China’s crackdown causes global impact
China’s ban on imported unsorted mixed recycled paper came into effect on 31 December 2017 and it has already had a significant impact on the global pulp market, leaving the Chinese short of a substantial amount of fibre.
Two thirds of the 97 million tonnes of fibre consumed in China last year was recycled fiber, including 25 million tonnes of imported recovered paper which partly consisted of the now banned unsorted mixed paper (about 20% of total imported recovered paper or 5% of total Chinese fiber consumption). Little wonder then, that there is now a serious fibre deficit in China.
In addition, the government has tightened the regulation of imported recovered paper, lowering the threshold for impurities from 1.5% to 0.5%. As a result, some suppliers have been reluctant to ship to China for fear of their shipments being rejected, exacerbating the tight supply situation. And over the last six to eight months, import permits for recovered paper have also been tightened, generally being granted only to the larger, most modern mills.
These three factors have resulted in a dramatic decline in imports of recovered paper to China. For the last quarter of 2017, the reduced volumes amounted to a deficit of on average one million tonnes of recovered paper per month, and this trend has continued into 2018. On a yearly basis this decline would amount to 10 million tonnes per year if it were to continue. No wonder the pulp market in China has reacted the way it has.
While the drastic change in legislation has disrupted the markets, the intention behind China’s actions is valid: According to Weng Haidong, Head of Strategic Initiative at Xiamen C&D Paper & Pulp, who addressed the BWPA Hawkins Wright Symposium during London Pulp Week, this is the first time that a Chinese president has signed a decree to limit the imports of solid waste to protect the environment and improve people’s health. Thousands of illegal factories currently operate sorting imported (plastic) waste into small particles to sell to small factories in southern China to make new plastics, heavily polluting the air and rivers in the process.
China is the single largest importer of solid waste in the world, importing 41 million tonnes of solid waste in 2015. Around 40% of all US exported solid waste ends up in China, 87% of the EU-27 plastic waste exports go to China, and China also produces about 500 million tonnes of domestic waste, a figure which is growing 7%/year due to its fast-growing urban population. A month-long campaign to curb the pollution caused by imported waste last year included fines on paper companies involved in illegal waste processing. Around 60% of some 1,792 companies that were inspected were found to be operating illegally.
The government says that imports of solid waste that could be substituted by domestic waste will be phased out by the end of 2019 while imported waste deemed to cause serious pollution was banned at the end of 2017.
Where will China find the resources to substitute the imports? The State has approved several schemes including domestic waste classification, a push for the integration of municipal waste and recycling industries, and rebates for solid waste processing. But these measures will take time and they will require substantial investment in waste recycling.
So in the short to medium term, the tight supply situation in China looks set to continue, with demand for both recycled and virgin fibre likely to stay high. The effects look likely to be felt closer to home as well as in Asia. However, in the long run, we should see a more sustainable and stable Chinese paper market.