BIR comments about 2017 in Paper recovery business (by Ranjit Baxi, J&H Sales International Ltd, UK)

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The Chinese economy continued its upward growth in the final quarter of 2017. The rate of 6.9% happened to be the highest in two years despite an ever-increasing debt burden which, in fact, has quadrupled over the last nine years. Euro-zone economies also performed well in 2017, with the UK doing rather well as a result of the weaker pound following the Brexit vote.
Export volumes to China have been hugely affected following the country’s “Border Gate Sword” controls made in July on scrap imports and the subsequent WTO notification to ban imports of mixed paper, as well as imposing tighter quality controls on all imports of fibre. Additionally, new licences were not being issued, forcing mills to depend more on domestic fibre supplies with prices increasing very steeply.
During December, the Chinese government announced that it would accept only recyclable fibres with a maximum contamination of 0.5%, to be enforced on all arrivals from March 1 2018. Such low contamination levels are difficult to achieve ; the market is now looking at how these contamination levels will be applied and checked, and at what will happen to the rejections.
Accordingly, fibre exports to China weakened significantly in the fourth quarter of 2017, with prices for mixed paper decreasing rapidly. Meanwhile, demand for better grades of OCC - such as NCC, Fruit Boxes, 95/5 and 100% OCC - continued to be shipped but at lower prices ; having started the fourth quarter at US$ 190+ per tonne, OCC ended the year at US$ 170+. Demand for mixed papers gradually decreased during the period, with prices falling from US$ 160+ per tonne to just over US$ 100+ amid very limited orders. Post 2017, this grade is expected to suffer a big drop in price.
On increased demand, export volumes to other Asian markets - namely India, Indonesia and Vietnam - continued to grow during the fourth quarter.
Exporters are looking forward to a new direction from the market after the Chinese New Year in February. Meanwhile, economists are watching very closely how China will be balancing its economy against the three critical battle lines it will be facing in 2018, namely debt, poverty and pollution.

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