Turning a New Page: The Impact of China’s RCP Policies on Global Paper Packaging

From 2013 onwards, China’s government has been implementing its long-term strategy to strengthen its waste quality policies. The potential effect of these policies on the global paper packaging supply chain is high. How China will move forward with its policies is however somewhat uncertain. We evaluate two potential scenarios, depending on the policy strictness: freezing today’s new policy or reverting to the initially planned stricter policy.

“Non-exporters of recovered paper (RCP), like Brazil, are hardly affected by China’s recent paper packaging policy changes,” says Natasha Valeeva, RaboResearch Analyst - F&A Supply Chains. “The US and Europe, on the other hand, do suffer, being the largest RCP exporters to China.” These countries are currently facing a large domestic RCP oversupply and significant price declines for old corrugated containers (OCC) and mixed paper. At the same time, margins of producers of containerboard, corrugated paper and boxes are positively affected as the price of these products remain high, driven by healthy demand.

Dealing with the RCP oversupply, however, requires new thinking from the EU and the US. Increasing RCP exports to new markets, such as India and South-East Asia, present an opportunity for the US and Europe, albeit a limited one due to growing processing capacity constraints in that region. In the longer term, substantial investment in innovative ‘quality’ recycling infrastructure is a necessary step both in the US and the EU.

In the longer term, the increased exports of RCP diverted into India and South-East Asia might result in growth in containerboard imports from the region into China. Due to the growing level of capacity constraints in this region, this might also be driving international companies (including Chinese ones) to set up new mills in the region.