How U.S. Mills are Benefiting from Low OCC Prices
Old corrugated cardboard (OCC), is widely thought as one of the few remaining profitable commodities in the wake of China's new scrap policies. “Average U.S. export prices for the material began to decline in July and were down 5% in August and 17% in September” Waste Dive tells us. Though OCC wasn't listed among the banned materials in China's July filing to the World Trade Organization, a new 0.3% contamination standard fee still applies to it and has also been affected by a shortage of import permits for recycled materials.
What Does This Mean?
What many people do not realize is that locally collected recycling is almost never recycled locally. In fact, most are not even recycled within the same state it was collected in, or even in the same country. Many regions across the United States have always shipped much of their paper, plastics and other scrap materials to China mills to be recycled and processed there. We could get rid of materials and have them recycled and in some cases get more usable materials back from the China mills. However, that changed when China announced last summer as part of its crackdown on pollution and waste production that it no longer wanted to import garbage and recycling materials from forging countries. This includes the United States. Since Jan. 1 of this year, China has banned the imports of various types of recyclable material and took measures to tighten standards and regulations for many of the trash and recycle slated materials it does still accept.
China and U.S. Import Relations
This refusal of certain materials means that these products are less expensive now as they are not valued overseas in mills and local mills can benefit from the lower prices. As more Chinese import restrictions roll in, domestic mills continue to pay even less for recovered fiber and other recycle raw material and by-product. Meanwhile, some are looking at how they can supply Chinese buyers with finished products in the future. Since China itself won’t have access to the recycle materials to make new material from, this gives domestic mills the opportunity to use cheaper materials to make end products that could be of value to customers overseas. This could open new trade options between the two countries in the future.
Capitalizing on the Situation
Most of the big players in OCC and recycle mills are very serious discussing various strategies to supply Chinese producers with finished products made from recycled paper. China’s manufacturers are struggling and now that they are refusing materials that they could recycle and reuse it gives domestic mills an opportunity to capitalize on the situation. “'China’s got a dynamic economy,' said Mark Sutton, CEO of International Paper. 'It’s going to need fiber in the long-term.' In the short term, North American fiber buyers continue to pay less for feedstock – and for the most part, they anticipate that will carry on at least through the end of 2018” (Resource Recycling).
This all may be terrifying to many and rightly so. However, it is important to carefully consider the deeper layers of this import-based issue and see what factors lead us to this point and what may be able to be done to rectify the situation. At Central Kentucky Fiber Resources, we can answer all of your questions about China's import ban and what it might mean for you. Contact us today to learn more.