Recycled Paper & Cardboard Pricing

There was a significant increase in the price of recycled Paper and Cardboard in China towards the latter part of 2016. While the price index has since eased, much blame was initially laid at China’s increased willingness to enforce environmental standards as the reason for these big spikes. In truth, other factors have played their parts too.
 
Recycled paper and cardboard are very important components in a vast array of items produced and packaged in the region. What happened during this period highlights the fine balance in supply and demand for this global resource and the effect price changes can have not only on the Chinese economy but in fact the Global one too.
 
Firstly, it is very true that the Chinese Govt. has made a much more concerted effort to bring their production facilities more into line with expected first world standards. This due to pressure from the Global Community and indeed from their own people looking to improve the conditions they live in.
 
Within our own IPL office in Guangzhou, through the many factory audits we conduct, we too have noted a sharp uptick in awareness from factories we look at as regards environmental issues.
 
In October 2016, China’s Environmental Protection Agency, under pressure to show results began cracking down on paper and cardboard facilities that did not meet pollution standards during production. Many small and medium size facilities that failed tests were forced to immediately shut down pending improvement they needed to make. This had a significant effect on the supply of Chinese recycled paper.
 
As with many things in China, there often is a strategy within a strategy. Raw material supply did in fact also appear to a large extent to indicate where most closures took place. Industries along the Coastal zones that use imported wood pulp were less affected than old mills using non wood and recovered paper from the Hinterland. The bottom line is that most mills with a capacity of less than 10,000 tonnes per year have been forced to close.
Secondly, very importantly and perhaps less publicised at the time, is China’s crack down on the importation of recycled materials that do not meet certain standards. The days of big countries like the US for example, simply sending undesired waste products to China for reprocessing are numbered. Under the “Green Fence” policy the bar has been raised on imports with environmental concerns. In Sept/Oct 2016, significant imports of waste paper into China were detained at customs and not allowed into the country as they included waste prohibited from import into the country. This resulted in almost 30% less than the normal supply being available.
 
The “perfect storm” from these concurrent events, had a massive effect on the supply and demand of these items with consequent “crazy” price jumps.
 
According to some reports, this situation was then further exacerbated due to some stock piling by some larger local suppliers, in the hope of taking advantage of the forecast price jumps.
 
The last few months have seen these stockpiles diminish but the majority of closed mills have not reopened. While prices have stabilised, grey board prices are up approx. 35% from the previous stable pricing and corrugate is up to 1.5 times more expensive.

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2017-09-07T16:50:26+00:00May 7th, 2017|0 Comments