, Burchnall said. “[Chinese mill] buyers had to react instead of doing forward planning.”

China has issued 23 batches of import quotas this year, allowing for the import of some 18 million metric tons of scrap paper, she said. China Certification & Inspection Group (CCIC) inspection reforms also were introduced; however, those changes have been interpreted differently by the various inspectors, and procedures are evolving. Burchnall said the time to perform customs clearance in China has doubled with the introduction of X-ray inspections and the full inspection of 1 in 10 containers.

The series of changes has resulted in a 38 percent reduction in China’s scrap paper imports through September of this year, she said.

At the same time recovered fiber trade with China is decreasing, Burchnall said fiber sales into India, Indonesia, Vietnam, Turkey and Thailand are increasing.

Paper mills in China are bridging the recovered fiber shortfall using five key methods, she said: buying more locally generated scrap paper, importing more pulp or finished paper, taking downtime and mill group diversification.

China’s internal market is insufficient for meeting the country’s demand for recovered fiber. In 2017, Burchnall said 59 million metric tons of this material were collected in China, and Boston-based RISI predicts that number should increase by 18 percent in 2018 to 63.7 million metric tons.

The country’s paper makers have imported more recycled pulp to address the shortfall in recovered fiber. The country’s imports of recycled pulp grew from 12,000 metric tons in 2017 to 17,000 metric tons in the first quarter of 2018 alone per China’s trade data, she said.

Burchnall said smaller mills in China are being priced out of the market and that 150,000 metric tons of capacity have been removed from market as a result.

She mentioned that Shanying as well as Lee & Man Paper Manufacturing Ltd. and Nine Dragons Paper Holdings Ltd. are adding recycled pulping capacity in the U.S. to help offset the scrap paper deficit that China’s recovered fiber import policies have created.

Farah Hamirani, managing director of Paper Chase International, Dubai, United Arab Emirates, said her company has benefited from the import restrictions and quality requirements that China has introduced for recovered fiber imports. She said Paper Chase’s exports to other markets have decreased, while its exports to China have increased. Previously, China was a seasonal buyer from the Middle East.

Paper mills in the Middle East have been increasing their purchase prices so they don’t lose tons to China, Hamirani said.   

She added that trade to China increased dramatically starting in April of this year, shifting from India, which was previously the company’s main market. However, Hamirani said China’s appetite is too large for the Middle East to satisfy.

As long as the U.S.-China trade war exists, she said she sees sustained demand from China for Middle Eastern recovered fiber, adding that she believes this would be the case regardless because of the quality of the paper from the Middle East, which is not affected by moisture-related issues as some other markets are.

When it comes to plastic scrap, Renhui Li of TL Import Export Handels GmbH, Frankfurt, Germany, said China will ban imports of this material at the end of the year, resulting in a 6-million-ton shortage. In the meantime, exports of plastic scrap to other Asian countries increased exponentially, creating chaos at their ports, he said.

Because of this ban, China will shift from being the largest importer of plastic scrap to the largest importer of recycled plastic flakes and pellets, Li said. The country’s companies are investing nearly 100 billion yuan ($14.4 billion) in response to the changes and will have the capacity to consume 10 million tons of regranulate annually.

Li said black recycled pellets are now being produced using masterbatches and then imported into China.

However, he added, some problems have been associated with recycled pellet imports, including false customs clearances. Li said customs inspections also are very stringent: All containers are scanned, weighed and opened for inspection. If problems are found, laboratory tests are required.

Li said some producers do not understand China’s “three uniform standard,” which requires pellets to be of a uniform size, shape and color. He added that three Chinese plastics associations are working on a group standard and regulation for imports.

In addition to recycled pellets, high-grade recycled polyethylene terephthalate (PET) bottle flake can be imported as general merchandise into China, Li said.  

The 2018 Paper & Plastics Recycling Conference was Nov. 6-7 in Prague. The 2019 show will be Nov. 5-6 in Barcelona, Spain. More information is available at http://paperplasticseurope.recyclingtodayevents.com.