OCC, mixed paper markets in flux

Market dynamics for many grades of recovered paper have been affected considerably by economic conditions, new mill capacity and other factors over the years. But, during a mid-September webinar Fastmarkets hosted, panelists said demand for recovered paper “is not going away anytime soon.”

“It’s only going to continue to grow because of the new capacity coming online,” Fastmarkets Forest Products price reporter Megan Workman said. “That new capacity is able to take in more mixed paper. ... They’re taking in more OCC [old corrugated containers] and mixed paper than ever before.”

Workman was joined by Hannah Zhao, Fastmarkets Forest Products director of fiber, during the “Recovered paper outlook for the North American market” webinar, which focused mostly on OCC and mixed paper.

"The sluggish Chinese economy slowed both the Chinese and Southeast Asian paper packaging sector and, therefore, slowed their demand for recycled fiber, including their imported demand for U.S. OCC.” – Hannah Zhao, director of fiber, Fastmarkets Forest Products

According to data published in late August by the Washington-based American Forest & Paper Association (AF&PA) that Fastmarkets cited, total recovered fiber consumption from January to June at U.S. paper mills increased 6.8 percent relative to the same period in 2023.

The AF&PA reports that U.S. mills took in 16.44 million tons in the first half of this year versus 15.4 million tons in the first half of 2023.

The group also says U.S. mills took in 8.2 percent more OCC in that period, consuming 12.3 million tons compared with 11.4 million tons in the first half of 2023. Mixed paper consumption increased 3.9 percent year over year, with U.S. mills consuming 1.91 million tons in the first half of this year versus 1.84 million tons in the same period last year.

The U.S. OCC market, while finally stabilizing a bit this year, has been in decline since late 2022, and the Chinese domestic OCC price declined at about the same pace, Zhao said.

“We all know the recovered paper market, particularly the OCC market, is a global market, so the North American market is tied closely with other regions, particularly Asia,” Zhao said.

“The sluggish Chinese economy slowed both the Chinese and Southeast Asian paper packaging sector and, therefore, slowed their demand for recycled fiber, including their imported demand for U.S. OCC.”

On the demand side, the more than 2 million tons of new recycled paper mill capacity that has started up over the last year in North America has been “the fundamental factor” behind a stronger OCC market, Zhao said; but, as that wave of new capacity has subsided, demand has normalized.

In terms of supply, Zhao noted two main sources of OCC in North America: a domestic source related to box shipments and an external source related to consumer goods imports in the U.S. She estimated that about 25 percent of total U.S. OCC is collected from that import channel.

“If we combine the domestic and the external sources together, we would say U.S. OCC supply was very tight last year,” Zhao said. “It improved slightly recently, but it’s still at relatively low levels.”

She also noted that soft generation reduced U.S. OCC exports in the first half of this year.

According to Fastmarkets data, U.S. OCC exports slid by 13 percent last year. While exports to Canada and Mexico more than doubled in the first half of this year, U.S. OCC exports declined by 11 percent, with exports to Asia declining by 18 percent because of the sluggish Asian paper packaging market and weak demand for recycled fiber. Zhao said healthier U.S. OCC demand also limited the material available to export.

Looking ahead, she said North American recovered paper demand will grow alongside expanding recycled paper and board capacity.

“Most of the new containerboard capacity will continue to run on recovered paper in the near and medium term,” Zhao said. “This will be the base for more recovered paper consumption in the future, and the growing domestic demand will mean there will be limited recovered paper available to be exported.”