China Set to Be Key Player in the Paper Recycling Market

The biggest driver for the paper recycling industry will become China, according to several speakers at the opening day’s program for WasteExpo. During a session focusing on the latest trends in the paper recycling market, all three speakers pointed to the explosive growth in China as the key factor for the paper recycling industry.

Brian Fielkow, COO for Peltz Brothers, a Milwaukee-based paper recycling firm, noted that while domestic consumption rates are projected to grow modestly, the market for paper exports is alive and well.

He notes that imports to China has experienced double-digit growth rates for many years. Further, the country will be the largest recovered paper consumer in Asia, and will continue to increase capacity.

Pete Grogan, with Weyerhaeuser Paper, Tacoma, Wash., echoed these comments. Looking at statistics, he pointed out that while paper stock exports to most countries declined by double-digit percentages, exports to China have rocketed up by close to 100 percent; a growth pattern that is not expected to slow down in the near future.

Further supporting this concept, Grogan pointed out that the Asian population continues to grow, with more younger, affluent consumers. “It is estimated, he says, “that a half billion people in Asia are economically middle class with significant buying power.”

To fuel this growing consumption, Asia is becoming more modernized.

While the United States will continue to be a large supplier of recovered fiber to China, the U.S. will continue to battle with both other Asian countries, as well as Europe, to supply this fiber-short region.

Dan Cotter, Cellmark Inc., focused on the shifting changes in the old corrugated market. He broke down the trends that have taken place in the paper recycling industry as the following: in the 1970’s, it was a time of free markets; in the 80’s it was government involvement in the collection arm, which resulted in the oversupply of fiber due to the explosion of curbside collection programs; the 1990’s saw markets at rock bottom levels, followed by the best markets ever, back to a return to rock bottom prices; and the 2000’s as the time when China sets the agenda for paper stock markets.

“China is the gorilla in the market right now,” Cotter says, echoing comments from the other two speakers. “They are the dominant wastepaper buyer from the United States.

While an examination of the Chinese market was a key theme for all three speakers, other issues were mentioned.

Fielkow pointed out that an important trend taking place right now is the mergers and acquisitions that are consolidating the paper industry. Over the past five years newsprint, tissue, and containerboard industries have all seen significant mergers that have resulted in the consolidation of the industry into a much smaller group of paper companies.

Along with the consolidation, however, have been the downside of the difficult markets that have swept the paper industry.

“In the past 18 months alone, there have been several major bankruptcies and closures, including: Plainwell Tissue, Globe, Armstrong Products, Ponderosa, FSC, Perry H. Koplik, U.S. Gypsum, and American tissue. The recent wave of mergers has caused many blue chip companies to take on high amounts of debt.”

Cotter sees other areas that are becoming major drivers for the market. Just-in-time, according to Cotter, started the most recent runup in OCC. Other areas will be the growth in the test liner market, the possibility of political intervention, and the growing question over who will control the collection and processing of recovered fiber.

While the long-term forecasts are optimistic, in the short term, the paper recycling industry is enjoying a decent market, with grades such as OCC boosting the overall market.

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