Will China’s Recovered Paper Problem Become Your Problem?


China imports millions of tons of recovered paper (RCP) each year for the production of paper and packaging products vital to its economy. Along with that recovered paper is a lot of unusable waste, including glass and plastic, which ends up in landfills. We estimate that China sends 25 million tons of waste paper product to landfills annually, a number that is expected to grow to as high as 65 million tons by 2025.

Fig. 1

With China’s production of municipal solid waste (MSW) projected to race past that of the US, their government is now addressing it as a critical issue. When the ban on unsorted waste paper coming into the country was announced in 2017, along with a tightening of quality requirements for other types of paper, it resulted in a dramatic plunge in the amount of recovered paper imported by China (Fig. 1).

Given the uncertainty about how these requirements were being implemented, some exporters of RCP stopped shipping to China because the risk of rejection was too high, and US exports essentially fell to zero in that time period (Fig. 2).


Fig. 2

Declining imports of recovered paper have significant impact on China. The country is extremely dependent on recycled fiber, which comprises about two-thirds of the fiber used to make its paper and packaging. Additionally, more than 40 percent of that recovered paper supply comes from other countries. Equally important, the five largest and most influential Chinese producers consume nearly one-third of the country’s total recovered paper supply (Fig. 3).

But this decline in imports doesn’t impact only China. As shown in Fig. 4, 50 percent of global RCP exports is destined for China, so the rest of the world depends upon the country to take its recovered paper. Turning off this part of the supply chain could have a tremendous global impact as there would be no place to send the recovered paper.


Fig. 3

Chinese imports of pulp have increased; however, they are nowhere near enough to offset the drop in the import of RCP, and the price for pulp in China had already jumped more than 40 percent between July 2017 and April 2018 (Fig. 5).

In terms of volume, in 2016 Chinese producers imported nearly 12 million tons of bleached recycled paper. Depending on yield, replacing these tons could require a staggering 20 percent of the world’s total supply of bleached market pulp. This could significantly affect other countries that also purchase bleached pulp.


If China continues to increase its demand for pulp, it stands to reason pulp prices will continue to rise. This could have substantial repercussions across diverse segments of the industry. Producers of specialty grades, for example, are particularly sensitive to changes in pulp market prices. Large volume grades, such as uncoated

Fig. 4

freesheet and consumer tissue & towel, are also heavily dependent upon purchased pulp (Fig. 6). In addition, while pulp prices have risen sharply, margins have eroded, especially for tissue producers, which have actually seen prices for their finished goods drop, despite skyrocketing costs of materials (Fig. 7). At some point, this will force either price increases where possible, or mill closures where inevitable. Equally important to consider is the impact this would have not only to pulp suppliers, but to all suppliers to these now high-risk mills (chemical, machinery, etc.).

But the news is not all dire, at least in the short term. For example, China’s largest publicly-traded paper companies are reporting record profits, in part because

Fig. 5

they have been able to get the recovered paper they need, while their smaller competitors did not. Additionally, OCC prices in the US have fallen by 50 percent since the Chinese restrictions were announced (Fig. 8). To purchasers, this is a tremendous boon (although sellers have realized a significant hit to their

Fig. 6

profitability). Producers have seen their profits more than double, and have announced significant new capacity (Fig. 9).


If China holds firm on restrictions, its producers will somehow need to replace their soon-to-be-exhausted inventory. Purchasing costly market pulp is not a viable long-term option. As a solution, Chinese companies could build virgin fiber mills where natural resources are available, and export pulp back to China. This, however, is a long-term project that would not help the short-term problem. A faster alternative would be for Chinese

Fig. 7

companies to begin buying existing pulp suppliers, which is already beginning to happen and is expected to continue.

The bottom line: China needs products made from RCP—corrugated boxes for their exports, as an example—to keep its economy growing. Fisher International will continue to keep its finger on the pulse of this evolving issue and its impact to the industry as a whole.



Fig. 8

Fig. 9


Tedd Powers is senior consultant, Fisher International, Inc., which provides insights, intelligence, benchmarking, and modeling across myriad scenarios. By arming companies with the knowledge that will help them gain a better understanding of their strengths and help identify weaknesses, Fisher is helping businesses stave off challenges and better position themselves for long-term growth.