UK Paper Mills Report ‘Temporary’ Lower Quality

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China Crisis: UK Paper Mills facing ‘Temporary’ Lower Quality as market is setting aside best quality material (cardboard) for the Chinese market


UK Paper Mills Report ‘Temporary’ Lower Quality

UK paper mills have been reporting lower quality of infeed material, as the market is seemingly setting aside best quality material (cardboard) for the Chinese market, which commands higher prices.

That’s according to Keith Trower, managing director of resource management at Viridor, who did however add that this is a short-term effect as mills “heavily invest” in quality initiatives.

Specifications:

The comments come from Mr Trower in his July quarterly report for the Bureau of International Recycling (BIR) – he is vice president of the organisation’s paper division.

Keith Trower of Viridor gave his views as part of a report into the world market by the Bureau of International Recycling

He emphasised that Chinese regulations are in force and exporters are required to meet import specifications of 0.5% maximum contamination adding that 100% of pre-inspection has now been introduced in the USA, Italy and France.

The reduction in imports has also led to Chinese mills “willing to pay a premium” for materials, as the country faces a shortage, according to Mr Tower.

Supply and pricing

When discussing the market, the Viridor resource management director said that the European paper market remains “dislocated” from that in Asia.

“Recent reports indicate a number of mills are modifying production in order to no longer require specific middle grades which limits the outlets for material,” Mr Trower said.

He added:  “Containerboard demand continues to increase but the end market is asking for a cheaper product, thus forcing mills to water down material with ‘mixed paper’.”

Future

Looking forward, Mr Trower said there has been an increase in UK exports “due to the high demand within China for deinking material”.

“Poly Cup is now being recycled widely across the UK and expectations are that this will increase significantly. With Europe currently in its lower collection months, the middle and high grades will be in demand as mills will be short of material,” he concluded.

Asia focus

A global view came from British paper recycler Ranjit Baxi, who is the president of the BIR. He highlighted the escalating trade dispute between the USA and China as having potential to impact on global paper markets.

 Ranjit Baxi, president of the BIR, predicted a ‘challenging’ second half of the year

He added that as well as the Chinese waste import restrictions, a “challenging” second half of the year for paper recyclers lies ahead.

According to Mr Baxi, the trade disagreement between China and the USA has slowed the Chinese economy – as America is China’s biggest export market and its second-largest trading partner after the EU.

Trade war

During the first half of 2018, according to Mr Baxi, China’s exports to the USA rose by 13.6% year on year to $217.7 billion while imports increased 11.8% to $84 billion, resulting in a trade surplus of $133.7 billion for the first half of 2018.

However, the two countries presidents have both been on record with threats of further trade tariffs, with Mr Trump hinting he may increase the duty on Chinese goods at American ports to around 25%. China has vowed to retaliate, and the Chinese government has accused Mr Trump of launching one of the biggest trade wars ever.

Tough climate

According to Mr Baxi, the escalating tensions, alongside import restrictions could lead to a tough climate.

“Exporters of recovered fibre both from the EU and the USA were greatly affected during the quarter by China’s controlled release of import licences (14 were released in the first half of the year, totalling around 11 million tons) and the imposition of strict quality controls by China’s customs enforcement department at all of the country’s sea ports,” he explained.

 The impact of efforts by the Chinese government to boost domestic recycling dominated the report

Mr Baxi continued: “Prices for the higher grades of fibre that met the specifications continued to be exported to China during the quarter.”

Reduced growth

With the trade dispute seemingly not likely to end soon, and port restrictions tightening in China, the BIR president added that the second half of the year will be challenging.

He said that various regulatory controls have continued to be introduced in China, including at the end of June, when he said China Customs issued a circular designating only a “limited number of ports for the handling of fibre imports”.

Europe

The BIR report also included commentary from a number of other industry experts from across the world.

In France, Jean-Luc Petithuguenin, owner of the French paper recycling company Paprec, explained that it is “possible to imagine” the restrictions easing a little, but said that the European market should “regain strength in the medium turn” once new projects and machines come online.

Reinhold Schmidt, of German recycling company Recycling Karla Schmidt, explained that in Germany the country’s “good employment situation” helped it through challenging times.

“Germany’s very good employment situation was reflected in demand for recovered paper in April. Manufacturers not only of packaging paper but also of printing paper were ordering increased volumes for the first time in a while and collected quantities were easily sold,” he explained.

Mr Schmidt added: “Despite the low level of recovered paper sales to China, there was no large stock build-up and prices were agreed relatively quickly at the same levels as in March.”


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