China Resource Recycling Association. Tang Yanju Secretary General of Recovered Paper Committee China Resource Recycling Association

Transcription

1 Tang Yanju Secretary General of Recovered Paper Committee China Resource Recycling Association

2 CONTENTS I. Size of China s recovered paper market 2013 II. Policies concerning recovered paper industry III. Changes in the structure of the recycling market IV. Challenges in China s recovered paper market V. How should recycling companies survive themselves?

3 I. The size of China s recovered paper market in 2013

4 The size of China s recovered paper market in 2013 The volume of recovered paper tripled in the past decade. The recycling of recovered paper pulp has propped up the growth in the output of paper products in China. The volume of recovered paper was 41.89mn tons The volume of recovered paper was 14.7mn tons

5 The size of China s recovered paper market in 2013 The recovered paper in China is supplied both at home and abroad, with the domestic and overseas suppliers occupying equivalent market share. In 2013, China consumed 29.73mn tons imported recovered paper, representing 40% of the total consumption in China. US, EU and Japan are still the major importers of recovered paper from China. In 2013, China consumed 44.51mn tons homegrown covered paper, accounting for 60% of the total consumption in China.

6 The size of China s recovered paper market in 2013 The overall recovery rate has jumped from 40% in 2006 to around 70% at present; the recovery rates of scrap, nonferrous metals, electrical appliances and electronic products (except mobile phones), plastic bottles and plastic buckets go as high as over 95%, while the recovery rate of paper reaches 75%. The volume of recovered resources totaled 164mn tons The recovery rate was 70% The volume of recovered resources totaled mn tons The recovery rate was 40%

7 The size of China s recovered paper market in 2013 Non-recyclable papers such as waste tissue, special paper and some wrapping paper In 2012, China registered a paper recovery rate of 44.5%, given the imperfect recovery channels and relevant policies at present, and the rate may improve considerably in the future. The volume of recovered paper equals to 83-85% of the total output of paper products

8 The size of China s recovered paper market in 2013 The output of paper and paper products and consumption of recovered paper both dropped YoY in 2013 The output and consumption of paper and paper products in 2013 and thousand tons Grade Output Consumption YoY growth (%) YoY growth (%) Total Newsprint Uncoated writing and printing paper 3.Coated printing paper Including: CWF Tissue Packaging paper White board Including: coated white board Boxboard Corrugating medium Specialty paper and board Others

9 The size of China s recovered paper market in 2013 The output of paper and paper products and consumption of recovered paper both dropped YoY in 2013 The consumption of recovered paper pulp in 2013 and thousand tons Grade 2012 Proportion (%) 2013 Proportion (%) YoY growth (%) Total Pulp Imported pulp 1489* * Recovered pulp Imported recovered pulp Non-wood pulp

10 The size of China s recovered paper market in 2013 Economic slowdown, transformation of consumption pattern Export shrinks, as the overseas demand for wrapping paper declined Domestic demand is insufficient, as the demand for printing and writing paper is decreasing year by year Transformation of economic growth mode Investment is depressed for green and low-carbon economic development The excess capacity in the papermaking industry results in production reduction and stoppage Requirements on the consumption of resources and energies are lower Industry High operational cost and low profitability are forcing the companies to transform themselves Disorder in the market and a lack of large-sized enterprises

11 II. The policies concerning the recovered paper industry in 2014

12 Policies concerning the recovered paper industry in 2013 and The Ministry of Commerce introduced the Classification Standard of Recovered Paper (SB/T ), which, drafted by China Resource Recycling Association, will come into force on Dec 1, Type Grade Code Description Ratio of inferior goods Ratio of forbidden substances Ratio of water Recovered carton I II III X1 X2 X3 Selected old corrugated cartons with imitation leather, craft or white craft surface; old corrugated cartons containing white or other pulp liners and cartons without coating and cladding. They are mainly composed of the boxes of high-end electrical appliances and large-sized machines and leftover materials generated during the production of corrugated cartons of this grade at package or carton plants. Selected old corrugated cartons and leftover materials, cartons and leftover materials with coating and grey-based white paper board, the content of which shall not exceed 20%; and whitesurface craft packaging box without coating, e.g. selected waste cartons and paper boxes generated in large-sized supermarkets Mixed cartons, such as the mixture of cartons and paper boxes, leftover materials of cartons, fruit and vegetable cartons and various wrapping papers IV X4 Mixed cartons, such as the mixture of cartons and paper boxes, leftover materials of cartons, fruit and vegetable cartons and various wrapping papers

13 Policies concerning the recovered paper industry in 2013 and 2014 The CRRA will promulgate and implement the Classification Standard of Recovered Paper in 2H14, please check and

14 Policies concerning the recovered paper industry in 2013 and The MIIT started to draft the Regulations on the Operation and Management of the Recovered Paper Sorting and Processing Industry The CRRA has joined hands with a number of large-sized recovery companies, such as China Recycling Development Co., Ltd, Changle Changdong Paper Recovery Co., Ltd, Dalian Huanjia Group, Guangdong Haiyang Materials Recovery Co., Ltd, Tianjin Xuyang Paper Products Package Co., Ltd, Jiangsu Paper Union, Guangdong Tianbao Regenerative Plastics Co., Ltd and Zhejiang Resource Development Group Co., Ltd to draw up the Regulations. They finished the survey and draft at the end of In accordance with the Thresholds of the Scrap Steel Processing Industry, the Regulations impose quantitative requirements on the layout, kinds of land, the size of site, processing capacity, the quality of recovered paper, the standards of equipments, security and environmental protection. In Feb 2014, the CRRA submitted the advice plan to the MIIT and gained support from the latter, with the plan covered by the latter s work scheme. In Apr 2014, the CRRA was authorized by the MIIT to convene the Enterprise Symposium. The CRRA will solicit opinions and recommend some companies.

15 Policies concerning the recovered paper industry in 2013 and The Ministry of Finance solicits opinions on including recovered paper in the directory of products exempt from VAT; it may provide favorable policies for papermaking plants by returning 50% of the VAT to them so long as they register the ratio of recovered paper to raw materials higher than 70% and the capacity per production line of 100,000tpy. Orientations: the recycling companies will enter partnership with the papermakers, which will take a part in the integration of upstream business, to encourage the latter to buy recovered paper from recycling companies which abide by the industrial regulations.

16 Policies concerning the recovered paper industry in 2013 and The Ministry of Environmental Protection has solicited opinions on the Imported Waste Management Directory and the measures about the reform of the approval power, planning to include recovered paper in the commodities subject to the import limit, delegate the approval power to provincial environmental protection departments and introduce the Environmental Protection Requirements on the Import of Recovered Paper.

17 Policies concerning the recovered paper industry in 2013 and 2014

18 III. Changes in the structure of the recycling market

19 Changes in the structure of the recycling market 1. State-owned recycling companies have gradually abandoned the sorting and processing business and transformed themselves to the providers of supply chain financial services or other services. 2. More and more papermakers have entered strategic alliance with largesized recycling companies and signed long-term supply agreements with the latter to evade price and quality risks. 3. Large-sized recycling companies have turned their eyes to the recycling and processing of recovered paper generated in institutions, making highquality recovered paper flow to large-sized companies. 4. A new trading mode and a new trading platform have begun to take shape, which may bring new changes to the capital flow, logistics mode and trading rules.

20 IV. Challenges in the Chinese recovered paper market

21 Challenges in the Chinese recovered paper market 1. Low concentration ratio caused by a shortage of large-sized enterprises and long term disorder in the market caused by a lack of effective supervision on self-employed businesses. Reasons: Low threshold and a lack of operation regulation and supervision mechanism; Too heavy tax burden and high cost; Small-sized and unregulated papermakers nourish unregulated practices among recycling companies The sluggishness of the entire industry

22 Challenges in the Chinese recovered paper market 2. Excessively high trading cost caused by a lack of unified quality standards as well as the unregulated and opaque quality inspection procedures, which make it hard for the quality of domestic recovered paper to be improved. In order to gain the pricing power, papermakers are unwilling to implement unified purchase standards, while recycling companies cannot force papermakers to accept their quality standards either. Therefore, even if the industrial regulations are introduced, it still has a long way to go to implement such regulations, which calls for the efforts of entrepreneurs who think highly of coordinative development.

23 Challenges in the Chinese recovered paper market 3. The recycling, sorting, processing, payment and invoice issuance procedures are separated from each other. The integrated recycling system, which has been under prepared for years, doesn t work. System and order are not in place.

24 Challenges in the Chinese recovered paper market 4. The market has long been in disorder, resulting in a lack of footholds for government policies and thus bringing about a vicious cycle. The government has been supporting and encouraging the sound development of the recovered resources industry all the way, and in the developed countries, it is the government and industrial policies that are supporting the development of the recovered resources industry; however, in China, the reality is that the recovered resources industry has not gained any fiscal support from the government while bearing the heaviest tax burden in the world, because the government has not introduced any effective supervision measures, nor implemented any strict entry rules for the recovered resources industry, the recovered paper industry in particular, making the violation of industrial regulations a common practice; as a result, the companies abiding by the regulations cannot gain access to the resources in the market and the government cannot find a foothold for any policies. Without correct industrial policies, sound development of the recovered resources industry is out of the question.

25 V. How should the domestic recovered paper industry rescue itself?

26 How should the domestic recovered paper industry rescue itself? 1. Standardization Implementing recovered paper classification standards Formulating operation and management regulations for packing plants Specifying regulatory authorities and measures Standardization Establishing a phase-out mechanism and an industrial blacklist Regulating the administration of recovery qualifications nationwide Regulating tax administration

27 How should the domestic recovered paper industry rescue itself? 2. Economy of scale 2-3 large-sized recovered paper trading centers (1mn tons per year) 15 regional or national recycling and processing conglomerates (800,000 tons per year) 10 medium-sized recycling and processing companies (3000 tons per month) in each city (with the population of 5mn or above) Gradually phasing out micro and small-sized packing plants with monthly capacity of less than 500 tons

28 How should the domestic recovered paper industry rescue itself? 3. Differentiation Product differentiation is an effective non-price competition strategy. Michael Porter proposed three competition strategies and they are product differentiation, focus and cost leadership.

29 How should the domestic recovered paper industry rescue itself? 3. Differentiation Differentiation Product differentiation High-grade recovered paper Mode differentiation Providers of environmental services for waste generators Trading platform Trading market Service differentiation Capital service Warehousing service Guarantee service Information service Logistics service Quality testing service

30 How should the domestic recovered paper industry rescue itself? Mode differentiation Logistics trading center It is a large-sized regional recovered paper logistics base, which can not only lower the logistics cost and ease the inventory pressure on papermakers but also provide supply chain financing services. The consumption mainly happens inland (in Xi an), while the production is concentrated in the coastal area (Guangdong) Exchange It is a third-party trading platform for standardized recovered paper and provides hedging and supply chain financing services for recovered paper companies to avoid the asymmetry of information and reduce unfair horizontal competition. Dalian Renewable Resource Exchange is a good example. E-commerce trading platform It is a trading platform between the exchange and logistics center and can promote the trading of recovered paper nationwide to balance the prices in the south and north and promote the unification of the product quality. Besides, the platform can provide all-round services by introducing financial and logistics platforms, but relevant standards should be in place.

31 How should the domestic recovered paper industry rescue itself? IV. Strategic alliance Recovered paper generators Recycling companies Papermakers Purchase alliance Long-term stable cooperation Packing plants Packing plants Concerted action, implementation of unified quality standards and pricing principles

32 The CRRA s work in the coming days 1. Compile China s Top 100 Waste Paper Recycling Companies in 2014 and do survey on the industry from Sep onwards; 2. Cooperate with the Ministry of Commerce to promulgate and implement the Classification Standard of Recovered Paper from Nov 2014 to the entire year of 2015; 3. Work together with the MIIT to draft the regulations for the recovered paper sorting and processing industry from Nov 2014 to Jun 2015; 4. keep joining hands with other associations to make the favorable taxation policies for recovered paper in place.

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35 China Resource Recycling Association