June 4, 2019
With the enactment of the National Sword Program by the Chinese government, which places limitations on recyclable materials, and the countervailing tariffs with the United States, the movement of old corrugated containers (OCC) and mixed office waste is now about 6–7 million tons per year, compared to a high of nearly 30 million in 2015. China has grown tired of the nonfiber material in our bales, is trying to energize its own internal collection systems, and is known as the major ocean polluter of plastic. Seven of the 10 worst rivers for ocean waste flow through China.
So, as the largest global producer and largest economy, China’s internal containerboard manufacturers scramble to feed their almost 100 percent recovered fiber system, looking to move both pulp and containerboard production to other countries. Nine Dragons, an AICC Associate Member as ND Paper, the largest containerboard producer in China, has made four domestic acquisitions here in the U.S. One mill in Biron, Wis., is scheduled to manufacture low-basis-weight board starting in the fourth quarter of 2019. China is only one of five foreign countries that has ownership of American containerboard manufacturing. We are not isolated from overseas interest in domestic papermaking and corrugated converting. This particular mill will probably sell its output into the open market, since they have no downstream box plants. It is not in an ideal location from which to export back to China.
On a very recent note, Nine Dragons has signed a memorandum of understanding to invest $625 million in a board mill in the Indian state of Maharashtra. This state includes the city of Mumbai and is located on the west central coast, serviced by the Arabian Sea. The site would be close to inland ports and a major north-south highway. Asia Pulp and Paper has also announced a 5 million-metric-ton complex. Both could be fed with American recovered papers, which could shore up prices that have slipped severely over the last 18 months. The virgin pulp for this will come from Indonesia and not from local forests.
We have had Matt Elhardt, senior vice president, business development North America and corporate strategy, Fisher International Inc., speak at our national meetings, so it comes as no surprise that we are invited on occasion to their webinars. Urban Lundberg delivered the one titled “Is India the Next China?” (You can view the presentation at http://bit.ly/fisheri. Fisher desires the recognition for most of the content.) The simple answer is, not likely! However, the paper packaging grades to feed China’s domestic and export needs must come from somewhere. India has the world’s second-largest economy now, between China and the U.S., and its population is forecast to surpass China’s by 2024. India’s per capita consumption of paper at 13 kilograms per year is a far cry from China’s 74 and the United States’ 229. While its GDP per capita is growing, its paper capacity is not. Time for foreign investment? India still maintains a 65 percent rural population, while the U.S. is at 18 percent.
India has not imposed stricter environmental requirements on the many old, small, inefficient producers that continue to operate. Their ownership of paper mills is absolutely opposite of the U.S. situation: 80 percent of the mills are independently owned and are relatively small—most under 150,000 metric tons a year. More than half are more than 30 years old, while half of China’s were built in the last 10 years. They do not have pine plantations as we do. Domestic fiber produces only about half their needs. Other nonsoftwood fibers are used, such as sugar cane, straw, and bamboo, including eucalyptus as hardwood.
India certainly has benefited from lower-cost OCC and mixed papers, as China has pushed supply up and demand down. This imported raw material stays close to the coast, where freshwater supplies and infrastructure are better than in the interior. The only U.S. companies that have investments there—and small ones—are WestRock and International Paper. The current state of the industry is highly fragmented, with small mills and outdated technology.
So, India will need to become the new China, but without the central government top-down push for industrial production. It has to have a national plan to attract foreign investment and draw recovered papers from the U.S. so that we do not have to continue landfilling or using waste-to-energy options. Stay tuned! Have questions? Ask at www.aiccexperts.org.
Ralph Young is the principal of Alternative Paper Solutions and is AICC’s technical advisor. Contact Ralph directly about technical that impact our industry at askralph@aiccbox.org.
