Abrupt adjustments

Chinese demand for U.S. recovered fiber has bounced back, and export prices have jumped considerably as a result for old corrugated containers (OCC) and sorted residential papers and news (SRPN) in November. Mixed paper prices to China also increased.

In addition, in the domestic market, pricing for all the major secondary fiber grades had sizable gains on the West Coast. OCC saw substantial price surges of $45 per ton out of Long Beach/Los Angeles and of $50 per ton out of the Pacific Northwest, according to the Nov. 6 PPW Yellow Sheet from Boston-based research firm RISI.

Sources say shipping to China is still “risky.” Yet, OCC prices to China increased by $53 to $58 per ton FAS (free alongside ship, meaning the seller must deliver goods to a named port alongside a vessel the buyer designates), while prices for SRPN exported to China grew by $25 to $28 per ton FAS, RISI reports. The OCC price hike nearly made up for the price decline the grade saw in the export market in October when it dropped by $70 to $73 per ton. This price drop was the largest decline OCC has ever recorded.

In other record-setting scenarios in October, mixed paper hit its lowest-ever price of $28.06 per ton. This has been followed with the second-lowest price for the grade, which sold for an average of $30 per ton in November. (In the December 2016 issue, Recycling Today reported that at $73.06 per ton, mixed paper reached its highest price for the second time since we began publishing RISI’s pricing in July 2014. Mixed paper pricing topped $73.06 for the first time in August 2016.) Beyond the West Coast, recovered paper prices in the U.S. dropped across the board in the South and Midwest for most grades, with some flatness being seen in pricing for SRPN and mixed paper in these regions.

A Midwest-based recycler says with pricing for the West Coast tied to export demand, it’s no surprise pricing for both grades bounced back. Export, he says, is rebounding.

“Competition for materials was sloppy in September and most of October,” says the Midwest-based recycler. “This has turned around in November and will accelerate through the new year. Domestic mills on the West Coast need to be competitive with export to obtain materials.”

On the other hand, the recycler says some mills don’t believe there will be a fiber shortage and “are behaving as if export will not be a factor.” He reports that one mill he works with has limited its recovered fiber purchases to contract tons. Another mill, which has bought his company’s material for years, cut back on its buying because of quality issues.

While domestic demand is good, sources say many U.S. mills are full and limiting orders.

A buyer based on the West Coast says it is a “wait-and-see situation” as to how the news coming out of China will play out. In the meantime, he says, other overseas markets have ramped up their buying of recovered fiber. The recovered paper trader says having alternative markets to sell to, notably Southeastern Asia, has been helpful.

“Dollar for dollar, I’d rather ship it to a different market and keep my fingers crossed than ship it to China,” says the buyer. “China is still going to be an important market for mixed, but it’s nice we now have some alternatives.”

Demand from other Asian markets, including India, remained firm to strong, reports Ranjit Baxi, president of the Brussels-based Bureau of International Recycling (BIR), in the organization’s October 2017 BIR World Mirror on Recovered Paper.

“Exporters are now looking forward to 2018 and asking where the economy is heading and how to mitigate the looming fiber export risks,” Baxi writes. “Exporters want to know whether Chinese mills’ import allocations for 2018 will be maintained at 2017 levels or reduced. Most markets believe a 25 percent reduction to be a possibility, which would make 2018 a very trying and testing year for fiber exporters to China,” he adds.

For a free trial of RISI’s PPW Yellow Sheet pricing, please visit www.risi.com/rt.