No end in sight

All eyes are on China as the effects of the country’s proposed ban on certain scrap imports, including mixed paper, plays out. China’s delay in reissuing import licenses also is contributing to the plunge in U.S. export prices from month to month. Export pricing for the major secondary fiber grades in September dropped by figures last seen in April 2017—by up to $40 per ton for one grade—when China slowed its buying.

Old corrugated containers (OCC) export pricing to China slipped by $38 per ton FAS (free alongside ship, meaning the seller must deliver goods to a named port alongside a vessel designated by the buyer) out of the ports in New York and San Francisco and by $40 per ton FAS out of the ports in Chicago and Los Angeles, according to the Sept. 6 PPW Yellow Sheet from Boston-based research firm RISI. Export pricing to China for mixed paper declined by $25 to $31 per ton out of every U.S. port, RISI reports. (In April 2017, mixed paper pricing fell $40 per ton, while OCC pricing tumbled by $35 per ton out of every port on the West Coast.)

Domestically, pricing for major secondary fiber grades dropped in nearly every region, with the exceptions of mixed paper and sorted residential papers and news (SRPN) in the Southwest. OCC fell by $25 to $30 per ton on the West Coast.

An exporter based on the West Coast points to China’s proposed ban as the culprit. He says, “When you take the largest export-buying country and shake it upside down, this is what happens. If China walked in tomorrow and said, ‘Ha-ha, just kidding,’ the market would go through the ceiling. It’d go up $50 in one night.”

While the demand is there, he says China cannot get material through its ports. “They want to buy, but they can’t. It’s not really supply and demand right now.”

A Sept. 15 article in the South China Morning Post outlines the effects of the import restrictions. The article says Hong Kong’s scrap paper exporters have warned of a “wave of business closures in the next few months as they began a weeklong strike on Friday over import restrictions in mainland China that have crippled their work.”

The California-based recovered paper exporter says he foresees the effects of China’s proposed ban as “a big problem. It’s not going away.”

The article details how workers in Hong Kong are complaining about the wait for their mainland buyers to get import licenses. Recycle Materials and Reproduction Business General Association Director Jacky Lau Yiu-shing is quoted as saying he hopes the strike will “be a wake-up call for the government to help us communicate with mainland authorities.”

Some 80,000 tons of OCC, newspaper and office paper are collected in Hong Kong each month, nearly all of which are exported across the border to mainland China “because of the city’s lack of sorting and processing capacity and the mainland’s demand for raw materials,” according to the South China Morning Post.

“Since last Friday, up to 50,000 tons of waste paper [have] piled up at three of the city’s docks, which can hold 110,000 tons between them. Storage areas at 2 out of 16 exporters were full to the brim by Friday,” the article states.

In the article, Lau says only about one-third of the 80,000 tons that are shipped to mainland China each month can be diverted to Southeast Asia. That leaves 50,000 tons with nowhere to go.

“If China is eventually unable to issue import permits, then we will be able to collect only what we can ship out, which will be only about 30,000 tons. It’s inevitable that some businesses will have to close down,” Lau says.

The article quotes James Tang Kwok-yau, an operator of a corrugated paper factory on the mainland, as saying that paper plants across the border had been “feeling the heat.”

Tang adds that there is “no end in sight” after “wholesale prices for the best grades of cardboard had risen by more than 20 percent to around 5,000 yuan ($760) per ton in the last two weeks,” according to the article.