Introduction:The China-US trade war has been ongoing for some time, and just as signs of improvement were about to emerge recently, on May 2, the General Administration of Customs suddenly issued an urgent document "Notice of the General Administration of Customs on Implementing Risk Warning Regulatory Measures for Imported US Waste Materials," delivering an unprecedented regulatory blow to imported US waste paper! This blow is likely to further boost demand for domestic waste paper, and waste paper and raw paper prices may hit historic highs as a result!

China wields the knife again on US waste paper, domestic waste paper demand continues to rise

The China-US trade war, which had been ongoing for some time and intensifying, finally showed signs of improvement in early May, as US presidential special envoy and Treasury Secretary Mnuchin led a US delegation to visit China on May 3-4.

At the same time, US President Trump tweeted: "Our great trade team is negotiating with China on trade competition, and I look forward to meeting with President Xi in the near future! We will always maintain a very good relationship!"

Just as everyone was eagerly anticipating this, on May 2, the General Administration of Customs suddenly issued an urgent document "Notice of the General Administration of Customs on Implementing Risk Warning Regulatory Measures for Imported US Waste Materials," delivering an unprecedented regulatory blow to imported US waste paper! The document put forward three measures:

Measure 1

Starting from May 4, 2018, 100% container opening and 100% unpacking inspection and quarantine will be implemented for waste materials from the United States. For suspected thermosetting waste plastics, metal scrap containing powdered substances, waste paper containing difficult-to-identify specialty papers (silicone paper, waxed paper, thermal paper, moisture-proof paper, etc.), and those suspected of carrying hazardous waste, 100% laboratory testing and analysis will be conducted. All ports will strictly implement stringent supervision in accordance with national environmental protection standards and inspection and quarantine procedures.

Measure 2

Starting from May 4, 2018, Class A risk warning measures will be implemented against China Certification & Inspection Group North America Inc. for a period of one month (May 4 to June 4, 2018). During this period, the company will no longer undertake pre-shipment inspection work for imported waste materials, and its use of the Pre-Shipment Inspection (PSI) Information Management System for imported waste materials of China will be suspended.

For waste materials for which China Certification & Inspection Group North America Inc. had already issued pre-shipment inspection certificates before (and including) May 3, 2018, import customs declaration applications may still be processed according to the original regulations. When accepting inspection declarations at various ports, the issuance date of the pre-shipment inspection certificates must be carefully verified.

Measure 3

Strengthen document review. Strictly verify the authenticity, completeness, and mutual consistency of pre-shipment inspection certificates for imported US waste materials, transport documents, and other import inspection documents. Require domestic consignees to provide all true cargo transport information and other materials. Where it is found that the inspection date on the pre-shipment inspection certificate is later than the shipment date, the inspection location is inconsistent with the place of departure, certificates were issued without inspection, or pre-shipment inspection certificates were issued in violation of regulations, it should be promptly reported to the Inspection and Supervision Department of the General Administration. The General Administration will focus on conducting special business interviews and supervision of the relevant pre-shipment inspection institutions.

Due to the sudden tightening of regulation, this has brought significant political risks and notably increased costs to US waste paper importers and domestic paper mills. After the document was issued, several major US waste paper importers have already held meetings to discuss countermeasures. The common practice is that recently signed new orders may be delayed or even cancelled.

Nine Dragons and Lee & Man successively raise prices to compete for domestic waste paper, prices may hit new highs

Although domestic waste paper prices have been in an upward trend recently, with prices already approaching the 3,000 yuan mark, in the past few days, the two leading companies, Nine Dragons and Lee & Man, suddenly raised prices to compete for supplies. For example, Dongguan Nine Dragons and Guangdong Lee & Man raised prices by 100 yuan/ton on the 3rd and 4th for two consecutive days, with first-grade paper prices both exceeding 3,000 yuan/ton. Jiangsu Lee & Man, Taicang Nine Dragons, Hebei Nine Dragons, and Tianjin Nine Dragons all generally saw purchase price increases of 100-200 yuan/ton.

It can be expected that within the next month, as the import volume of US waste paper may experience a cliff-like decline, and Japanese and European waste paper imports cannot make up the shortfall in the short term, market demand for domestic waste paper will further expand, and prices may reach historic highs, which will also drive rapid increases in packaging paper prices.

Appendix: Notice of the General Administration of Customs on Implementing Risk Warning Regulatory Measures for Imported US Waste Materials

(Source: Paper Industry Internal Reference)