Chinese National Sword – Impact on Recovered Paper Imports

The tighter Chinese customs rules, as well as the restricted availability of import permits, haveweighed heavily on the recovered paper (PfR) import market in China during the two first months of2018. The PfR imports plunged again tremendously during January (-44,6% / Jan 17) and inFebruary (-47,8% / Feb 17). The main reason being the complete stop of Mixed Grades imports inFebruary after already a sharp drop in January.It is now more than evident that the structure of the PfR imports, as well as the Chinese PfR market, are completely disrupted with these new constraints and that for a long time as the flows usually directed to China are now reoriented to other countries or purely cancelled (e.g. some exports of commingles from Europe).

Despite this overall decline in volume, the average value of the imports (per ton) remained on a highlevel in January and February due to the fact that the cheapest grades imports disappearedcompletely. At the end of February, the average imported price (all grades) was higher by +35$compared to the Feb. 17 and by +29$ compared to December 2017 average price. As already mentioned, this drop in volume during the first two months of 2018 resulted principally from the disappearance of Mixed Grades imports, coming from a monthly average of 450 Ktons in 2017 to zero in February 2018.

But, the higher constraint on the impurities level for the other PfR grades had also an influence onthe Chinese imports of C & K, which declined by a third during the first two months of 2018. Thedrop is more or less the same for High Grades imports (-39.7% end of Feb. 18), while the imports ofDeinking Grades plunged by -43% during the first two months. Geographically, all the importsources were touched in a similar way, whatever grade is concerned. Only two peculiarities arenoted: the first concerns the deliveries of Deinking Grades from Europe, which have increased (+41%) in the first two months, and the second concerns the Japanese deliveries of the same grade,up by +73% at the end of February. However, it could be that these growths correspond to some remaining deliveries of the previous year.

At the end of February, it appeared that the calculated average value of imports for 2018 (CIF) wasquite high compared to the beginning of 2017. After a drop of the imported prices during the lastquarter of 2017, they increased again in January and February for C & K grades (+14$ since Dec.17). Compared to one year ago, the C & K price level at the end of February 2018 was +34$ higher, but, due to the evolution of the exchange rate € / $, the price level at the end of February 2018 was equal to the February 2017 value.

The average price of the High Grades also faced a similar development, with an increase of +8$ atthe end of February 2018 compared to December 2017. Compared to the situation a year ago, theprice level of Deinking Grades is higher in Dollars (+7$) but lower in Euros (-28 €). As for the importprices of the Deinking Grades, they showed an increase (nearly +25$ compared to December 2017)during the two months under report. Their price level was still +20$ above the level one year ago,but in Euros they were below by nearly -10€. Due to the ban of Mixed Grades, the price level of imports reached 0 in February, this level having a huge effect on the European and US domestic markets.