RaboResearch: China’s recovered paper policies shift global trade dynamics 

The global paper packaging industry, heavily reliant on recovered paper (RCP), is undergoing a transformation as China’s policies continue to influence global trade flows. According to the newly released “Recovered Paper and Pulp World Map” by Rabobank’s RaboResearch, China’s RCP policies have redirected exports once bound for Chinese markets to Southeast Asia and India.

China accounted for around half of global RCP exports before 2013. However, a series of national import restrictions — culminating in a full import ban in 2021 — led to a decline in global RCP trade, which has fallen by nearly 5% annually from 2016 to 2023. For major RCP exporters like the US and EU, China’s import restrictions have resulted in new trade strategies, looking toward Mexico and Turkey. 

RaboResearch senior analyst Natasha Valeeva and analyst Xinnan Li sit down with Packaging Insights to discuss China’s trade shifts and the resulting global trade patterns. We also investigate how the industry’s increasing sustainability demands are influencing the demand for logically sourced RCP.

“We believe China has created a diversified fiber supply that sufficiently supports its current needs, though it is still largely dependent on RCP from other regions through imports of recycled pulp and containerboard,” says Valeeva.

“China continues to optimize its local RCP quality and diversify its fiber import origin countries, also for imported virgin fiber, which is partly used to replace recovered fiber. This strategy helps maintain a stable fiber supply amid growing geopolitical, trade, and supply chain uncertainties.”

Shifting trade dynamics

Southeast Asia has become a key intermediary hub, where RCP is processed into recycled pulp or containerboard before it is shipped to China. As a result, China remains the largest recipient of RCP-related imports, albeit indirectly, relying on processed materials from major exporters, according to RaboResearch.

“The main RCP exporters — the US and Europe — have searched for extra opportunities either in existing destinations, like Mexico for the US, or new destinations, like Turkey for the UK and the EU. For instance, Turkey requires more RCP to support its new paperboard capacity projects. Additionally, both regions are looking for further opportunities to utilize excess RCP locally,” highlight the analysts.

In a previous interview with RaboResearch, Li told us that the tariffs imposed by the current US administration on Chinese paper products have little direct effect on the national economy. The analyst now reinforces her earlier remarks, stating that these tariffs are not expected to impact the stability of RCP trade due to limited RCP trade between the US and China.

Companies are increasingly transitioning to paper-based packaging, a trend referred to as “paperization”.“However, in response to tariffs on other goods, China might impose high tariffs on US paperboard imports, similar to what happened during Trump’s last administration. This might further stimulate the substitution of US virgin containerboard exports with exports from other countries, like Russia. In the longer run, a potential decrease in the export of goods, due to tariffs, might reduce the demand for boxes and, consequently, for RCP in China.”

Local RCP demand increase expected

Meanwhile, European businesses face additional trading hurdles due to the EU’s new waste shipment regulation, effective in May 2024. The regulation mandates that non-OECD countries receive approval to import RCP by 2027, potentially increasing compliance costs for both EU exporters as well as Southeast Asian and Indian importers.

“From a sustainability perspective, producing recycled pulp separately and then transporting it is less sustainable than using old corrugated containers (OCC) directly at the paper mill. This is because recycled pulp requires an additional step of drying and then rewetting, which increases the environmental impact and cost,” says Valeeva.

“The increasing demand for sustainable packaging and regulations will spur the supply chain to consume more RCP locally while improving the recyclability of more challenging paper packaging grades. So, the [EU’s] Packaging and Packaging Waste Regulation (PPWR) sets recycling targets for paper packaging at an ambitious 85% by 2030, with the aim to boost recycling beyond traditionally highly recyclable grades like OCC.”

To meet regulatory targets, European companies are increasingly switching from plastic to paper packaging. Moreover, Valeeva expects the increasing use of fiber and recycled fiber in packaging to continue.

“In response to these developments, packaging companies are innovating and introducing new fiber-based materials to the market. However, these new materials don’t always fit well with existing recycling systems,” she continues.

“The necessity to overcome challenges like recycling contamination will continue to spur players across the supply chain to look for innovations and to invest in recycling infrastructure capable of handling different types of paper packaging.”Supply chain collaboration is key to improving paper packaging’s recycling rates, according to RaboResearch.

AI and supply chains

Li shares that in the US market, which has traditionally relied on virgin-based capacity, the growth of recycled containerboard capacity is notable. 

“Over the past decade, recycled containerboard capacity in the US has grown at an annual rate of 4%, compared to just 0.1% for virgin-based capacity. This growth requires more RCP domestically. Additionally, more recycled fiber is being incorporated into virgin containerboard, leading to lower costs and improved sustainability,” she explains.

“These trends are expected to continue, supported by the increasing presence of international companies like Australia’s Pratt Industries and Ireland’s Smurfit Kappa, which has merged with WestRock. These companies bring advanced recycling expertise and recycled-based packaging solutions, likely accelerating these developments in the US. However, growing domestic demand will limit the availability of high-quality US OCC for export in the future.”

In an earlier interview, Rabobank told Packaging Insights that the US and Latin America could benefit from Smurfit Kappa’s expertise in the EU, where environmental sustainability regulations are more stringent.

The report suggests that to increase RCP’s role in sustainable packaging, the industry should improve the material’s quality and enhance the recyclability of challenging paper packaging grades.

“The practical recyclability of challenging paper packaging types will be key to paper packaging’s competitive edge and its circularity. Currently, multiple initiatives are addressing these issues, but faster progress is needed,” says Valeeva.

“Innovations in paper packaging materials, packaging design for recycling, and recycling infrastructure — sometimes requiring separate streams — are essential. Emerging generative AI technologies are increasingly aiding these innovations, especially in RCP collection and sorting. Packaging supply chains should speed up their efforts to fully benefit from RCP’s circularity for paper packaging products.”