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Market Discussion from China - RISI Asian Conference

While fears of a trade war have roiled markets in the U.S. and many stock exchanges around the world, the paper and pulp industry in China appears to be taking a step back to lick its wounds and be as cooperative as possible with the new regulatory landscape.

BernieRISI

Between stonewalling or vague commentary from the Chinese government and uncertain trade negotiation strategies coming from the U.S. administration, it was important to get into the details on the ground with industry players. To that end, Bernie Lee accepted an invitation to join a panel discussion on the future of paper recycling markets in volatile regulatory environments at the 2018 RISI Asian Conference in Shanghai, China. This is a conference for the entire pulp and paper industry of Asia to network and get relevant market updates from analysts and researchers at the leading publication on the pulp and paper industry. There were about 300 attendees with a rough 50/50 split between Chinese and non-Chinese companies. While being a conference about the entire pulp and paper industry in China, recycling was the hot topic for the conference and a large majority of the attendees were there to discuss recycling markets and network.

There was a general acknowledgement of the unsustainably high prices for recovered paper and the difficulties in utilizing virgin pulp from both a cost and operations perspective that is affecting the industry. Many other economic factors such as rising labor mobility, significant trade balance surplus in goods, and supply chain scalability seem to be either blatantly ignored or conveniently forgotten. Most of the presentations were about industry sector-specific outlook reports, macro-level investment presentations, and supplemental services or alternative market insights.

Mr. WANG Dong of the newly formed Ministry of Ecology and Environment gave an interesting presentation about the water pollution and conservation. It appears that many of the recent tests on water quality have shown that the industry self-corrected problems of discharged water quality. Presuming a clear translation was given, then there may be a disconnect in that water quality improvements may be due more to economic policies during former president HU Jintao but will likely be attributed to current president XI Jinping’s supply-side reforms.

Seido KAN of Seiko PMC, a Japanese producer of paper production chemicals, gave a presentation on technology developments in paper manufacturing. The primary takeaway for North American recovered paper processors is that their in-house testing found that paper made from U.S.-sourced OCC outperformed OCC from Japan and China by considerably margins.

Type of Test

OCC Source ->

US

Japan

China

Burst Index

kPa/(g/m2)

2.34

1.71

1.19

RCT Index

N* m2/g

186

157

114

Folding Endurance

# of folds

83

38

14

  *courtesy of Seiko PMC Corporation

Overall outlooks for boxboard and containerboard did not bring many surprises. Market demand has obviously been changing to favor individualized shipments which has led to a declining need for display packaging.

 

The recovered paper market outlook was the only presentation followed by a specific discussion panel. Despite providing a forum for new companies to present their supply chain logistics solutions and product innovations, China Resource Recycling Association’s Secretary-General of the Paper Division, TANG Yanju, and ISRI’s Research Analyst for Commodities, Bernie Lee, took part in answering many of the questions about how markets may adapt to new policy barriers to the movement of recovered paper and how the market may be affected by other trade policies that have been announced and rumored. The discussion turned to alternative markets, foreign investment initiatives, and how environmental policies may begin to leap-frog in implementation for many developing nations who borrow from China’s industrial development model.

 

If you have any questions, comments, or concerns, please contact Bernie Lee for more information. 

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