Uncertainty Defines Asian RCP Market Trends

Hannah Zhao, senior economist, recovered paper, for Fastmarkets RISI, examined global RCP trends, with a focus on Asia, at PSI’s Recovered Paper (RCP) & Containerboard Summit, held Feb. 20 in Nashville, Tenn

China’s total RCP imports dropped almost 40%—or 6.6 million mt—in 2019, with its imports from North America alone declining 28%, she noted. By grade, China’s imports of OCC and ONP each decreased 39%, while its high-grade imports slipped 50%, Zhao said, adding that China has imported no mixed paper since 2018.

China’s lower RCP imports left it with a 5.6 million mt fiber shortage in 2019, which it partially filled using virgin pulp, recycled pulp, and domestically collected RCP. Its imports of recovered pulp surged in 2019, with the U.S. and other Asian countries the main suppliers, Zhao said. In addition, many Chinese paper companies have announced projects to make recycled pulp in the U.S. and Southeast Asia, totaling about 6 million mt a year.

So far in 2020, China has issued RCP import licenses equivalent to 3.2 million mt, which is 42% less than the 5.5 million mt issued in its initial batches in 2019, Zhao reported. China announced it may waive the 25% import tariff on U.S. RCP in March, which could prompt  Chinese to buy more U.S. OCC, she said. [Editor’s note: After the PSI meeting, China announced it will waive the 20% tariff on recycled pulp.]

The coronavirus is a wild card that could change the global market dynamics. Already, the virus has caused many more fatalities than the SARS outbreak in 2003, it has seriously curtailed China’s domestic RCP collections, and it is disrupting China’s port operations, Zhao said. Given those factors—and the fact that China’s economy is now on a much slower growth track—the virus could increase China’s need for imported RCP and have a “considerable impact” on its economy, Zhao said.

Despite the market uncertainty, China is likely to issue RCP import licenses equivalent to 6 million to 7 million mt in total this year, and it could proceed with its planned ban on imported RCP, possibly as soon as the end of 2020, Zhao said.

As China’s RCP imports have declined, other Asian countries have dramatically increased their RCP imports, though they are following China’s lead in imposing tighter inspection requirements, higher quality standards, and other restrictions, Zhao noted.