outlook on global pfr markets · • new pfr import regulations • high prices for domestically...

Outlook on Global PfR MarketsGreat Uncertainty About China

2019 | Fastmarkets | Outlook on Global PfR Markets

March 2019

Hannah ZhaoSenior Economist, Recovered PaperFastmarkets RISI

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Chinese PfR import regulations

55%2017-2018

• National Sword 2017 and Blue Sky 2018

• Mixed paper ban

• Announced in July 2017, took effect at the end of 2017

• New 0.5% contaminant standard

• Took effect at the beginning of 2018

• Trade dispute between China and the USA

• Duty on US PfR (25%) and US recycled pulp (10%) …

• Inspection and pre-inspection regulations: new rules about CCIC…

• In total, 18 million tonnes of PfR import permits were issued for 2018, compared to 28 million tonnes for 2017

Of world RCP consumptio


Chinese PfR importsMillion tonnes

SHARP DROP IN 2H2017 AND 1H2018

• New contamination standard and new inspection and pre-inspection rules lowered Chinese imports sharply in the first half of 2018

• Chinese imports picked up somewhat in the second half of 2018, especially for OCC

• Total Chinese imports dropped by 34%, or 8.7 million tonnes, to 17 million tonnes in 2018, compared to the 18.1 million tonnes of import licenses issued by Chinese government


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34% DECLINE IN 2018• OCC imports dropped by only 14%, less

than other grades

• But China bought high-quality OCC only (double sorted or double lined kraft)

• Zero mixed paper imports because of the mixed paper import ban

• ONP imports declined by 31% due to the concerns over quality

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2015 2016 2017 2018

OCC MIX ONP HGR



CHANGING IMPORT SOURCE• North America and Europe were impacted

significantly by Chinese import regulations

• US share of Chinese imports fell sharply from 45% in 2016-2017 to 37% in 2018

• European share of Chinese imports dropped from about 30% in 2016-2017 to 27% in 2018

• Chinese imports from Japan and Other Asia increased in 2018 for quality and distance reasons

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China: PfR imports and domestic collectionMillion tonnes

SHARP DECLINE IN IMPORT SHARE• New PfR import regulations

• High prices for domestically collected PfR

• Improvements in domestic collection driven by growing demand and high prices for domestic PfR

• Support of private sector (paper companies, resource recycling companies, e-commerce and logistics companies) and local and central governments on resource recycling

• Economic transformation

• Export driven to domestic consumption driven increasing potential supply for PfR

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2005 2010 2015 2016 2017 2018

Domestic collection Imports


18%22%

31%35%38%

39%

49%

OCC prices in different regions

CHINESE PAPER COMPANIES FACING HIGH RECYCLED FIBER COSTS• One set of OCC prices before July 2017

• Two sets of prices in 2H2017 and 1H2018: Chinese price and prices outside of China

• Sharp drop in US and European OCC prices in 2017 and 2018

• Domestically collected OCC became very expensive in China as demand/supply balance tightened significantly

• Recent decline in OCC prices globally because of the reduction in Chinese PfRpurchase

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2016 2017 2018 2019US average, USD/tonne (L) German OCC, EUR/tonne (L)Chinese imported #12, USD/tonne (L) Chinese domestic, RMB/tonne (R)


China’s increasing virgin pulp importsMillion tonnes

INCREASE IN VIRGIN PULP IMPORTS CAN’T SOLVE CHINA’S RECYCLED FIBER SHORTAGE ISSUE• Increasing imports of BHK and

unbleached kraft pulp (UKP)

• Increasing demand for UKP

• Limited availability and high prices for market UKP


Grade 2016 2017 2018

Total 18.79 21.05 21.57

% change -7.1 12.0 2.6

BSK 8.05 8.13 7.95

BHK 8.34 10.47 11.29

Unbleached kraft 0.65 0.65 0.80

Other 1.76 1.81 1.53

China’s surging recycled pulp importsThousand tonnes

SURGE IN RECYCLED PULP IMPORTS• No well-established quality standard or

specifications for imported recycled pulp.

• Will China have restrictions on recycled pulp imports in the future?


2016 2017 2018

Total 12.58 11.91 302.52

% change 55% -5% 2,441%

Taiwan 0.23 0.42 110.50

Vietnam 0 0 96.83

Germany 5.72 6.83 23.12

Malaysia 0.38 0.23 20.17

India 0 0 17.65

Russia 0 0 15.13

Other 6.24 4.43 19.13

China’s falling paper and board outputMillion tonnes

RECYCLED FIBER SHORTAGE• Falling production for paper and

board grades relying heavily on PfRin 2018

• Demand softness because of slowing economic growth and shift from paper packaging to plastic

• Continuous decline or slow growth in packaging paper and board output in 2019-2020, if restrictions on PfR imports persist

• Chinese paper companies’ pulp and paper investments outside of China 0

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2016 2017 2018E 2019E 2020E

Containerboard Cartonboard Newsprint


CHANGE IN PACKAGING AND LOGISTICS ▪ The sharp increase in paper packaging cost in

2017 and 2018 has resulted in improvements in packaging and logistics in China

▪ Over-packaging lightweight box and recyclable box

▪ E-commerce companies, logistics companies and more …


China Post - lightweight boxes Recyclable boxes

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Testliner, RMB/tonne

China’s increasing paper and board importsMillion tonnes

RECYCLED FIBER SHORTAGE• Accelerating imports for

containerboard and newsprint in 2017-2018

• Where did Chinese imports come from?

• North America, Other Asia and Europe

• Where will China buy more from in the future?

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Containerboard Cartonboard Newsprint


Chinese PfR import regulations

55%2019

• PfR import permits: 5 batches (5.5 million tonnes) of import permits were issued so far

• How much more import quota will China issue for the rest of 2019?

• Will we see another sharp decline in Chinese PfR import quota this year? 40% cut?

• Positive news about the trade issues between China and the USA?

2020 AND BEYOND

• Will we see another sharp cut in import permits in 2020?

• Will China ban imports of all PfR grades? When?

• Will Waste Paper become Recovered Paper (RCP) or Paper for Recycling (PfR) in China?

• Will high-quality PfR be allowed to be imported in the future?

• Or will China postpone the ban from 2020 to ?


Chinese PfR import policies have and will continue to affect the way Chinese paper companies operate

55%CHINESE PAPER COMPANIES’ PULP AND PAPER INVESTMENTS OUTSIDE OF CHINA

• Most Chinese top producers have plans to invest in pulp or paper projects outside of China for the potential fiber shortage problems

• Most of the investments have been in Other Asia and the USA

• Most of the investments have and will continue to be in paper packaging, virgin pulp (including UKP), and recycled pulp segments

HOW ABOUT THE PLANNED NEW CAPACITIES INSIDE CHINA

• Will some projects be delayed because of the fiber shortage issue?

• Will we see another wave of closure of small paper and board mills?


China’s investments in recycled pulp

ANNOUNCED RECYCLED PULP PROJECTS• Nine Dragons

• Fairmont, USA: about 220,000 per year (started up already)

• Biron, USA: 650,000 tonnes per year on two recycled pulp lines

• Rumford, USA: about 400,000 tonnes per year

• India: no detail yet

• Lee & Man

• Malaysia: 550,000 tonnes per year

• Sun Paper

• Laos: 400,000 tonnes per year

• Jingxing Paper

• Malaysia: 550,000 tonnes per year

• Risks associated with recycled pulp investments

• How much of them will start up? When? Are there more to come? Will there be some recycled pulp projects in Europe? Uncertainty surrounding Chinese PfR import policies


China’s domestic PfR collection

FURTHER IMPROVEMENTS IN DOMESTIC COLLECTION

• Zero Waste City plan: to set new recycling and waste systems

• Supports from central and local governments on resource recycling business: tax rate cut from 16% to 13%, and more …

• Supports from private sectors

• Better quality standards and specifications to be established led by Chinese paper companies and associations

• Further growth in domestic-consumption-driven economy: more paper packaging materials will stay and be collected within China

• Overall: there is still some room for more domestic PfR collection


China’s impacts on other regions

MAJOR PFR EXPORTING REGIONS

• Falling PfR exports and increasing RCP availability for domestic paper mills at relatively low cost

• Changing PfR trade flows

• Opportunities for new recycled pulp and paper packaging projects in these regions

OTHER ASIA

• Surging PfR imports

• Increasing PfR availability and low PfR cost

• Growing paper and board and recycled pulp production and exports


US PfR exportsMillion tonnes

CHANGING EXPORT DESTINATIONS• Exports to China dropped 30% YOY in the

first 11 months of 2018

• Chinese share of US exports declined from 70% in 2016 to 42% in 2018 YTD

• Shipments to Other Asia soared 86% YOY in January – November 2018

• Share of Other Asia in US exports jumped from 20% in 2016 to 43% in 2018

• Significant increase in exports to Europe of OCC and high grades

• 2018YTD: January – November 20180.00

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China India Mexico Indonesia S. KoreaVietnam Taiwan Thailand Italy Other


European PfR exportsMillion tonnes

CHANGING EXPORT DESTINATIONS• Total Western European exports fell by

about 5% YOY in the first 11 months of 2018

• Exports to China plummeted 38% YOY

• Chinese share of European exports declined from 78% in 2016 to 42% in 2018 YTD

• Shipments to Other Asia surged 76% YOY in January – November 2018

• Other Asia share of European exports rose sharply from 16% in 2016 to 49% in 2018

• 2018YTD: January – November 2018 0.00

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China India Indonesia Vietnam ThailandTaiwan S. Korea E. Europe Other


Western Europe: PfR exports and domestic consumptionMillion tonnes

FALLING EXPORT SHARE IN TOTAL COLLECTION• Falling export share in total PfR collection

caused by the decline in exports to China

• Strong domestic demand driven by growing containerboard output

• New recycled containerboard capacity

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Domestic demand Net exports

16% 14% 13%


Other Asia: PfR imports and domestic collectionMillion tonnes

SHARP INCREASE IN IMPORTS• Fast-rising import share in total PfR

consumption driven by demand

• Increasing availability of PfR at low cost because of the decline in Chinese imports

• Limited growth in domestic collection

• Less efficient recycling system, world’s new manufacturing hub (net “exports” of packaging materials led to less potential supply of PfR)

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Domestic collection Imports


18% 20% 20% 24%35%

Other Asia’s growing containerboard output and exportsMillion tonnes

INCREASE IN EXPORTS TO CHINA • Growing domestic demand and

exports to China

• Rising operating rates and new containerboard capacities

• Chinese paper companies’ investments in Other Asia

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Output Net Exports


Other Asia: PfR import regulations and others

55%WILL OTHER ASIA FOLLOW CHINA?

• Quality and environmental concerns over PfR imports

• How will imports impact local PfR collection?

• Taiwan started to limit imports of low-quality PfR in October 2018

• Some have import license systems and inspection and pre-inspection measures

• Vietnam, Indonesia …

• Port issues


Summary

MAIN POINTS

• Asia will remain the most important PfR buyer

• China will continue to have significant impacts on global PfR markets through its imports of PfR and recycled pulp and its import regulations

• Great uncertainty

• Other Asia will lead the growth in PfR demand and imports

• Europe

• Growing domestic demand and limited exports

2019 | Fastmarkets | Outlook on Global PfR Markets 24

Thank you!

For more information:

Outlook for Global Recovered Paper Markets 2017www.risi.com/GlobalRCP

OCC/UKP Market Analysis and Outlookwww.risiinfo.com/OCC-UKP

The China Recovered Paper Market: A Comprehensive Analysis and Outlookwww.risi.com/ChinaRCP

World Pulp and Recovered Paper 5-Year & 15-Year Forecastswww.risi.com/forecasts

World Recovered Paper Monitorwww.risi.com/OGRPM

2019 | Fastmarkets | Outlook on Global PfR Markets 25

outlook on global pfr markets · • new pfr import regulations • high prices for domestically...

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