Pricing for bulk grades plummets as mills turn away tons

Prices for bulk grades in the United States have taken a dive in the domestic and export markets as mills continue to divert tons, with some sources saying they essentially have been able to name their price, particularly for old corrugated containers (OCC).

The Northeast and Midwest regions were hit hard when it comes to OCC pricing, with Fastmarkets RISI’s Pulp & Paper Week for Aug. 5 showing a $20-per-ton decrease, while the Southeast saw a $25-per-ton drop. Mixed paper also sank, with many regions seeing decreases of up to $30 per ton.

Melanie Harman, executive vice president of sales at Recycling Management Resources, headquartered in Duluth, Georgia, says plainly, “Everybody’s hiding because it’s such a disaster in corrugated.”

Harman says about two months ago, the Southeast Asian market, particularly India, had bought lots of tons from the U.S., but before the tons could make it to their destinations, the orders were being canceled on the water. “A lot of international brokers and shippers with goods on the water had to displace, and when that happens, typically you’re discounting, you’re calling in favors,” she says.

In the months that have followed, Harman says displaced inventory from the export market has been coming back into the U.S., which hasn’t been able to absorb it all. “Now, it’s kind of the pick of the litter,” she says. “I can name my price. And by the way, I don’t even need it, so I’m turning it away.”

Harman says she suspects consumer habits have played a role in the state of the corrugated market today. The looming recession has curtailed spending to a degree, meaning fewer goods to ship. She adds that this has created what she describes as “one big overnight explosion.”

Many in the industry were blindsided by how quickly the market turned, but Harman says she doesn’t believe it’s going to change any time soon, despite the upcoming containerboard capacity expected to come online within the year as some of the projects are anticipating potential delays.

According to Cascades Inc.’s second-quarter 2022 earnings report, the Kingsey Falls, Quebec-based packaging producer says its Bear Island mill conversion in Ashland, Virginia, has been affected by the current inflationary environment, adding that higher costs combined with labor and material availability constraints have led to temporary delays in construction milestones.

The total cost of the project has increased to $470 million to $485 million. When the project first was announced in October 2020, the estimated cost was approximately $380 million, and the anticipated startup date was mid-December.

“Our team is working closely with contractors to mitigate any potential delay caused by these elements in order to meet the targeted mid-December 2022 start date,” Cascades President and CEO Mario Plourde said during the earnings call.

Sources contacted by Recycling Today suspect the Bear Island mill likely will start up early 2023.

OCC pricing is a far cry from that of high grades. Sorted office paper (SOP) saw an increase of $10 per ton across the board in the U.S. and up to $20 per ton more in the export market as demand continues to increase for tissue grades.

“When you have the printers consolidating, you’re just not getting that same output of recycled fiber and trim waste from the printers or from the office buildings,” Harman says. “I just feel like the SOP tissue problem was due to consolidation and production that was just turned off. Output is not there.”