Far-flung changes have local impact on newsprint

The laws of supply and demand are pretty straightforward, which is probably why they’re called laws and not just ideas. However, in today’s global economy, things can get pretty complicated, connecting actions and consequences that seem completely remote from one another.

One illustration is how changes to laws in China affect the balance sheet of community newspapers in the United States.

For decades, China has been the destination for over half of the world’s recycling. Container ships would leave China with manufactured goods bound for North America and Europe. Rather than return empty they would return with containers full of recyclable materials. However, most of that material was paper, plastic, and metal collected from curbside pickup, which is known as “single stream” recycling. This meant that the materials needed to be sorted once they arrived in China, and anything unusable had to go to a landfill.

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Over the past several years, the Chinese government has begun working to improve the country’s environmental impact. In support of this effort, during 2018 the government set strict standards for purity of imported recyclable material, and also severely curtailed the number of “import licenses” it issued for that same material.

The change to the purity standards means that the single stream recycling that used to arrive by the shipload now has to be sorted before heading overseas. Unfortunately, facilities in North America and Europe don’t have the capacity to suddenly handle all of this tonnage, so much of it is going to domestic landfills.

Unlike newsprint mills in North America, mills in China do not have access to their own forests to feed their mills with wood fiber. These mills have come to rely on imports, and have historically been engineered to use a large percentage of recycled fiber, in contrast to North American mills that are generally engineered to use mostly virgin fiber which has no recycled content.

The new limits on imported recycled materials were intended to increase recycling in China, which is very good for the environment overall. However, because it takes time to build the infrastructure for collecting and processing all of that recycled material, Chinese mills have faced a shortage of raw materials.

In response, Chinese printers have increased imports of newsprint made from virgin fiber. This meets the purity standards, and does not contribute to pollution in China. For this reason, China has recently gone from being a net exporter of newsprint to a net importer of newsprint.

An additional benefit to the Chinese from importing virgin newsprint comes from the fact that paper fibers can only be recycled a limited number of times. Each time paper is recycled, the fibers break down into smaller pieces, resulting in less paper and more unusable “sludge” going to the landfill. By injecting newer fibers into the papermaking process, yields go up and landfill deposits — along with costs — go down.

While importing finished newsprint helps printers and publishers, it does not keep the newsprint mills running. The solution to that problem is a product called “market pulp”.

Market pulp is an intermediate step in the paper making process that can be used as a raw material in newsprint, tissue, cardboard, or other paper products. North American companies have been exporting increasing amounts of market pulp to China.

In a sign that market players believe the Chinese recycling laws won’t be loosening any time soon, Chinese paper companies have been investing in fiber facilities outside of China with the intent of creating a permanent stream of raw materials to feed their mills.

Companies including Nine Dragons and Shanying International, two of the largest newsprint producers in China, have recently purchased facilities in North America. Nine Dragons purchased two pulp mills from Catalyst in Canada in 2018, and will continue the export business that was started under Catalyst.

So what does this all mean for a community publisher?

Despite the fact that North American publishers use of newsprint continues to fall steadily, the price has not changed in nearly six months. While producers have naturally looked for other markets as the demand for newsprint decreases, this change of direction in China adds a new dynamic that could prop up newsprint prices for the long term.

Another less likely scenario would be Chinese companies purchasing additional mills in North America with the goal of using those resources to supply the Chinese market. While many experts say this possibility is remote, such a move — particularly if it happened in the west — could make newsprint hard to find in the south and west of the United States.

The laws of supply and demand are simple in theory, but they’re a little more complicated in the real world. Welcome to 2019.

Tony Smithson is Vice President of Printing Operations for Bliss Communications in Janesville.