Restrictions on recovered paper imports into China made 2018 especially rough for some of those commodities. More specifically, mixed paper experienced much change in just the past 12 months. While export demand remained relatively the same from 2016 to 2017, export demand significantly declined from 2017 to 2018.
As a result, it’s likely that as much as 500,000 tons of mixed paper have been landfilled this year in the U.S. as of mid-October.
Bill Moore, president of Atlanta-based Moore & Associates, says reduced exports of mixed paper from the U.S. to China ultimately have led to the collapse of the mixed paper market. He adds that China has made it clear it won’t be changing its tune on mixed paper trading anytime soon.
So, what’s next?
“I was always on the bandwagon of we need to have more capacity in the U.S. to handle more mixed paper.” – Bill Moore, Moore & Associates
Moore thinks increased domestic use of mixed paper and additional exports to non-China countries will help alleviate some of these setbacks. Moore discussed his perspective during Recycling Today’s Paper & Plastics Recycling Conference (PPRC) at the Marriott Chicago Downtown Magnificent Mile Oct. 17-19 in the workshop Feeling China’s Fatigue – What’s Next, which included Dan Gee, a senior associate with Moore & Associates.
While some in the industry think China could import mixed paper again in the future, Moore said it’s far from certain and the U.S. needs to have a Plan B besides relying on China for its recovered paper.
“There is potential [things] will change,” he said. “Even some of the smart, top people in China are saying, ‘Well, this might not last.’ But long before this China thing, I was always on the bandwagon of we need to have more capacity in the U.S. to handle more mixed paper.”
China’s doors have closed on low-quality recovered fiber products, but Moore said he thinks domestic demand within the U.S. could be a solution to this problem. He added that the U.S. had become too reliant on exports in the last 15 years.
“With domestic demand, we can process the materials here and we won’t rely so much on exports,” he added. “That’s better for the collection system, and it’s better for the mill system, too.”
It’s also very much a possibility, as Moore said new domestic mill projects have been planned over the next 24 months that will consume about 1 million tons per year of mixed paper.
Moore listed a few companies that will have projects coming on board that will consume mixed paper. Pratt Industries, Conyers, Georgia, is constructing a new mill in Wapakoneta, Ohio, and Moore said most Pratt mills consume about 200,000 or more tons per year of mixed paper. “They are the largest user of mixed paper in the U.S.”
Also, Wisconsin-based Green Bay Packaging announced it will be replacing its mill in Wisconsin and will be able to consume significant quantities of mixed paper. Similarly, Cascades, Kingsey Falls, Quebec, has plans to add a mixed paper system at its recently acquired White Birch Bear Island paper mill in Ashland, Virginia, and Mexico-based Bio Pappel has plans to install a mixed paper system at its McKinley Paper Co. mill in Port Angeles, Washington.
Hong Kong-based Nine Dragons also has announced it will make more than $300 million in investments in U.S. mills, which Moore said will only create additional demand for old corrugated containers (OCC) and mixed paper domestically.
Aside from the construction of the Pratt mill that has been planned for a while, Moore said, “the China situation” drove most of the other recent domestic investments in mixed paper.
“All those other projects were going to use OCC almost exclusively, then came the China mixed paper situation, pushing those folks to use mixed paper—Green Bay Packaging, Cascades, Bio Pappel,” he said. “And, of course, Nine Dragons wouldn’t have happened if it wasn’t for the restrictions. It’s a different story, but the same end result.
“I think some natural economics are going to push it back to domestic. Mixed paper prices are low, and the consensus of thought is that OCC is going to continue upward price movement. If you can substitute some mixed paper, especially mixed paper with a lot of corrugated boxes in it, that’s an economic[al] bale.”
Moore said he also anticipates other countries have and will boost their imports of U.S. recovered paper in the next few years. He said containerboard projects in other parts of the world will help to consume U.S. mixed paper and OCC.
“With domestic demand, we can process the materials here and we won’t rely so much on exports.” – Bill Moore, Moore & Associates
“Just looking at the projects coming and containerboard projects around the world—many will consume mixed paper and OCC,” Moore said. “If you look at the projects and you project a little bit of where things are going with e-commerce and corrugated box business, you can come up with a replacement for the tons that were going to China.”
Moore estimated it will take up to four years to fully replace the tons that had been going to China, but he said the situation will likely improve steadily each year.
India is buying more today from the U.S.—the country has posted large increases in recovered fiber imports from the U.S. However, as Moore put it, “they’re no China in terms of size.
“It’s a different game than China,” Moore said of India. “The numbers are different. But India is catching up a bit, but [it’s] nowhere near China [levels]. Percentage increase is large, but the tonnage is small.”
Moore adds that he’s noticed more opportunities for recovered fiber from the U.S. East Coast to flow to European markets. He says several conversations on this topic were heard throughout Recycling Today’s PPRC, and he thinks it’s likely because of better pricing and increased demand in Europe.
“More European mill buyers have come to [the PPRC in] Chicago than we have ever seen,” he says. “They were there to buy. I saw it happening in 2018, and I think it will continue into 2019.”