Where has all the scrap paper gone?

China: Bad for American labor, but good for the recycling business?


Andrew Leonard
April 6, 2006 3:58AM (UTC)

Back in 1995, a strange thing started happening to the stacks of old newspapers I left out on the curb for Berkeley's recycling trucks to pick up. The poachers, who had previously only been interested in cans and bottles, started grabbing the magazines and papers. But less than a year later, they ignored them again. The power of the price mechanism had struck -- for a brief period, the market price of waste paper had spiked, and there was gold in them thar recycling bins. But then it crashed.

The reasons for that price spike are complicated and much-debated, a mix of cyclical trends in the pulp industry, underinvestment in paper mills, speculative buying, and even government incentives aimed at encouraging markets for recycled goods. But the upshot, for environmentalists, was a bit depressing. For one shining moment, it seemed as if the market for recycled paper was taking off, and then it collapsed. A bunch of brand new mills built to produce recycled paper products closed soon after opening their doors.

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But in today's commodity-mad global economy, scrap paper has seen a new source of demand emerge: China. China has been building new paper mills like crazy for years. But China has few large stands of forest, which means these new mills are mostly built to process so-called recovered fiber.

"Demand in recent years has generally been very good," says Leno Bellomo, commodities marketing manager for Norcal Waste Systems Inc. in San Francisco, "primarily due to new capacity in China and Southeast Asia."

Bellomo did caution that prices for waste paper and other recycled goods are highly volatile. In recent months he said he'd seen downward pressure on prices for most grades of scrap paper (Norcal sorts waste paper into eight different grades). He attributed that, again, to China, but said the problem now was that China had built so many mills that it was suffering from overcapacity.

But not to worry, says Bellomo, because there's a new entry on the scene beginning to show hunger for all kinds of of recycled materials. India.

It all adds up to a tangled exposition of the contradictions and contrary impulses of globalization. There are plenty of good reasons for worrying about the impact of China and India's economic growth on the global environment. But at the same time, China's voracious demand for waste paper that it can turn into cardboard for the boxes encasing all the products it is exporting to the U.S. helps to make the paper recycling industry an increasingly economically viable business. Which, in turn, could be good news for Canada's forests.

On the other hand, the boom in Asian paper mills has created brutal competition for mills in the United States. Total capacity in the U.S. is on a steady downward trend, with more mills closing every year. For recyclers like Norcal who are on the West Coast and near large ports, that's not so bad, because they can just stuff a container full of scrap and send it on its way. But if you're in the Midwest, says Bellomo, transport costs skyrocket. In which case, China's demand for scrap paper is less relevant.

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So location still means something in the global economy. But in the long run the growth of emerging nations should be good for the economics of recycling. Unless rising energy costs make even transport by sea too expensive. And so it goes.


Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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