High inventories, stable pricing

Recovered paper prices have been flat overall so far in 2016 as U.S. mills continue to supply the domestic market with inventory, according to speakers at the Southeast Recycling Conference and Trade Show (SERC), held March 13-16, 2016, in Destin, Florida.

Michael Hoffman—managing director in the diversified industrials sector, covering environmental services, for Stifel Financial Corp., a St. Louis-based brokerage and investment firm—provided an overview of “The State of the Waste Industry,” where he discussed how paper prices remained flat three months into 2016, “but still less than in 2015,” he said.

The March 4 PPW Yellow Sheet (In February Boston-based research firm RISI announced the name change of its monthly recovered paper pricing report “in recognition of our history combining recovered paper price coverage from PPI Pulp & Paper Week and the OBM [Official Board Markets] Yellow Sheet.”) validated Hoffman’s statement, reporting that domestic pricing for recovered fiber remained mostly flat across the board month over month.

Pricing for mixed paper and old corrugated containers (OCC) was flat in all domestic regions, except in the Pacific Northwest, which increased $5 per ton from the prior month. Old newspapers (ONP) pricing also remained stable in all U.S. regions month over month, with the exception of the Southeast and Los Angeles/San Francisco regions, which saw a $5 per ton increase.

Hoffman said “little brown boxes” in the waste stream continue to increase, and he questioned how the industry could better collect OCC for recycling. “How do we economically catch the value of these goods?” Hoffman asked the audience.

Corrugated box shipments in the U.S. showed modest growth in February, according to RISI, which referenced a Fibre Box Association (FBA), Itasca, Illinois, report that showed box shipments jumped 5.6 percent from a year ago but were only 0.6 percent higher on an average-week basis.

U.S. containerboard mills ran at 95.1 percent capacity rate in February, according to the American Forest & Paper Association (AF&PA), Washington. That is nearly unchanged from 95.2 percent in January.

However, the domestic market remains in oversupply regarding finished box inventory.

A California-based exporter says, “For the mills, I think they try to push on the production volumewise; however, the box plants cannot sell that much.”

Consumption of recovered fiber parallels the strength of the U.S. economy, a Midwest-based broker says, and, according to several of the SERC speakers, the nation’s economy is improving.

Jesse Bowen, executive vice president of KTI, a Minneapolis-based transportation broker, said, despite the improving economy, “freight rates aren’t going to get any better.”

He said a source estimated a 2 percent to 5 percent increase in freight rates in the next year; however, Bowen said he did not think the increase would be that high.

“Economic growth will equal a jump in freight rates … in my opinion that is 1 to 3 percent,” he said. “And you have government regulations that will affect the industry in a negative way.”

Low oil prices have kept freight rates at their lowest levels in years, and many sources in the recovered fiber market say they continue to see savings through cheaper transportation and energy costs.

“For the mills, I think they try to push on the production volumewise; however, the box plants cannot sell that much.” – an exporter based in California

Steve Viny, CEO of Envision Waste Services LLC, Cleveland, who spoke during the second plenary recycling session at the SERC, said fuel costs will rise over the next two decades.

Pricing for recovered paper exports to China has not diminished recently. Prices for mixed paper, OCC, ONP and sorted office paper (SOP) exported to China increased in every U.S. region for March buying, according to the March 4 edition of PPW Yellow Sheet.