Global OCC Markets Impact of Chinas import ban November 2019 - - PowerPoint PPT Presentation

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Global OCC Markets Impact of Chinas import ban November 2019 - - PowerPoint PPT Presentation

Jun 11, 2023 207 likes •427 views

Global OCC Markets Impact of Chinas import ban November 2019 Hannah Zhao Senior Economist, Recovered Paper Fastmarkets RISI 1 2019 | Fastmarkets | Outlook on Global RCP Markets Chinese RCP import regulations 2017-2019 YTD Mixed

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2019 | Fastmarkets | Outlook on Global RCP Markets

November 2019 Hannah Zhao Senior Economist, Recovered Paper Fastmarkets RISI

1

Global OCC Markets

Impact of China’s import ban

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Chinese RCP import regulations

55%

2017-2019 YTD

  • Mixed paper ban

– Announced in July 2017, took effect at the end of 2017

  • New 0.5% contaminant standard

– Took effect at the beginning of 2018

  • Trade dispute between China and the USA

– Duty on US RCP (25-30%) and US recycled pulp (20%)

  • China imported 17 million tonnes of RCP in 2018, down from 28.5 million tonnes in

2016 and 25.7 million tonnes in 2017

  • By the end of September, 10.3 million tonnes of import licenses had been issued for

2019, compared to 15.5 million tonnes in 2018

  • The ban on all RCP: If? When? The end of 2020?

2 2019 | Fastmarkets | Outlook on Global RCP Markets

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Chinese RCP imports by grade

Million tonnes FALLING IMPORTS FOR ALL RCP GRADES

  • Chinese RCP imports dropped by about

27% year-over-year in the first eight months of this year after plunging by nearly 35% in 2018

  • Zero mixed paper imports since 2018
  • OCC imports declined by only 14% in

2018, less than other grades, which fell by 34% on average

  • OCC imports dropped by 23% year-over-

year in January-August 2019, while ONP and high grades imports declined by 33% and 42%, respectively

  • YTD: January-August

5 10 15 20 25 30 35 2015 2016 2017 2018 YTD19 OCC ONP MIX HGR

3 2019 | Fastmarkets | Outlook on Global RCP Markets

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Chinese RCP imports by sourcing region

Million tonnes DECLINING IMPORTS FROM MOST TRADE PARTNERS

  • Imports from the USA declined by about

27% year-over-year in January-August 2019 after plummeting by about 45% in 2018

  • Imports from W. Europe fell by about 33%

year-over-year in the first eight months of this year after declining by about 38% in 2018

  • Chinese imports from Japan increased in

2018 but declined by 28% in January- August 2019

  • Trade dispute between the USA and

China

  • YTD: January-August

5 10 15 20 25 30 35 2015 2016 2017 2018 YTD19 N.America

  • W. Europe

Japan Other

4 2019 | Fastmarkets | Outlook on Global RCP Markets

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OCC prices in different regions

  • Sharp drop in US and European OCC

prices since 2018

  • Domestically collected OCC became

quite expensive in China due to the recycled fiber shortage issue in 2018

  • Recent weak OCC markets because of

the sluggish paper packaging sector, continuous decline in Chinese imports and deceleration in Asian RCP import purchases

500 1,000 1,500 2,000 2,500 3,000 3,500 50 100 150 200 250 300 350 2016 2017 2018 2019 US average, USD/tonne (L) German OCC, EUR/tonne (L) Chinese imported #12, USD/tonne (L) Asian imported US OCC, USD/tonne (L) Chinese domestic, RMB/tonne (R)

5 2019 | Fastmarkets | Outlook on Global RCP Markets

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China’s fiber balance

Million tonnes INCREASE IN PULP IMPORTS CAN’T SOLVE CHINA’S RECYCLED FIBER SHORTAGE ISSUE

  • Increasing imports of wood pulp
  • Limited availability and high prices

for market UKP

  • Sharp fall in RCP imports
  • Fast-growing recycled pulp imports
  • Non-wood pulp usage
  • YTD: January-August

6 2019 | Fastmarkets | Outlook on Global PfR Markets

Grade 2017 2018 2019YTD Total wood pulp net imports 21.04 21.58 15.07 % change 12.2 2.6 4.0 UKP net imports 0.65 0.80 0.48 Recycled pulp net imports 0.01 0.30 0.46 RCP net imports 25.72 17.03 7.30 Domestic RCP collection 55.87 56.94 38.65

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Chinese recycled pulp imports

Million tonnes IMPORTED RECYCLED PULP HAS EMERGED AS A VIABLE OPTION

  • Chinese recycled pulp imports surged in 2018

and so far in 2019, with the USA and Other Asia the major suppliers

  • About 5 million tonnes of recycled pulp capacity

was announced in the USA and Other Asia, but how much of this will start up as planned? Many

  • f the announced projects are still up in the air.
  • No well-established quality standard or

specifications for imported recycled pulp

  • Risks associated with recycled pulp

investments: uncertainties surrounding Chinese regulations and the regulations in the countries/regions where recycled pulp projects are planned

  • 2019YTD: January-August

50 100 150 200 250 300 350 400 2017 2018 2019YTD Other Asia N.America Europe Other

7 2019 | Fastmarkets | Outlook on Global RCP Markets

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Falling Chinese containerboard production

Million tonnes RECYCLED FIBER SHORTAGE

  • Falling production for

containerboard in 2018 and 2019

  • Limited supply of domestic RCP
  • Higher environmental standards
  • Demand softness because of

slowing economic growth and trade dispute between the USA and China

  • Increasing imports of

containerboard from mainly Other Asia and the USA

10 20 30 40 50 60 2015 2016 2017 2018 2019E Production Net imports

8 2019 | Fastmarkets | Outlook on Global RCP Markets

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Chinese domestic RCP collection

Million tonnes SHARP DECLINE IN IMPORT SHARE

  • Improvements in domestic collection driven

by growing demand and relatively high prices for domestic RCP

  • Support of private sector and governments
  • n resource recycling
  • Economic transformation

– Export driven to domestic consumption driven  increasing potential supply for RCP

  • Limited room for an increase in domestic

collection and recovery rate:

– Already high real paper recovery rate 10 20 30 40 50 60 70 80 90 2015 2016 2017 2018 2019E Domestic collection Imports

9 2019 | Fastmarkets | Outlook on Global RCP Markets

31%

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China and Other Asia: RCP imports

Million tonnes OTHER ASIA CATCHING UP WITH CHINA

5 10 15 20 25 30 35 2012 2014 2016 2017 2018 China Other Asia

10 2019 | Fastmarkets | Outlook on Global RCP Markets

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Other Asia: RCP import regulations and others

55%

WILL OTHER ASIA FOLLOW CHINA?

  • Taiwan started to limit imports of low-quality RCP in late 2018
  • Indonesia announced stringent restrictions on RCP imports this spring: contaminant

standard and inspection and pre-inspection measures

– Still waiting for the final regulations – Reduction of the impurity content over several years to a targeted 0.5%?

  • Vietnam: import quota system and tighten inspection measures
  • India: A ban on mixed paper imports soon?
  • Overall Other Asia

– Increasing quality and environmental concerns over RCP imports – Continuous increase in RCP imports driven by growing demand

11 2019 | Fastmarkets | Outlook on Global RCP Markets

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Other Asia RCP net imports

Million tonnes SURGE IN IMPORTS

  • Regional net imports surged from 7.2 million

tonnes in 2016 to 14.2 million tonnes in 2018

  • Most countries/regions in Other Asia

registered a significant increase in imports in 2016-2018

  • There is growing RCP demand and

increasing availability of low-cost RCP from the major exporting regions thanks to the decline in Chinese imports

  • Regional import growth decelerated in the

first seven months of 2019 due to slowing demand and restrictions on imports

  • 2019YTD: January-July

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 India Indonesia Thailand Vietnam Taiwan South Korea Malaysia 2017 2018 2019YTD

12 2019 | Fastmarkets | Outlook on Global RCP Markets

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Other Asia: RCP imports and domestic collection

Million tonnes SHARP INCREASE IN IMPORTS

  • Fast-rising import share in total RCP

consumption driven by demand

  • Increasing availability of imported RCP at

low cost because of the decline in Chinese imports

  • Limited growth in domestic collection

– Less-efficient recycling systems, world’s new manufacturing hub (net “exports” of packaging materials leads to less potential supply of RCP) 5 10 15 20 25 30 35 40 45 50 2015 2016 2017 2018 2019E Domestic collection Imports

13 2019 | Fastmarkets | Outlook on Global RCP Markets

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Other Asia’s growing containerboard output and exports

Million tonnes INCREASE IN EXPORTS TO CHINA

  • Growing domestic demand and

exports to China

  • Rising operating rates and new

containerboard capacities

  • Chinese paper companies’

investments in Other Asia

  • 5

5 10 15 20 25 30 2015 2016 2017 2018 2019E Output Net exports

14 2019 | Fastmarkets | Outlook on Global RCP Markets

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US RCP exports by destination

Million tonnes CONTINUOUS DECLINE IN SHIPMENTS TO CHINA AND SLOWING DEMAND FROM OTHER ASIA

  • RCP exports to China dropped by about 20%

year-over-year in January-August 2019 after plunging by 30% in 2018

  • US exports to Other Asia surged by nearly

80% in 2018 but the increase slowed to 5% year-over-year in the first eight months of 2019

– Slowing demand and tightening restrictions

  • n imports
  • Other Asia has become the largest buyer of

US RCP

  • Exports to Mexico and Canada increased as

well

  • YTD: January-August

5 10 15 20 25 2015 2016 2017 2018 YTD19 China Other Asia Other

15 2019 | Fastmarkets | Outlook on Global RCP Markets

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US RCP exports by grade

Million tonnes FALLING EXPORTS FOR MOST RCP GRADES

  • RCP exports dropped by about 6% year-over-year

in the first eight months of this year

  • All RCP grades except high grades (HGR) showed

decline in exports in the first eight months of this year

  • OCC exports rose by 27% in 2018 despite the

sharp decline in shipments to China thanks to the rising exports to Other Asia

  • OCC exports declined by about 5% year-over-year

in January-August 2019 as Chinese imports fell continuously and demand from Other Asia slowed

  • Mixed paper and ONP exports fell sharply by about

25-30% in 2018

  • YTD: January-August

5 10 15 20 25 2015 2016 2017 2018 YTD19 OCC ONP MIX HGR

16 2019 | Fastmarkets | Outlook on Global RCP Markets

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US domestic RCP consumption and exports

Million tonnes DECLINE IN EXPORT SHARE

  • Net exports accounted for about 40% of the

total US RCP collection before 2017 but the share fell to 38% in 2017-2018 and an estimated 36% in 2019

  • Domestic consumption contracted by about

3% year-over-year in January-August 2018, and net exports declined about 6% during the same period

  • Paper recycling business

– Challenge of improving quality – Some RCP went to landfills because of the lack of demand and low prices

  • Expected decline in total RCP collection and

paper recovery rate in 2019

10 20 30 40 50 60 2015 2016 2017 2018 2019E Domestic consumption Net exports

40% 38% 36%

17 2019 | Fastmarkets | Outlook on Global RCP Markets

31%

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RCP and UKP consumption in world containerboard sector

Million tonnes LIMITED MARKET UKP CAPACITY

  • Slowed RCP consumption in recent years

due in part to China’s RCP import restrictions

  • Upcoming market UKP capacity: 2.5 million

tonnes in 2018 to 2.9 million tonnes in 2021

– Recycled containerboard capacity is estimated to grow from 149.3 million tonnes to 159.5 million tonnes during the same period – RCP and RCP pulp will remain the most important fiber utilized in the containerboard sector

  • Will OCC crunch come again soon?

50 100 150 200 250 2012 2015 2016 2017 2018 2019E UKP RCP

18 2019 | Fastmarkets | Outlook on Global RCP Markets

31%

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Outlook on global OCC markets

GREAT UNCERTAINTY OVER ASIA

  • China: Import ban on all RCP? Regulations on RCP pulp imports?
  • Other Asia: Tightening controls on RCP imports? Any restrictions on recycled pulp production and exports?
  • Trade dispute between China and the USA: Potential impacts on RCP, recycled pulp and finished paper and

board trade between these two nations

  • Demand side

– More RCP to be utilized domestically in the major RCP exporting regions: Paper and board and recycled pulp production – Chinese demand: Decline in RCP consumption and further increase in recycled pulp demand – Growing Other Asian demand to produce both paper and board and recycled pulp

  • Supply side

– Challenges of improving quality in the major RCP exporting regions – Limited growth in Chinese RCP collection

  • International trade will remain an important part of the global RCP markets, with continuous change in trade

patterns

19 2019 | Fastmarkets | Outlook on Global RCP Markets

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Thank you!

For more information: Outlook for Global Recovered Paper Markets, 2017 www.risi.com/GlobalRCP OCC/UKP Market Analysis and Outlook www.risi.com/OCC-UKP The China Recovered Paper Market: A Comprehensive Analysis and Outlook www.risi.com/ChinaRCP World Pulp and Recovered Paper Forecast, 5-Year www.risi.com/forecasts World Recovered Paper Monitor www.risi.com/WRPM

2019 | Fastmarkets | Outlook on Global RCP Markets 20