In looking at the full range of social and environmental issues facing the paper industry, there are a few key themes that are causing quite a bit of turmoil in supply and demand, directly affecting Asian prices.
Paper consumption has reached unsustainably high levels, particularly in Asia. Paper use is steadily increasing and recently exceeded 400 million tons in one year. More than half of the consumption is in China, the U.S. and Japan, and one quarter in Europe.
In addition, many countries are working to eliminate as much as possible the use of plastics in packaging, and therefore many paper-based or biodegradable alternatives are finding their way into the footwear industry as well as the food, apparel and other industries.
The use of paper comes with substantial climate change impacts, from raw material sourcing in forests, through production and end of life products. Many footwear brands have stipulated that the paper used for their packaging must be sourced from FSC® (Forest Stewardship Council) forests, which adds an important dimension to sourcing responsible wood worldwide. The benefits outweigh the slight increase in the related costs: The FSC® logo is prominently displayed on the outside of the packaging, which the consumer can easily see.
The different types of paper that are commonly used in footwear packaging have actually increased in price by about 500 yuan renmimbi (€66-$79) per metric ton in the first three-four months of this year. Most packaging firms have had to absorb this increase due to the fact that prices had already been negotiated for the production of their autumn/winter 2018/19 collections.
Paper prices have gone up most recently by a further RMB 200 (€26-$32) per ton following meetings in Beijing between U.S. and Chinese trade authorities, which have led the Chinese government to institute 100 percent control on imports of Old Corrugated Carton (OCC), alias waste paper, from the U.S. Prior to this, Chinese customs authorities were random-checking containers for the integrity of the contents. Most probably, prices will rise further as the April-November period is the peak production season in Asia, where the demand traditionally rises.
Besides China's tightening control over the recovered paper imports from the U.S. and the restricted availability of Chinese import permits, there have been numerous government closures of many small to medium-sized paper mills in China and the rest of Asia due to stricter environmental standards and CSR regulations.
According to Luigi Grosso of Euro Brand Management (EBM), a Certified Benefit Corporation specializing in packaging solutions, the net effect of these changes in the industry is that global brands and big-box retailers are looking at the state-of-the-art redesign of packaging systems, creating innovative sustainable solutions that reduce waste, eliminate toxins and increase the loading capacity of containers. EBM works with Arnaud Brohé, a global expert on carbon accounting, to calculate the reduction in each company's GHG emissions.
About 10 years ago, Nike committed to developing packaging that would reduce the amount of cardboard by 16 percent from an estimated annual level of about 5,000 tons. Many trees have been saved thanks to such an initiative, which has been embraced by many other shoe companies.