As Chinese merchandise poured into the United States via sea containers, shipping companies were happy to have scrap paper shipments to at least fill some of the containers on the return voyage.
But shipping patterns and priorities have changed, and the changes have created unpleasant results for recyclers. In a session at Recycling Today’s Paper Recycling Conference entitled “New Export Algorithms,” moderator Mike Belus of Harmon Associates set the tone by noting, “The drastic change in trade flows [means] fiber tonnage once coveted by shippers is now competing for space.”
In addition to searching for space, recyclers also face rates three or four times higher than what they were paying just one year ago, according to Belus.
The shipping strains have not tempered China’s demand for North American recovered fiber, according to Byron Luo of Ralison International, Diamond Bar, Calif. He remarked that continued Chinese GDP growth would likely translate into similar 7-to-10 percent demand growth for paper.
Raw materials make up 67 percent of the cost of paper made in China, so mill buyers there will continue to seek out affordable supply.
According to Luo, the Chinese government continues to encourage mills located near Shanghai and Guangzhou to source recovered fiber from overseas through ocean ports.
However, the government there has also designated some 75 million acres of land for wood pulp plantations, said Luo, that could supply more than 6 million metric tons of pulp to the market.
Scott Krohn of shipping company OOCL U.S.A. Inc. noted that despite flat import-export activity at the Port of Los Angeles-Long Beach in 2007 and 2008, the U.S. Department of Transportation sees growth in volumes returning, with container activity possibly tripling by 2020.
Recent shipping woes for recyclers have been caused by the U.S. to East Asia route shifting “from 65 percent to 120 percent industrial load factor,” said Krohn. This quick shift from excess capacity to overcapacity was caused by the weak dollar, overall global market growth, and the maxing out of bulk shipping vessels spilling over into increased container demand.
In Krohn’s words, the west-bound route from California to Asia “is no longer the stepchild of east-bound repositioning. The subsidy of west-bound cargo has disappeared.”
The cost of bunker fuel, used by large ships, has also increased freight rates, Krohn noted. While a 6,000-TEU (twenty-foot equivalent unit) ship used to be able to sail for $33,000 per day, that cost has escalated to $110,000 per day.
Krohn’s unfortunate near-term prediction: “West-bound costs will increase during 2008.”
Another shipping company representative, Mario Bruendel of Fr Meyer’s Sohn NA, Newport Beach, Calif., noted that in addition to vessel space being tight, most terminal warehouses are also at full capacity.
“There is still a lot of scrap paper moving,” said Bruendel, but it is competing for space with other materials shifting over from an overloaded bulk shipping market—including grain.
Recycling Today’s 2008 June Conferences were held at the Hyatt Regency O’Hare June 22-24. Next year’s Conferences will be June 7-9 in Atlanta.