Manageable, if not resurgent

Most mill buyers of old corrugated containers (OCC) saw no need to up their bids in early September, but the beleaguered mixed paper grade is beginning to fetch a little more interest. Prices tracked by Boston-based RISI Inc. in the early September buying period portray OCC stranded in a narrow range, while a few other grades enjoyed a slight rebound.

The slight uptick for mixed paper prices (and for the sorted residential paper, or SRP, grade) appear tied to increased buying from India and anticipated demand increases from mills in North America. As mixed paper became unwelcome material in China in late 2017 and 2018, opportunistic buyers from India have stepped in to buy small but consistent amounts of the grade off the East Coast.

While the volumes required by India represent only a fraction of China’s former demand, the interest has helped the grade fetch slightly higher export prices in late 2018. (Additional coverage on this topic can be found in the article “Moving the pieces,” starting on page 34 of this issue.)

Although the benchmark OCC grade continues to feed mills and pulping lines around the world, it has struggled to regain the value it lost in the second half of 2017 with the announcement and enactment of China’s quality restrictions.

Some paper producers in China are signaling their intentions to continue to tap into North American feedstock by pulping recovered fiber in the United States and shipping that pulp directly to their mills in China.

In late August, Hong Kong-based Nine Dragons Paper Ltd. and China-based Shanying Paper announced their acquisitions of mills in West Virginia and Kentucky, respectively. Nine Dragons had previously purchased mills in Maine and Wisconsin in May.

Hong Kong-based Lee & Man Paper Mfg. Ltd., in recapping its 2018 first half, says it intends to “make [a] proactive effort in diversifying the paper and pulp business and seeking opportunities for overseas expansion while at the same time maintaining stable production for [our] plants in China.” The company is adding production capacity in Vietnam but has not announced plans to acquire or invest in paper or pulp making assets in North America.

North American recyclers report they have an abundant supply to meet a market in which China’s demand has dropped significantly. A hauler and recycler on the East Coast says, “Cardboard prices were flat [in September] and processors are still struggling to meet an acceptable specification” when selling material.

However, he says, reaching a higher level of quality can make collected OCC fetch more interest. “There is solid demand and good pricing on double-sorted cardboard,” the East Coast source says. “Pricing for material coming out of our double-sort plant is improving slightly (by about $10), with two mills competing for material.”

Although surveyed RISI pricing points to improving average values for white grades in the second half of 2018, the East Coast recycler says, “ONP (old newspapers), mixed paper and office paper remain flat and essentially weak.”

A recycler with plants in the Midwest refers to the start of the autumn market as “still lackluster, although demand for the SOP (sorted office paper) and CB (coated book) grades is aggressive, which helps.” The Midwest-based recycler says supply and demand are roughly in balance, though oversupply of some recovered fiber grades remains a concern.

The recycler based in the Midwest adds that she continues to hear that some plant operators in the region are “landfilling and storing materials,” but she indicates that contract sales and “good relationships” have helped her company keep material flowing. “If we were looking for a home for additional tonnage or for new tonnage, I think we would have trouble,” she adds.

Containerboard mills in the U.S. in July operated at a brisk 99.4 capacity rate, according to the American Forest & Paper Association, Washington, helping to provide a solid base for OCC sales in the face of a shriveling Chinese market.