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Source: PIERS PIERS

Chinaâs New Restrictions May Impact US Wastepaper Exports

Published: 20 May 2015 01:05:38 PST

JOC_DotCom_2013-1  Today's entry originally appeared on JOC.com on October 11, 2014

Chinese companies are expecting more restrictions on wastepaper imports in early 2015 following a proposal circulated in August by the Ministry of Environmental Protection that reflects a growing emphasis on environmental protection.

Under the proposal, the MEP would cancel automatic import licensing in 2014, according to Chinapaper.net, an information provider for the paper trade. Three types of wastepaper that used to benefit from automatic import licensing will face new restrictions. They are unbleached craft paper or paperboard or corrugated paper or paperboard (NCM 4707100000), paper or paperboard made mainly of bleached chemical pulp, not colored in the mass (NCM code: 4707200000), and paper or paperboard made mainly of mechanical pulp, for example, newspapers, journals and similar printed matter (NCM code: 4707300000).

Those types of wastepaper exports from the U.S. to China have been growing over the past three years though at a declining rate, according to PIERS. In 2013, the corrugated paper and paperboard not colored category exports each have risen more than 60 percent compared to 2011, while printed matter has increased 54 percent.

Wastepaper_chart_No

“This has become a key issue now for those firms that run material recovery facilities,” said Greg Rudder, editor of PPI Pulp & Paper Week, a magazine of RISI, an information provider for global forest products industry and sister company of JOC Group within Axio Data Group. He said material recovery facilities often run fast and count on being able to push through volume efficiently. However, they may have to slow down processing now to make cleaner bales, which will increase production costs.

The wastepaper industry is waiting for more details. Though canceling automatic licensing would mainly affect Chinese companies, it could also affect U.S. exporters who are less than fully confident about the outlook of wastepaper exportation. Some Chinese paper mills probably won’t be able to import the type of wastepaper they are currently importing, according to Eddie Yeung, director of America Chung Nam, which has been the largest U.S. containerized exporter every year since 2001, according to JOC Group rankings, with more than 374,000 TEUs of wastepaper shipped in 2013.

“Having all wastepaper under the restricted category will make the business more difficult,” Yeung said.

In a recent RISI report on the Chinese recovered paper industry, Hannah Zhao, a RISI economist, forecast Chinese recovered paper imports would decline over next five years. “It’s still unclear what exactly the Chinese government’s steps are,” Zhao said, adding that licensing policies certainly reflect a growing focus by the Chinese government on environment issues.

Despite a cooling down growth in U.S. containerized exports of wastepaper to China in 2013, not all U.S. companies have been equally affected. “I can say that OCC (old corrugated container) exports will not decline, either way, because Chinese containerboard mills count on the US OCC and have trading companies in the USA,” Rudder said, explaining that old corrugated container exports account for almost half of the wastepaper exports to China. Companies such as Wal-Mart and Waste Management generate a large number of corrugated containers.

New regulations proposed by Chinese government may largely change the landscape of old newspaper (ONP) exports, which account for 21 percent of the total export. “If processors push for cleaner material, they may end making less ONP and focusing on making more mixed paper, if that is what Chinese mills demand,” Rudder said.

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