Many in the waste/recovered paper sector have told letsrecycle.com that prices for used cardboard and other waste paper normally allowed into China for board making are likely to reduce. And, there are also fears that from late October, stocks will build and material could become harder to move as UK arisings increase ahead of Christmas.
At the same time, and partly because of the ongoing quality pressures on the Chinese market, the major three Chinese mill groups which take in used cardboard from Europe and America, are all actively looking for more opportunities to develop mills outside of China, including in the UK.
Downturn
In terms of the markets and prices for used cardboard, one exporter said: “There will be a downturn from the middle of October because of problems with quotas. This will be added to by pressure from the shipping lines who will not want to take material from November unless they are certain that it will be allowed to be landed in China.”
Another exporter remarked: “The real dynamic is whether the shipping lines will stop taking material or allow exports to continue on the assumption that the quotas will be issued by the end of the year so that January deliveries are acceptable.”
There are various estimates as to when the final day for shipping material to arrive in China actually is, although by the end of October, for delivery to the dockside by about 14 December is seen as realistic. And, there are also different views as to by how much the price of used cardboard and consequently mixed papers could reduce by. One waste paper expert claimed the fall could be “as bad as we saw 10 years ago when the recession started.”
Much may depend on other markets for the material but the suggestions are that UK mills are well-stocked, and also using more mixed papers, and that the Continent too has sufficient supplies and will have Christmas arisings as well in its marketplace.
Buying nations such as India can take up some of the slack but are not seen as able to absorb any glut of material. Plants in Indonesia and Vietnam have been taking in extra volumes but again the capacity to take more material there is seen as low.
Two halves
Simon Ellin, chief executive of the Recycling Association, said: “I think we are going to see a month of two halves in October with the Chinese buyers keen to secure material ahead of the last shipments in late October.”
In terms of how the markets will fare, he said: “You never know with China, they could come back at the end of October and say keep shipping as the quotas will be issued in January. But, it is likely we will see significant downward pressure in the last quarter.”
Any downturn in cardboard prices will put renewed pressure on mixed paper grades and in particular MRF operators. Speaking to letsrecycle.com, Biffa chief executive Ian Wakelin has said that MRFs continue to have an important role but that there will be more separate collections of paper “because mixed papers are extremely difficult to find outlets for”.
Chinese mill groups
The pressures in the China market, caused by China’s desire to ensure it only takes in contaminant free used cardboard are prompting the main Chinese mill groups to develop overseas. The main groups are Nine Dragons Paper which has the ACN buying group in Europe; Lee & Man which has the Mark Lyndon buying division; and Shanying International, which owns the Cycle Link International buying group. The three groups also under added pressure because from 2020, Chinese government aspirations not to take in ‘waste’ materials could see further restrictions on the import of secondary commodities, or even a complete ban; although the latter is seen as unlikely in some quarters.
Already all three mill groups are developing overseas.
Nine Dragons
In August 2018, Nine Dragon’s wholly-owned subsidiary in the USA agreed to buy a recycled pulp manufacturing plant in Fairmont, West Virginia. It said: “The project has a production capacity between 220,000 and 250,000 tpa and is one of the three pulp mills in the world that produce air-dried recycled pulp.” One possibility is that the pulp could be exported to China for use in boardmaking there.
Earlier this year Nine Dragons also bought two pulp and paper mills in Wisconsin, USA.
But, so far the company is thought not to have actually acquired facilities in Europe although it is said to be actively looking at opportunities.
An option could be for Nine Dragons to come to the UK and develop a pulp facility. With newspaper readership falling dramatically in the UK and also in Europe, one expectation in the sector is that it could acquire newsprint manufacturing sites such as those owned by UPM across Europe. UPM has a UK site in north Wales at Shotton, which also has a closed-down machine, which would give the possibility to produce cardboard or even produce pulp sheets to export to China for manufacturing there.
Industry observers point to the fact that UPM is involved in a wide range of other sectors such as biochemicals, timber, energy and biofuels and may see the divestment of a UK mill or machine, and others in Europe, to a buyer such as Nine Dragons, as freeing itself of some mills in a changing market.
Nine Dragons declined to comment to letsrecycle.com on its plans for the UK and Europe and said any announcements would be made on the investors section on its website.
Lee and Man
Lee and Man’s main focus of activity outside of China is currently in Vietnam where it is building a new paper manufacturing machine to begin operation in late 2019, with a 500,000 tonnes production capacity annually.
However, the group has signalled that it is looking for opportunities overseas. Edmond Lee, chief executive officer of Lee & Man Paper, said in a recent company statement: “Looking ahead, the Group aims to boost the development scale, make proactive effort in diversifying the paper and pulp business and seeking opportunities for overseas expansion, while at the same time maintaining stable production for its plants in China.”
Shanying International
Cycle Link owner Shanying is investing in Europe, announcing in April 2018 that it will take the larger share ownership of a new pulp mill in northern Finland, known as the Boreal project. It is expected to produce 500,000 tonnes of pulp a year, starting up in 2020.
And, like Nine Dragons, it is buying paper mills in the USA. Through a subsidiary of Global Win Capital, part of Shanying, the group has bought the Verso mill in Kentucky for $16 million and plans investment of $150 million. The mill, which was closed and will now reopen, produces pulp and brown paper packaging.
Register for free to comment