The recovered paper industry has faced plenty of adversity this year and seems to be in it for the long haul as market conditions do little to inspire much confidence.
Recyclers were optimistic that this year, despite some anticipated cooling of recovered paper demand and pricing, the industry wouldn’t face lows similar to those seen in 2019. Unfortunately, as the end of 2022 draws near, the market remains tumultuous.
Old corrugated containers (OCC) pricing is looking at a potential all-time low, according to experts, while some recyclers noted that high-grade premiums reached as high as they’d seen in their careers.
Industry experts aren’t expecting an end to the turmoil, either.
Since January, mills have reported being full as OCC inventories, in particular, have built up around the U.S., while tissue grades remain highly sought after since the coronavirus pandemic forced a shift to remote work and school.
The export market did nothing to relieve pressure. Ongoing backlogs at major ports across the United States forced recyclers to divert tons back into the domestic market, which already was oversupplied.
Recyclers on the West Coast have been especially on edge during the ongoing labor negotiations between the International Longshore and Warehouse Union and the Pacific Maritime Association. The talks began in May, and no resolution was reached before the previous agreement expired July 1. Negotiations continue, as do operations, but it has caused major frustrations for exporters.
“The process is so complicated, and the whole process is geared toward import,” a West Coast paper packer said in June. “Meanwhile, us over here in export are like, ‘Hello? Remember us? Remember 20 years ago when you used to wine and dine us?’ We felt like a valued customer. Now, we are just an afterthought, and it’s brutal.”
New North American containerboard capacity had recyclers feeling hopeful about 2023—and some still do—but one expert questions how much the upcoming projects will help the oversupply situation.
Adam Josephson, managing director of equity research at Cleveland-based KeyBanc Capital Markets Inc., says containerboard supply at box plants and mills rose to 4.8 weeks in September—the highest in any month since February 2009, and containerboard inventories increased to nearly 3.02 million tons, marking the highest in any single month since July 2000.
“These companies have been quietly delaying these projects by one or two months,” he says. “But I characterize that as no more than kicking the can down the road because eventually these machines are going to have to start up and these companies are going have to figure out where to sell all this containerboard. … Into this oversupply situation is coming more than 2 million tons of additional containerboard supply. Where’s it all going to go?”
The recovered paper industry certainly is anxiously awaiting the answer as we head into a new year.
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