Page 70 from: May 2016
70 May 2016
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ping lines will be limited because ports are not
ready yet.
Baxi also touched on the ‘elephant in the room’
– the impending ‘Brexit’ referendum to decide
whether the UK will leave the EU. ‘I can’t imag-
ine what a nightmare it will be to arrange logis-
tics to take cargo from the UK to Düsseldorf,’
he said. ‘Shipping will be horrible. I really hope
it won’t come to this.’
Economic trends
‘As we all know, the global economy has not
yet returned to its pre-crisis health,’ noted Per-
Ove Nordström of research firm McKinsey &
Company. He presented a global ‘heat map’ that
compared fluctuations in economic drivers for
August last year to 2007 levels. It showed that
the USA has seen ‘some improvements’ to its
business and industry landscape while the situ-
ation has worsened in Europe, India and Russia
while showing ‘no significant change’ in China.
Trade has improved most notably in India,
alongside some gains in Europe and Russia, lit-
tle change in the USA and China, and a decline
in Brazil.
Nordström estimates that world GDP growth for
next year will be 3.5%, up a little from the 3.2%
forecast for 2016. The economy to which all eyes
are turned – China – is expected to experience
GDP growth of around 6.2% in 2017 compared
to the 6.5% forecast for the current year.
‘Too good to be true?’
China still counts as the predominant consum-
er of commodities, accounting for 31% of pulp
demand and no less than 69% of recovered fibre
demand in 2014. ‘In this market, China’s demand
has more than doubled over the last 10 years,’
Nordström pointed out. ‘So naturally, any eco-
nomic wobbles will be felt worldwide.’
The ‘new normal’ in China has led to disagree-
ments among market observers about the coun-
try’s growth prospects. The World
Bank anticipates a GDP upturn of
6.9% for this year while Citi has
ventured a figure as low as 5.1%.
‘The question in all of this is do
we believe these numbers?’ Nor-
dström asked. ‘Is it too good to be
true? Will long-term growth really
be this strong?’
While exact figures are open to
debate, the certainty is that slower Chinese
growth will have a ‘major impact’ on printing
and writing markets.
Global paper and board production has been
increasingly reliant on recycled fibre, account-
ing for 54% of the 350 million tonnes produced
in 2015 compared to 44% back in the year 2000.
‘Capacity growth is concentrated in China and
the rest of Asia, mostly in packaging,’ Nord-
ström added.
‘Recycling success story’
China’s current overcapacity in printing and
writing grades stands at 1.4 million tonnes, with
announced new capacity potentially adding a
further 1.24 million tonnes. At this rate, China’s
potential overcapacity could be 3.46 million
tonnes by the year 2020. Given this scenario,
it is believed that China’s paper exports could
increase from today’s 3.7% of global demand to
as much as 6.4%.
China’s impact on the containerboard market
is ‘relatively smaller’, according to Nordström.
Current overcapacity is at 4.775 million tonnes,
which could rise to 4.955 million tonnes by
2020. This means exports could climb from
the current 1.5% of global demand to 2.8% in
four years from now. Also, Asia has announced
4.93 million tonnes of new capacity for recycled
fibre-based containerboard for the period from
2014 to 2019. In North America and Europe, new
capacity scheduled to be introduced over those
same years is estimated at, respectively,
2.5 million and 2.1 million tonnes, del-
egates were told.
Nordström remarked that global con-
tainerboard production is relying
increasingly on recycled fibre. ‘This is a
recycling success story,’ he stated. And
yet, the sector will need to incorporate
at least a third of virgin paper by 2029 in
order to sustain production.
OCC recovery ‘getting stretched’
‘Because many developed countries have
managed to improve paper recovery
rates every year, they are getting closer to
their likely individual maximums,’ Nordström
went on to say. The global recycling rate is 57%,
while Japan has achieved 75%, followed by the
USA on 70%, Europe on 69% and China on
60%.
In particular, OCC recovery is at 79% and is
‘getting stretched’, he suggested, before asking:
‘So will recovery of graphic papers in emerging
markets offset the decline in mature markets?
Or more importantly, we must answer the ques-
tion as to what will happen to recycled fibre
yields in the future as we are moving towards
improving technology on the one hand and
declining quality on the other.’
OCC yields in the USA have fallen from 93%
in the early 1990s to 89% today. ‘And European
OCC yields are now some five (percentage
points) lower than 10 years ago,’ Nordström
added. McKinsey has calculated that recycled
fibre demand growth for the period from 2014
to 2024 will amount to 64.2 million tonnes.
Should this rise more aggressively to 75.7 mil-
lion tonnes, the ultimate yield loss could be
three percentage points.
Think like Darwin
Quality is increasingly commanding ‘centre
stage’, Baxi acknowledged. Whether in Europe,
India or elsewhere, he said there is no market
for co-mingled or contaminated fibre. ‘Qual-
ity and quality alone is the key to success,’ Baxi
declared. But then again, quality without price
is not a ‘winning formula’.
To illustrate how to keep ahead in such turbu-
lent times, Baxi name-checked a true pioneer of
his time. ‘Think like Darwin,’ he said. ‘Business
is just like Nature’s evolution – it is survival of
the fittest. So look left, look right – to plastics or
aluminium. Diversify,’ he rallied the audience.
Baxi dubbed mergers and acquisitions as ‘the
best survival strategy for Europeans today’. And
he added: ‘We have had a long period of low
profitability, fluctuating demand and increasing
costs. Mergers of two or more companies is the
wise thing to do. Don’t forget that acquisition
prices are now at an all-time low. Don’t wait
around; take a chance, take action.’
See you at IFAT
hall b3 stand
115/214
One stop for scrap recycling
+44 1709 724 300
[email protected]
www.danieli-centro-recycling.com
Annual recovered fibre
consumption in India amounts
to 7.9 million tonnes.
