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2020 Waste Paper Import Quota Tightens

SCI99

2019-12-27

2020 Waste Paper Import Quota Tightens

On December 23, 2019, the China Solid Waste and Chemicals Management Center released the 1st batch waste paper import quota for 2020, and the total waste paper import volume of 2,783,470 mt by 39 paper producers including Nine Dragons Paper, Lee & Man Paper, Shanying Group and Shandong Huatai Paper was authorized. In contrast to the 1st batch quota in 2019 (5,035,180 mt), this year’s quota has decreased by 44.72%, and the number of authorized producers also decreased by 12 (from 51 in 2019). This result seemingly verifies the market anticipation that the waste paper import quota will be halved in 2020 on the basis of that in 2019. During our communication with market participants, those who held a more optimistic sentiment reckoned this year’s quota would be around 6 to 7 million mt in total, but others held that the quota might be just 5 million.

Nine Dragons Paper, Shanying Group and Lee & Man Paper are still on the top three in terms of quota acquired, and they account for 24%, 13% and 12% respectively. In 2019, the proportions of those three companies were 31%, 13% and 13%. The proportion of None Dragons Paper has dropped, while those of the other two companies remained the same.

Besides, newsprint producers such as Shandong Huatai Paper, Guandong Huatai Paper, Guandong Guangzhou Paper Group and Shanying Group also acquired authorizations. Huatai Paper (Shandong and Guangdong) and Shanying Group only acquired authorizations to import ONP (HS Code 47073000).

In general, the 1st batch import quota has set the tone for the waste paper import authorization in 2020. The quota will continue to decrease, as China’s goal of achieving zero solid waste import by the end of 2020 remains undeterred.

The shrinking waste paper import will pose major challenges on the feedstock supply in China’s paper industry from two aspects. Frist, the waste paper supply shortage will continue to expand. Second, the supply of fine-quality long fibers will be further tightened.

In order to offset the impacts, the paper industry in China has placed hope on increasing recycled pulp import. In 2019 (Jan-Oct), the recycled pulp import volume was 670kt, which has increased by 120% from the total import volume in 2018. However, even though the recycled pulp import volume had increased sharply, it only accounted for a tiny fraction in the feedstock structure.

Currently, paper mills are still facing difficulties in importing recycled pulp. During the communication with paper producers, SCI notices that most paper producers are still cautious in recycled pulp import as the fine-quality pulp is too expensive and not economic enough, while the quality of cheap resources is too low to meet their requirements. Besides, the national recycled pulp import standard is yet to be released in China, and the recycled pulp capacity overseas is limited. In addition, it is heard that China is to impose tariff on recycled pulp import in 2020, which further dampens paper producers’ enthusiasm.

Under restricted feedstock supply, SCI holds that the packaging paper production layout may be changed. Producers may be forced to downgrade and produce low-end packaging paper, while the high-end packaging paper supply may rely more on import. Thus, China’s packaging paper producers may face more pressure from peer competition.

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