A saturated stateside market

As the fall season continues, domestic paper mills are maintaining their strong run to meet the need for containerboard and packaging globally. In late October, many paper mills—including Sonoco, Graphic Packaging International and International Paper—said they expect to see strong seasonal demand for corrugated packaging through year-end.

While domestic paper mills were running well in early November, mills in Southeast Asia were taking downtime. Therefore, export demand for recovered paper—particularly from mills in Southeast Asia—remained slow in the November buying period. As a result, more material recovery facility (MRF) operators, paper packers and traders of recovered paper were trying to sell their tons to domestic consumers rather than to overseas buyers.

With more tons of recovered paper being sold stateside, some domestic paper mills have full recovered paper inventories this fall.

“Paper mills are running very well,” a buyer based in the South says. “If they weren’t running well, they would be overflooded with supply.”

“Paper mills are running very well. If they weren’t running well, they would be overflooded with supply.” – a paper mill buyer based in the South

She adds that many of the tons that previously had gone to export markets are staying in the U.S., which is partly why mills’ recovered paper supplies appear to be high as of early November. “Most mills are full inventorywise,” the buyer says. “We have the highest inventories right now than we’ve had in 10 months. We do not foresee any problem keeping supply over the holiday season.”

A MRF operator based in the Midwest says the mills that he sells to “aren’t screaming for tons” as of November.

“Mills are pretty well-saturated,” he says. “Usually, this time of year, they ask for extra tons to get through Thanksgiving, but nobody is asking for that.”

Domestic and export prices for most recovered paper grades declined in the November buying period because of high inventories at domestic mills and lower export demand.

Throughout the summer and first half of fall, paper mills paid higher premiums to secure recovered paper, particularly old corrugated containers (OCC). But recyclers and brokers say these premiums will start to decline or disappear as prices go down and demand softens.

“Pricing is starting to drop,” the MRF operator says. “Premiums are coming off. All of these guys who said they got $75 premiums aren’t seeing that anymore. They’re back in the $30 to $40 range.”

He adds that he thinks pricing for OCC and mixed paper likely will continue to decline for the next six months as soft export demand likely will continue for a while. “We’ll probably see [OCC] at $100 before the end of the second quarter [of 2022]. Mixed will follow suit and might go back to $35 to $40.”

Although paper mills in Southeast Asia aren’t demanding recovered paper, a buyer for a mill in India says that market “started to pick up again” in October. His mill consumes mostly mixed paper, old newspaper and sorted office paper. He says demand had been slower in the summer because some businesses and schools were not open and the nation still faced problems related to COVID-19 and logistics. But for the past month, he says businesses and schools have been reopening, boosting demand for packaging as well as for printing and writing paper in India.

“We have a steady demand, but not a crazy demand,” he says.

Transportation also remained challenging in November, and costs continued to rise.

“We’ve seen transportation costs go up,” the mill buyer based in the South says. “Gas prices are going up, diesel is going up, everything is going up. I do see [trucking] opening up somewhat, but again, it’s still a challenge.”

The buyer for the Indian mill adds that securing shipping containers has been a persistent issue for most of this year. He says “challenging” is the only word he would use to describe logistics.

“It’s very challenging to get containers, it’s challenging to get bookings and it’s challenging to get trucking,” he says. “We might have good bookings, but then sometimes you can’t get the truckers because truckers are in high demand.”

With the challenges related to securing trucking, the buyer for the Indian mill says he suspects U.S. paper mills could start relying on rail rather than trucking where possible to move loads.