Paper360 - May/June 2017 - 46

the bottom line | OCC MARKETS

The Changing World of OCC
ILKKA KUUSISTO

Old corrugated containers (OCC)
are the main fiber raw material for corrugating materials, brown boxes used mainly for
transport packaging. This market is growing
globally, but it is also changing. This article
looks at some of these changes and what they
mean to the paper industry.
For the past two decades, the world has
been dividing into two parts: the rapidly
growing "emerging markets" of mainly Asian
countries; and the stagnant, or slow-growing
"Western countries," which include North
America, Western Europe, and Japan. Now
these Asian emerging markets have become
the leading paper-consuming region, with
half the global paper production and the lion's
share of global investment (Fig. 1). But they
remain short on fiber even more than before.
To feed all these new paper machines, Asia has
been importing increasing volumes of fiber
in all forms-round logs, wood chips, pulp,
and recovered paper. This endless appetite for
fiber has changed the market forever. Now this
market is about to change again.
CHINA THE DYNAMO
China is the key to this development, being
the new economic dynamo of Asia as well as
the largest producer and consumer of paper,
paperboard, and all packaging materials
worldwide. China is also the largest importer
of recovered paper, including OCC.
China's economic growth is slowing; it has
been for a few years, and there has been a lot of

Fig.1

46

speculation about whether it will be a hard or
soft landing. In fact, it is not going to be a landing at all, just a slower overall growth, which is
natural when an economy gets to be as big as
China has become. But slow growth in a big
economy still means a lot more tons every year
than a much higher growth from a small base.
At the same time, the Chinese economy is
changing. What used to be an investmentdriven manufacturing center for the world is
now increasingly becoming a more domestic
oriented consumer society. Industrial development is moving away from the coastal areas,
both to inland provinces (where the growth
will continue, albeit at a slower pace than in
the export boom of the past 15-20 years) and
outside of China to places like Vietnam and
other nearby countries with large populations
and low income levels.
This structural change affects the Chinese
packaging market in many ways. The slower
economic growth will eventually mean less
investment in new paper machines, though
there will continue to be new investments
located in inland provinces. Some of these are
smaller machines, which can be simpler and
cheaper as they target local consumers for local
box manufacturing. In such instances, quality
requirements will be easier to meet. Shorter
transport distances reduce damage so the boxes
don't need to be as strong and there will be less
extreme variations in weather conditions, etc.
However, many big and modern machines
are still in the pipeline, including those for the

inland provinces. This domestic, inland focus
will also mean that more corrugated boxes will
remain in China and, increasingly, in inland
provinces. There they can be collected locally
and used as raw material by the local paper
mills. Less developed countries and regions
tend to have a higher proportion of other uses
for old boxes-whether for re-use, for other
packaging, or even as floor coverings. This
tends to decrease when a nearby mill can create
a market for the material.
In Asia, waste paper is not waste, but a valuable commodity that has a price at the point of
collection. Use of recycled boxes close to their
origin means that the rate of circulation will
be faster: The cycle from re-pulping OCC at
the mill to producing liner and medium, to
making boxes and using them, and eventually
collecting the OCC and bringing it back to the
mill will be significantly faster when the whole
cycle happens within a few-hundred-kilometer
radius. The long cycle of export manufacturing, product exports to the US or Europe (Fig.
2), and eventual collection and return freight
will be avoided. This not only reduces costs,
but the same boxes can be recycled more than
once in a single year, reducing nominal yearly
consumption of OCC.
At the same time, the US may be focusing more on domestic production instead
of importing all its consumer goods-even
more so with the new US president promoting domestic manufacturing and purchasing.
This will lead to higher use of domestic boxes

Fig. 2

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Table of Contents for the Digital Edition of Paper360 - May/June 2017

Setpoint
Over the Wire
Leadership for a Changing Industry
An Ode to Small
The Graying of the Paper Industry
Suppliers Reach Out to Mill Leaders
Making a Difference: 2017 TAPPI/PIMA Awards
RISI’s Asian CEO of the Year
TAPPISAFE Offers Solid Benefits for Mills, Contractors
Reinventing Varkaus
Failure Isn’t Just an Option—It’s Unavoidable
Blower Technology Proves Its Worth
TAPPI Journal Summaries
Global Study: Most People Highly Value Paper and Print
The Changing World of OCC
TAPPI News
ASPI News
Index of Advertisers
Paper360 - May/June 2017 - intro
Paper360 - May/June 2017 - ebelly1
Paper360 - May/June 2017 - ebelly2
Paper360 - May/June 2017 - cover1
Paper360 - May/June 2017 - cover2
Paper360 - May/June 2017 - 3
Paper360 - May/June 2017 - 4
Paper360 - May/June 2017 - 5
Paper360 - May/June 2017 - Setpoint
Paper360 - May/June 2017 - 7
Paper360 - May/June 2017 - Over the Wire
Paper360 - May/June 2017 - 9
Paper360 - May/June 2017 - 10
Paper360 - May/June 2017 - 11
Paper360 - May/June 2017 - An Ode to Small
Paper360 - May/June 2017 - 13
Paper360 - May/June 2017 - 14
Paper360 - May/June 2017 - 15
Paper360 - May/June 2017 - The Graying of the Paper Industry
Paper360 - May/June 2017 - 17
Paper360 - May/June 2017 - Suppliers Reach Out to Mill Leaders
Paper360 - May/June 2017 - 19
Paper360 - May/June 2017 - Making a Difference: 2017 TAPPI/PIMA Awards
Paper360 - May/June 2017 - 21
Paper360 - May/June 2017 - 22
Paper360 - May/June 2017 - 23
Paper360 - May/June 2017 - 24
Paper360 - May/June 2017 - 25
Paper360 - May/June 2017 - 26
Paper360 - May/June 2017 - 27
Paper360 - May/June 2017 - RISI’s Asian CEO of the Year
Paper360 - May/June 2017 - 29
Paper360 - May/June 2017 - 30
Paper360 - May/June 2017 - 31
Paper360 - May/June 2017 - TAPPISAFE Offers Solid Benefits for Mills, Contractors
Paper360 - May/June 2017 - 33
Paper360 - May/June 2017 - Reinventing Varkaus
Paper360 - May/June 2017 - 35
Paper360 - May/June 2017 - Failure Isn’t Just an Option—It’s Unavoidable
Paper360 - May/June 2017 - 37
Paper360 - May/June 2017 - Blower Technology Proves Its Worth
Paper360 - May/June 2017 - 39
Paper360 - May/June 2017 - TAPPI Journal Summaries
Paper360 - May/June 2017 - 41
Paper360 - May/June 2017 - Global Study: Most People Highly Value Paper and Print
Paper360 - May/June 2017 - 43
Paper360 - May/June 2017 - 44
Paper360 - May/June 2017 - 45
Paper360 - May/June 2017 - The Changing World of OCC
Paper360 - May/June 2017 - 47
Paper360 - May/June 2017 - TAPPI News
Paper360 - May/June 2017 - ASPI News
Paper360 - May/June 2017 - Index of Advertisers
Paper360 - May/June 2017 - cover3
Paper360 - May/June 2017 - cover4
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