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China driving recovered paper market

Packaging grades in China is where the dollars are going, last months 2007 European Paper Recycling Conference in Amsterdam was assured by Bill Moore of US-based consultancy Moore & Associates. In his global review of planned capacity investments by recovered paper type, he revealed that more than 16 million tonnes of packaging grade capacity is scheduled to be added between 2005 and 2009, with China accounting for well over half the total. Over the same period, global newsprint grade capacity is expected to climb around 7 million tonnes (including some 4 million tonnes in China), and woodfree capacity between 1 and 2 million tonnes. Despite mounting bureaucracy in China imposed by bodies such as AQSIQ, Moore was confident that the countrys massive demand for recovered paper would ensure no major disruption to the international supply pipeline. The story still is China - China is driving the market and will do so for some time to come, he insisted. China is too reliant on fibre from offshore locations to let (bureaucracy) get in the way. It was noted in Amsterdam that the Taiwanese government had introduced a ban on exports of recovered paper with effect from August 1 so as to prevent material from being lured to countries such as China because of the latters preparedness to pay higher prices. While acknowledging some potential for similar action to be taken in other countries, he later contended: I believe its an isolated incident. According to Mr Moore, the rate of growth of Chinas purchasing in Europe was increasing while the same countrys buying activity in the USA was slowing. Chinas mill companies were now establishing buying arms in Europe as they did in the USA in the late 1990s, he explained. In a session devoted to recovered paper quality, delegates were told that the way to a world standard is a long way given that different markets imposed differing requirements. Dr Michael Kuehl, managing director of the Kuehl Recycling Group in Germany and president of the European Recovered Paper Association (ERPA), went as far as to argue that, for certain materials, a globally-agreed standard could prove impossible to achieve. The speaker added that a working group comprising representatives from ERPA and from the Confederation of European Paper Industries was planned in order to investigate ways of increasing collections of office paper in Europe. On the theme of quality, Guillermo Valles Albar, materials director with SAICA in Spain, called for investment by mills and suppliers in equipment to measure unusable material content. He suggested a Europe-wide bonus and discount system should be based on the results of these measurements, adding that recovered paper suppliers were generally not worried by the issue of unusable material because they do not suffer the impact of the problem. Nuno Messias, raw material buyer for another Spanish company EuroPac, made the similar point: We should be able to reward and/or penalise based on what we are getting. Messias said the impact of deteriorating recovered paper quality had been softened by the growth of China as an outlet. However, Wade Schuetzeberg of ACN Europe in the Netherlands described the suggestion that China was prepared to accept a lower quality of recovered paper as a myth. And he added: For our mills, its just as important to control quality. Former ERPA President Dr Maarten Kleiweg de Zwaan pointed out that recovered paper prices in Europe were determined to a large extent by the 15% exported elsewhere rather than by the 85% staying within Europes borders. Highlighting key changes seen over his many years in the industry, he noted that mill stocks often fell below one weeks supply these days whereas inventories running to three months had been far from unusual in the past. And he added that smaller mills were finding it more and more difficult to buy at any price. Barring a significant economic downturn, Kleiweg de Zwaan expected prices to remain at their current high levels. Focusing specifically on OCC, Chew anticipated a fairly strong market over the next five years. In contrast, Cees van Berkel of CVB EcoLogistics in the Netherlands predicted that recovered paper prices would fall by the end of 2008 to a level more similar to previous years.

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