Wastepaper is a bedrock of U.S. exports, accounting for more than 20 of the top 100 U.S. exporters of containerized cargo and more than 15 percent of total export containers. That’s unlikely to change soon, but two emerging trends could slow future growth.
Growth in U.S. paper demand is slackening as print publications cut back and products require less packaging. That will limit U.S. supply while China, by far the top U.S. wastepaper customer, is supplying more of its needs domestically.
“I don’t think the impact will be significant for the next five to seven years … but longer term, China’s imports are not going to increase as fast as they have been increasing,” said Rod Young, chief economic adviser at RISI, a Journal of Commerce sister company that covers the forest products industry.
U.S. containerized exports of wastepaper to China rose 10.5 percent last year to 1.1 million 20-foot-equivalent units, according to data from PIERS, another JOC sister company. That was 10 times the volume shipped to India, the No. 2 U.S. customer. Total exports of paperboard and other wastepaper increased 6.2 percent to 1.8 million TEUs.
Wastepaper shipments to China this year are feeling the impact of China’s “Green Fence” program. Frustrated with extraneous material in wastepaper shipments, Chinese officials are cracking down with import inspections and rejection of loads that don’t meet quality standards.
Delays in cargo clearance, however, are expected to be only a short-term blip. Wastepaper exports are rising globally and are expected to pick up later this year and into 2014, Young said.
Although growth in U.S. paper consumption is slowing, there’s room to wring additional supply through increased recycling. “Our recovery rate still can go up compared to where it is,” Young said. “There’s still potential for pulling more out of the waste steam.”
Wastepaper is the perennial leader among U.S. containerized exports of forest products, but wood pulp, linerboard and lumber also are important commodities.
Containerized shipments of pulp rose 9.4 percent last year to 426,250 TEUs. China was the largest U.S. customer with 133,618 TEUs, but overall market share was widely distributed.
Pulp shipments are rising for imports and exports. Efficient U.S. mills are exporting more softwood pulp used for products as diverse as diapers and cigarette filters. But the U.S. is importing more hardwood pulp, which is used primarily for tissue and printing and writing paper.
U.S. mills are the world’s lowest-cost producers of linerboard, much of which goes to Latin America for corrugated boxes used to ship bananas and other fruit. “Any time the U.S. wants to export linerboard, it can,” Young said.
But after a wave of industry consolidation, U.S. producers have been keeping a rein on capacity as they work to boost profitability. The top four containerboard producers now account for 70 percent of North American capacity, compared with 47 percent in 2000. With the U.S. economy strengthening gradually, producers are cutting back exports as they divert production to fulfill domestic orders that tend to provide higher margins.
U.S. lumber exports, primarily to Japan and China, also are taking a backseat to domestic demand. Revival of the U.S. housing industry has spurred a 60 percent jump in U.S. lumber prices from last year’s weak levels. The sharp increase makes U.S. lumber shipments less competitive internationally, and encourages producers to seek higher margins available from domestic customers.
In contrast to pulp and linerboard, the U.S. isn’t the lowest-cost lumber producer, Young said. U.S. sawmills “have been forced into the export market by the severe downturn in the domestic market, but now that domestic demand is picking up, they’re probably going to pull back.”
RISI expects U.S. lumber exports to be flat at best this year, while imports rise. Most U.S. lumber imports arrive by rail from Canada, but some increase in containerized lumber imports also is likely, Young said.