Domestic demand stays steady

With the holiday season approaching, many packaging firms have reported “healthy demand” for boxes and containerboard in recent months. Several domestic mill operators say business has been robust lately.

One mill buyer based in the Midwest says operations have come back “quite strong” in the latter half of the year. While he says it’s hard to say what specific factor has helped domestic mills run better this fall, he adds, “E-commerce is a big part of it. It’s the growth of at-home buying really across the board.”

“We have seen Malaysia, Korea, Indonesia and everybody worried in terms of importing ‘foreign trash.” – a broker on the West Coast

With domestic mills operating well, demand for old corrugated containers (OCC) seems to be holding steady. A mill buyer in the South says OCC markets are more “balanced” than they had been last year and even earlier this year.

“Even though domestic demand is up, Chinese companies are now out of the market completely,” he says. “That has allowed for more [OCC] tonnage to be available domestically. Some other Asian countries have picked up purchases in November. But, for all intents and purposes, corrugated is balanced.”

Published OCC prices have not moved up or down much heading into the November buying period, either. However, several recyclers have expressed concerns about Fastmarkets RISI’s PPI Pulp & Paper Week prices that were published Nov. 5.

“I don’t think cardboard is being priced accurately by a long shot,” a recycler in the Upper Midwest says, adding that generation of OCC from commercial streams is down, yet demand for that material has gone up in recent months.

On the flip side, material recovery facilities (MRFs) are seeing more OCC arrive via residential single-stream recycling programs. A MRF operator based in the Midwest says his city audited its material stream for this year, and it has seen a 7 percent increase in incoming OCC and a 13 percent decrease in mixed paper compared with 2019.

Mixed paper prices inched up again in the November buying period, with the MRF operator noting that the price gap between OCC and mixed paper has been narrowing.

Despite the improvement, a West Coast-based broker adds that it hasn’t totally changed the fact that mixed paper will always be a slightly lower quality paper grade that will contain some prohibitives.

“Vietnam is saying mixed paper is too contaminated; it’s still 10 percent trash.” – a MRF operator in the Midwest

While new opportunities for mixed paper are available domestically, export markets are a different story. In late September, Vietnam announced plans to ban mixed paper imports by Dec. 31, 2021. The country’s prime minister issued a statement that details new import guidelines for recyclables. The statement identifies mixed paper by its harmonized commodity code and explains that the material will only be allowed for import until the end of 2021, according to the English translation of the statement.

The MRF operator says, “Vietnam is saying mixed paper is too contaminated; it’s still 10 percent trash.”

“We have seen Malaysia, Korea, Indonesia and everybody worried in terms of importing ‘foreign trash,’” the broker on the West Coast says. “[Mixed paper is] the No. 1 item that probably contains a little bit more than normal of the prohibitives. It is the lowest furnish grade that we ship or export from the U.S.”

Demand for sorted office paper (SOP) and deinking grades also has remained challenged throughout 2020, primarily because of factors related to the ongoing pandemic. Although tissue mills had high demand for SOP and deinking grades in the first part of the year, demand has decreased for away-from-home tissue products that use recovered paper.

“If it wasn’t for this pandemic, the price of sorted office paper would be through the roof,” the recycler in the Upper Midwest adds.

But commercial generation also is down in most parts of the U.S. A recycler on the West Coast who handles recovered paper primarily from the commercial sector says generation has not returned to prepandemic levels. She estimates that commercial generation is down by about 40 percent this year.