(International Perspective) Global shipping companies to end waste paper exports to China

Recycled Paper (RCP) shipments to China are likely to stop before the end of 2020, so current global shipping companies are now refusing to ship to the country after the end of September.

The world’s second- and fifth-largest shipping groups (Mediterranean Shipping Company [MSC] and HarperCollins Lloyd) have each announced that they will stop accepting orders to ship recycled paper to China by the end of 2020. The shipping companies’ move was in response to a law introduced in China at the end of April. China’s law, introduced at the end of April, brings the country closer to its stated goal of stopping recycled paper imports altogether by the end of 2020.

Key points about China’s ban on recycled paper imports

– Land after 2018 China has been releasing signals to stop importing recycled paper in 2020.

– In April 2020, China tightened its solid waste management laws.

– In late June 2020, the Chinese government announced a ban on solid waste imports starting in 2021.

– All major shipping companies are implementing the ban ahead of schedule, thus reducing potential risks.

As part of their risk management strategy, both companies appear to be planning to stop shipping containers to China after the beginning of October. One customer informed that other shipping companies are also “negotiating” the future of recycled material to China.

In the meantime, China’s import permits continue to be calculated according to national demand, and exporters from countries such as Australia and New Zealand are not even sure how they will ship in the short term.

 Potential impact on Australian RCP exports

This development must be seen alongside another significant development in the global fibre market over the past two years: the number of mills producing recycled pulp for shipment to China is now increasing rapidly. Such mills have been rebuilt or built in North America, Malaysia and Vietnam, which will become an even more important conduit for waste paper into China.

Most likely, by the end of the year, Australian suppliers will be seeking alternative markets outside of China in greater proportions than ever before. As of May 2020, Australia’s total paper exports to China were 249.2kt (worth €41.2), down 54% on the previous year. In fact, Australia’s exports in May 2020 were just 8,579 kt, the lowest level of Australian exports to China in more than seven years, at an average price of A$122 per tonne, below the lowest monthly average price on record.

Australia’s paper export recovery to China: January 2017 to May 2020

Indonesia is the next most likely destination for Australia’s recycled fibre. According to Fisher data, Australia is already shifting its exports to Indonesia from China in 2020.

In the year to May 2020, Indonesia received 295.5 kt of Australian waste paper feedstock (valued at A$52.8). However, Indonesia’s market is approaching capacity saturation and is expected to be overwhelmed by potential new supply, which will put significant pressure on the price of waste paper feedstock. Indonesia has recently repositioned its import quality requirements for recycled paper, and countries such as South Korea are doing the same.

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