Packaging / Advertising & Office

Things are precious! As China banned the import of foreign waste, it did not expect to make OCC rare goods habitable. Not only did prices soar, but also attracted Chinese paper mills to follow in OCC's footsteps and smash 15 million tons of production capacity in Southeast Asia.

What is the situation? Look at a few important news from overseas.

During the purchase period in July, the domestic demand for waste paper in the United States was still very strong, and it promoted the price increase of most paper grades in the domestic and export markets. "Demand is very good," said Bryce Starkamp, recycling operations manager for the Scott County Waste Commission in Iowa. "The value of cardboard and mixed paper is rising. This month, the price of mixed paper seems to be going In the range of US$90 per ton. Not long ago, our selling price was about US$2 per ton."

Kyle White, chief analyst of equity research for paper, packaging and environmental services at Deutsche Bank Securities in New York, said that in 2020, domestic containerboard mills in the United States consumed 22.8 million tons of OCC, an increase of 4% from 2019. As of May this year, U.S. domestic consumption of OCC has increased by 5.8% year-on-year. OCC's export demand is also strong. From January to April, U.S. domestic OCC exports increased by 18.4% year-on-year.

This summer, strong demand kept waste paper prices high. White said that the average price of OCC in July was US$129 per ton, and the price has been increasing for at least eight consecutive months. “We have never seen such a high level of pricing since China began to implement a waste paper import ban in September 2017,” he said.

Beginning in 2017, after China restricted the import of foreign waste and completely closed the import channel in 2021, India, Europe, Southeast Asia, South Korea, Taiwan, and Thailand became alternative export destinations. In January 2021, the amount of US waste paper imported by India has been close to the amount imported by China in the same period last year. Thailand's imports of waste from the United States have also increased significantly. The first half of 2021 has increased by 260% from the 288,000 short tons imported in the same period in 2020.

At the same time, Southeast Asian countries have promoted the effective return of export containers by importing large amounts of waste paper. Therefore, Southeast Asia has not seen a situation where freight rates have soared by 500% as in China, and it is still difficult to find a container. Its social benefits are immeasurable. Pete Keller, vice president of public service recycling and sustainability based in Phoenix, added that he did not see any challenges related to waste paper transportation.

In fact, the growing demand for US waste paper in Southeast Asia is largely driven by the conversion of Chinese paper companies to Southeast Asia. Before China implemented a waste ban, the destination of US waste paper exports has always been China. The reason is simple. China is the world's factory. Every year, a large number of cartons are sent to the United States with export commodities. This is an irreplaceable chain. At the same time, China's pulp resources are scarce, and the cost of importing waste paper from the United States is extremely low. Recyclers represented by Nine Dragons Zhongnan Company used return empty containers to transport U.S. waste. The cost was once as low as $40 per container.

Due to the accumulation effect of this cycle, it has greatly promoted the expansion of China's manufacturing capacity. Take Nine Dragons as an example. In 1995, Nine Dragons Paper invested in a paper production capacity of 50,000 tons in Dongguan. In just 25 years, Nine Dragons has developed into a paper aircraft carrier with a production capacity of 19 million tons. If Nine Dragons' planned production capacity in the United States, Southeast Asia and Mainland China is included, Nine Dragons Paper will be far behind IP International Paper, the world's largest paper manufacturer.

Prior to 2017, the entire Southeast Asia's paper production capacity was less than 3 million tons. Due to the small market, Nine Dragons, Lee & Man, and Taiyang have been making slow progress after they announced their entry into Southeast Asia. However, Southeast Asia quickly seized the historical opportunity of China's ban on abolition and used tax incentives to attract overseas paper companies, including mainland China, to build factories in Southeast Asia.

According to preliminary estimates, the planned production capacity of paper companies in mainland China alone in Southeast Asia is as high as 15 million tons. In addition, paper giants such as Europe, the United States and Japan have also opened up the Southeast Asian market. In January 2019, Japan's Marubeni Corporation announced that it would build a 350,000-ton/year corrugated cardboard project in Ba Ria-Vung Tau Province, Vietnam, and put it into production in the second half of fiscal year 2020. GS Paperboard & Packaging (GSPP) of Japan's Oji Paper Holdings Co., Ltd. has built a new 1445-ton boxboard corrugating machine in Malaysia, which will be put into operation in 2021, thereby increasing the local production capacity from 300,000 tons per year to more than 750,000 tons.

Recently, Nine Dragons Paper purchased five BlueLine OCC stock preparation lines and two flow systems from Voith to provide them in Malaysia and other overseas factories. The total production capacity of the new system will reach 2.5 million tons per year, and it is planned to be put into operation in 2022 and 2023.

Lee & Man Paper Group is also actively expanding its recycled pulp business in Southeast Asia to replace imported waste paper, enhancing the allocation of raw materials, and ensuring production cost advantages. In the second half of 2019, Lee & Man's affiliates successfully put into production the 400,000-ton waste paper wet pulp project in Myanmar. In the first quarter of 2020, Lee & Man Paper's second waste paper pulp production line with an annual output of 400,000 tons was successfully put into operation in Malaysia. At the same time, Lee & Man will build four containerboard production lines in the Malaysian plant, with a total production capacity of 1.2 million tons. Earlier this year, local media in Cambodia reported that Lee & Man Paper had decided to invest US$500 million to build a large-scale paper mill in Gongbu, a coastal province in Cambodia, which had been approved by the Cambodian Development Council.

On May 14, 2020, Zhejiang Jingxing Paper Co., Ltd. and Voith Paper officially signed a contract for Voith to provide two complete BlueLine waste paper pulp board production lines to its production base in Malaysia. It is estimated that after the installation is completed at the end of 2021, the output of the two pulping lines using AOCC as raw material will reach 2,400 tons/day.

On May 10, 2021, the 400,000-ton pulping equipment and flow system provided by Kadeng for the Golden Crane 4800 Pulp Board Line Project of Shanying Paper in Thailand were successfully put into operation. This project mainly uses imported American waste as high-quality raw materials to build a 400,000t recycled fiber pulp board production line, which will be transported back to China in the form of pulp board as raw materials for the production of cardboard paper.

Sun Laos Company, which was registered in 2010, also quickly seized this historical opportunity, using imported American waste paper and European waste paper as raw materials to build a 400,000 tons of recycled fiber pulp board production line and two high-end 400,000 tons of high-end fiberboard production lines. Packaging paper production line, as well as supporting projects such as thermal power plants, waste paper recycling paper sheds, water supply plant reconstruction, wastewater pretreatment, roads, and storage yards. Among them, the first phase of the project has been put into production.

The natural profit-seeking nature of capital has unintentionally contributed to the prosperity of the paper industry in Southeast Asia, and it also fully reflects the strong influence of China's economy.