Although U.S. paper exports have declined over the past year, recyclers are still sending more of their waste paper overseas because of the slow growth of the paper industry in Europe. The Pulp Industry chapter of the Washington-based Recycled Materials Association has been watching the downward trend in U.S. wastepaper exports, which affected the market in 2023 and continued throughout the year.
Although China is once again slightly open to imports of waste paper that meet certain criteria, its withdrawal and the adjustment of waste paper acceptance standards by domestic factories in the United States have led to changes in import and export patterns, at least in the short term. In the European market, the decline in Chinese demand did have an impact, but in the past two years, this trend has been offset by various geopolitical factors and changes in the recycling market environment. These changes have led to a surplus of waste paper on the continent, with more now going to overseas markets.
Careful recycling and end-market contraction
In 2023, the European paper and paperboard industry reduced production, resulting in the use of less recycled paper than in 2022. This change has led to a 33% increase in European recycled paper exports in 2023 compared to the previous year. This is one of the key findings noted by the European Paper Industry Federation in Brussels in its 2023 report.
The European Paper Industry Federation's report details the overall performance of the European paper and recycling industry in 2023, providing information on European and global demand and supply conditions. The data shows that the export volume of waste paper in the CEPI region in 2023 exceeded 9.4 million tons, while in 2022 the figure was less than 7.1 million tons, an increase of 33 percent in exports.
On the supply side, the European Paper Industry Federation reports that the recycling rate of waste paper and paperboard in Europe reached 79.3% in 2023, of which 82% of recycled paper is consumed within Europe and the remaining 18% is exported outside the European Paper Industry Federation region. In comparison, the export rate of waste paper in Europe in 2022 is 14%.
Several European countries lead the world in paper recycling, partly because landfills and other disposal methods are too expensive, and partly because officials are struggling to meet EU packaging recycling targets.
The European Paper Industry Federation itself organizes a number of recycling programs aimed at ensuring that its member companies have access to sufficient recycled paper raw materials. These include the 4evergreen initiative, which aims to increase the recycling rate of paper and paperboard in Europe to 90%.
"Our recycling activities have been growing rapidly since the 1990s," Jorie Ringemann, director general of the European Paper Industry Federation, said at a press conference in July. The purpose of the press conference is to detail the contents of the 2023 report. Ringelmann also noted that the European Paper Industry Federation region set a new European record for recycling rates in 2023.
Active recycling activities led the European Paper Industry Federation region to export 9.4 million tons of recycled paper in 2023. The European Paper Industry Federation region includes more than 850 plants, and while its scope is not exactly equivalent to that of the European Union, most EU countries, as well as Norway and the United Kingdom, are within its coverage.
More than 88% of the European Paper Industry Federation region's recycled paper is exported to Asia, and most of the rest is exported to non-European Paper Industry Federation countries. Among them, Turkey received about half of the export share of non-European Paper Industry Federation European countries, accounting for 11% of total exports. Another reason for Europe's waste paper glut last year was that mills were operating below design capacity, which the European Paper Industry Federation attributed to a combination of factors in its July briefing.
Close to home market
According to the Washington-based Recycled Materials Association, the growth trend of global waste paper trade in Europe is the opposite of that in the United States. Exports of recycled paper in the United States fell by 18 percent last year and continue to decline in early 2024. According to a report released by the Washington Association for Recycled Materials in March this year, compared with 2022, US waste paper exports continued to decline throughout 2023, and this trend continued to this year.
In the first quarter of 2024, U.S. recycled paper exports fell 19 percent to 2.98 million tons, while the total value of those exports also fell nearly 17 percent to $600 million.
The downward trend in monthly data is even more pronounced. U.S. waste paper exports decreased by about 23% in March 2024 compared to March 2023; However, ReMA noted that despite this, the volume of exports in March 2024 picked up compared to February, increasing by 5%.
Similar to Europe, the production of paper in the United States in 2023 also suffered setbacks. According to a report by the Washington-based American Forest and Paper Association, total U.S. paper and paperboard production in 2023 decreased by 7.2% from the previous year, with declines in all categories except household paper.
However, unlike Europe, the US recyclables collection system is more resilient and market-oriented, which partly explains the failure of US waste paper exports to grow.
In addition, investments in paper pulping capacity in the United States have increased, increasing the recycling content of domestically produced paper and board. According to the American Forest and Paper Association, several large plants will come on line in 2023, adding A total of 2.1 million tons of 100% recycled paper production capacity. These include the Domtar conversion plant in Tennessee, the Cascades Box Board Mill in Virginia and the Pratt Industries paper mill in Kentucky.
Another American Forest and Paper Association report noted that in 2023, the United States also permanently shut down more than 1.7 million tons of capacity, mainly from native wood fiber.
In terms of export markets, in the first quarter of 2024, Thailand was the largest importer of US waste paper, importing nearly 550,000 tons. However, that figure was down nearly 27 percent from 750,000 tonnes in the first quarter of 2023.
India was the second largest importer of US waste paper in the first quarter of this year, importing nearly 515,000 tonnes, but that was down almost 25% from the first quarter of 2023. In addition, the other major import destinations and their imports for the first quarter of 2024 are: Mexico (461,000 tons), Malaysia (429,000 tons), Vietnam (270,000 tons), Canada (240,000 tons), South Korea (133,000 tons), China (121,000 tons), Taiwan (97,000 tons) and Indonesia (57,000 tons).
Challenges in the energy industry
At a briefing in July, Jorie Lingemann, Director General of the European Paper Industry Federation, and Bernard Lombardi, Director of Trade and Industrial Policy, described two major dilemmas facing the European paper industry in 2023: high operating costs and excess inventory.
In 2023, the production of all types of paper and paperboard in the European Paper Industry Federation region fell, of which the production of wrapping paper fell by 9.5%, household paper fell by 4%, and printing paper fell by 24.2%.
The roots of this dilemma go back to before the coronavirus pandemic. After the outbreak, supply chains were disrupted and the subsequent Russia-Ukraine war led to a sharp reduction in supplies from Russia, once an important energy supplier, causing energy prices to soar for European paper mills in 2022. "Energy prices are still nearly three times higher than before the pandemic, severely undermining the competitiveness of European industry," the European Paper Industry Federation said.
In addition to energy prices, another factor affecting the industry is the long-term accumulation of excess inventory issues. While these inventories were gradually depleted last year, their presence still suppressed orders and production of paper and cardboard, leaving the industry at a much lower level than in previous years. In a briefing in February, the European Paper Industry Federation specifically mentioned that German carton manufacturers in 2022 due to the supply chain disruption caused by the epidemic and concerns about supply chain sustainability, which made the problem worse. While the process of destocking continued through most of 2023, the problem was largely alleviated as of early this year.
While the European paper industry is facing difficulties, China's demand for pulp in the region has become a bright spot. As a result of environmental restrictions, Chinese factories have reduced imports of old corrugated boxes and other waste paper and increased demand for pulp, a commodity exported to Europe. In 2023, commodity pulp exports in the European Paper Industry Federation region increased by 47.8%, mainly driven by the Chinese market. The European Paper Industry Federation defines commercial pulp as pulp that does not contain recycled materials, and its main producers are Sweden and Finland, which are rich in forest resources. The European Paper Industry Federation is optimistic about Europe's ability to use its own recycled paper production capacity, and believes that factory productivity will increase by 2024.
The push for local action
Ringelmann and Lombardi said in a press release that while energy costs in Europe remain higher than in North America and other regions, energy prices have gradually eased since 2022, which provides a positive signal for the start of 2024. European paper and board producers increased production by 6.6% in the first quarter of this year compared with the same period last year as inventories dwindled.
Despite these positive signs, the European Paper Industry Federation, along with other European industry groups, is actively pushing for a so-called "industrial deal" to complement the EU's Green Deal. In February this year, 73 business leaders from 17 industries jointly presented the Antwerp Declaration of the European Industrial Agreement to European Commission President Ursula von der Leyen and the Belgian Prime Minister. More than 1,000 organisations and businesses across 25 sectors have now backed the declaration, calling for a European industrial pact to complement the EU's Green Deal and safeguard jobs in Europe.
"At a time when European industry is facing its worst economic downturn in a decade, significant investment is needed to drive Europe's transition to climate neutrality." Action is urgently needed to restore business confidence to invest in Europe."
"We expect the legislation to be more supportive of investment," Ringelman said. Ideally, legislation should simplify regulatory requirements and speed up the investment cycle to accommodate a faster pace of legislation. We understand that Europe has a penchant for red tape, but nobody needs that much."
