Sloppy market conditions continue

In the recovered fiber market, movement is key today as prices are reaching new lows. Old corrugated container (OCC) prices declined for a fifth consecutive month in May. OCC prices are at $30 per ton in the May buying period, according to PPI Pulp & Paper Week, while mixed paper prices are at -$2 per ton.

Domestic prices for high grades, such as sorted office paper (SOP), also declined in most regions by about $20 per ton, PPI Pulp & Paper Week reports.

“The feeling in the market is that corrugated may have hit the bottom. This may be the bottom … but we’ll see.” – a mill operator in the Southeast

“Prices reflect the difficulty of movement, and it’s certainly difficult to move material right now,” says a mill operator in the Southwest.

A broker in the Northeast describes the current market conditions for recovered fiber as “pretty sloppy.”

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A broker on the West Coast notes that he hasn’t seen prices this low for recovered paper since 2008. “The supply of fiber has exceeded the demand for recycled fiber. From an economic standpoint, it’s hard to justify moving anything that’s not clean and segregated,” he says.

Domestic mills are still taking downtime. A mill operator in the Southeast says all the extra downtime could be an indicator for the state of the overall U.S. economy.

“The economy is slow right now. With a lot of mills taking downtime, some people think there could be a downward swing in the economy soon,” she says.

The mill operator in the Southwest adds that mills also are spending a lot of time managing their inbound loads. “Containerboard mills are being disciplined and are producing to their demand for the rolls of containerboard,” he says.

Mixed paper seems to be stuck because mills do not have as much incentive to take mixed paper with low OCC prices. Some communities are landfilling residential mixed paper. Also, the city of Lexington, Kentucky, reported in mid-May that its Lexington Recycle Center temporarily suspended paper recycling.

“We let the public know that environmentally speaking as well as fiscally speaking, it makes more sense not to bring the material in rather than to pay a processing fee and added fee to throw it away,” says Barry Prater, plant manager at the Lexington material recovery facility (MRF).

The temporary suspension will affect several municipalities surrounding Lexington in central Kentucky. Prater says the city will likely revisit paper recycling in a few months.

Export demand for recovered paper also is low. China continues to reduce the number of import permits it is issuing for recovered paper. Byron Luo of Winfibre US Inc., formerly Ralison International Inc., said that with China’s permit quota decline, only 10 million to 12 million metric tons of recovered paper are estimated to be permitted for import this year. He spoke during the session Post China & the Current Status of Recycling at WasteExpo 2019, which took place May 6-9 in Las Vegas.

The broker from the Northeast says he sees some opportunity for export in some parts of Southeast Asia—mainly Taiwan, Vietnam and Indonesia—as well as in India. “They keep buying, but their demand is not like China’s demand” in the past.

“Prices reflect the difficulty of movement, and it’s certainly difficult to move material right now.” – a mill operator in the Southwest

The mill operator in the Southeast says more export opportunities have been popping up with China reducing the amount of recovered fiber it purchases. “There’s been a reset going on since China quit taking, but that reset may be coming to an end.”

Despite the limited demand, mill operators Recycling Today connected with in May say they are seeing cleaner, higher quality recovered paper bales being produced. “Everyone is being careful about quality,” the broker in the Northeast adds.

Some sources say it’s also possible for high grade prices to fall further. The mill operator in the Southwest says high grades like SOP are moving “but not effortlessly like they used to.”

Regarding OCC, the mill operator in the Southeast says, “The feeling in the market is that corrugated may have hit the bottom. This may be the bottom … but we’ll see.”