One answer to China's ban on scrap imports

On Jan. 1, China banned the importation of certain recyclable materials, much of it coming from the U.S., on grounds that they were not environmentally sound. The move, which took effect six months after it was announced, has contributed to a glut of waste in the U.S. market and has sent U.S. waste exporters in search of new global customers.

However, an industry partnership has emerged that may alleviate the crunch. Earlier this year, online marketplace merQbiz joined forces with broker and third-party logistics (3PL) provider C.H. Robinson Worldwide Inc. to streamline the buying and selling of recovered paper (RCP), a process typically mired in red tape and traditionally done by phone, fax, and email between close-knit trading partners. The partnership combines the merQbiz online platform—which connects buyers and sellers in real time with tools that allow them to book, pay for, and track orders—with Robinson's services, allowing buyers and sellers to complete the loop with guaranteed transportation services, an aspect of the business typically left for buyers to manage on their own.

The timing couldn't be better as the RCP market reacts to an oversupply of so-called mixed paper—a broad category that includes magazines and phone books to office paper and packaging—and a desperate need for new places to sell it.

"There are huge impacts within the RCP market out of this [ban]," says John Fox, CEO of Manhattan Beach, Calif.-based merQbiz, which was co-founded last year by German engineering group Voith and Boston Consulting Group's Digital Ventures. "People that relied on the export market as their way of selling material [are] really struggling to find [new customers]."

Fox says the merQbiz/C.H. Robinson collaboration can help by connecting sellers to buyers outside of their traditional networks. "We give [customers] more options," he says, pointing to other parts of Asia as well as South America as places sellers are turning to in the early days of the China ban. "We offer additional market sources. And by having C.H. Robinson on board ... we can provide support for domestic freight as well as the potential to work with [us] for sea transportation."

Adina Renee Adler, senior director of government relations and international affairs for the Institute of Scrap Recycling Industries (ISRI), echoes Fox's comments about the market difficulties caused by China's ban on scrap materials. Adler says the swiftness of China's actions has exacerbated the problem.

"As a result of this ban ... there is a backup of materials here in the U.S.," Adler adds. "We in our homes and offices and industrial sites are still sending paper to the recyclers, but without a lot of lead time from the Chinese government about the ban, companies were not able to quickly find new customers for that volume."

As a result, mixed paper is being stockpiled and in some cases making its way to landfills. But Adler says there is still strong demand for the product, which is used by paper mills to make everything from cardboard to tissue paper. She says ISRI has seen an uptick in exports to India and Southeast Asia. She adds that there may be potential for sellers to find new markets in North America, as well.

"There is huge potential probably here in North America for that feedstock to be more readily available for paper mills here in the U.S. and Canada," says Adler. "There is some other growth potential, as well. Markets sort themselves out—the challenge was just that China gave us very short notice about it."

The situation is accelerating an existing trend toward cleaner, higher quality materials. Mixed paper is sometimes contaminated, thus explaining China's desire to no longer be considered the world's dumping ground. The U.S. alone processes about 130 million metric tons of scrap materials per year—including paper, plastic, metals, and electronics—a third of which is exported to about 150 countries. Before the ban, China took in roughly 30 to 40 percent of those exports, Adler explains.

It makes sense for China to clamp down on the import of garbage in the interest of cleaning up its environment, Adler says. However, clearer distinctions need to be made between higher quality scrap materials still needed for the country's booming manufacturing business and those that are less desirable.

"We had already started to see a trend in demand for cleaner, high quality material, [so this situation] spurs companies to know that this is a permanent, long-term trend—for materials to be cleaner, separated, and ready to go right into the paper mill," she says. "There are paper processors that are making the needed investments [to do that]."

For Fox and his colleagues, such changes underscore the paper industry's need for efficiency, transparency, and an improved overall transaction experience.

"The China ban has brought increased attention to the international supply chain of recycled paper products and the need for clear visibility," Chris O'Brien, chief commercial officer for Eden Prairie, Minn.-based C.H. Robinson, said in a statement. "For now, it of course increases the current supply available in North America. Long term, markets adjust and in our view merQbiz built their model to deal with all prevailing market conditions by improving the experience."

To that end, in early February merQbiz added an export feature designed to ease the cumbersome documentation process associated with transporting materials around the world.

"This all goes back to addressing a pain point," Fox explains. "Now, not only can I buy and transport the paper, but I have a better way of managing the documentation around that."

"We make the experience of buying and selling RCP better, easier, more transparent—so that whatever the market [conditions], we can provide a better solution and ways to make life easier for the people in this market," he says.