Opportunity Awaits on the Other Side of China’s Green Fence

There has been much speculation regarding the long-term impact of China’s Green Fence – an operation launched by the Chinese government to improve the quality of imported recyclables. What is certain is the demand/supply dynamic that once governed the global flow of materials has officially shifted and its impact has reverberated throughout the recycling value chain.

According to a recent report by Moore & Associates, commissioned by the Carton Council, an aggressive pursuit of manufacturing capacity in Asia coupled with lower labor costs weakened the demand for certain recovered materials in North America and increased their export to off-shore markets over the past decade, China in particular. Over a ten year span, Canadian paper and paperboard production was nearly cut in half dropping from approximately 20 million tonnes in 2002 to 11 million tonnes in 2012. Over the same period, Chinese production rose by 145%. With limited virgin resources, China was hungry for recovered materials to fuel their growing production capacity and North American as well as European exporters obliged. For instance, in 2012 the US exported 41% of its recovered paper, 71% of which was exported to China. With buyers so dependent on China, it is little wonder the recycling industry was shaken when the Green Fence was raised.

In spite of industry efforts to direct the flow of recovered cartons into its own dedicated grade (PSI Grade 52), some aseptic and gabletop cartons that Tetra Pak produces end up in mixed paper bales. As is the case for other material grades, scrutiny imposed by Green Fence requirements has resulted in recovered paper and paperboard being sent back to North America, signaling to all affected that further action is needed to ensure recovery efforts are not in vain. Green Fence has been a wake-up call. As China’s consumer culture comes of age and its collection infrastructure is expanded to manage its byproducts, their demand for North American recyclables is likely to diminish. Simply put, Chinese buyers can afford to be picky and seek out higher quality material.

So now what? For us, the Green Fence has reaffirmed our commitment to invest in processing infrastructure in North America to build a diversified portfolio of end markets minimizing risks of disruption in the future. Along with other members of the Carton Council, we have put a lot of effort into increasing access to carton recycling and encouraging people to use it. Continuity is crucial to maintaining consumer confidence in that system. We have also been reaching out to materials recovery facility operators and municipal recycling coordinators to promote proper sorting of cartons to maximize the value of the material.