Really, really robust demand

Supply and demand for most recovered paper grades appear to be benefiting recyclers and brokers slightly, particularly in the domestic market. In the May buying period, the domestic price for old corrugated containers (OCC) increased for the sixth consecutive month, according to the latest information from Fastmarkets RISI’s PPI Pulp & Paper Week. Mixed paper is on a similar trajectory, though its price hasn’t been rising as steadily as that of OCC.

Recyclers and brokers say they are enjoying the seller’s market for the time being.

“OCC has appreciated in value over the last quarter, and that’s helped us,” says a recycler based in the South, adding that there's a lot of demand for OCC.

“The need for boxes has been going up by 2 to 4 percent every single year because people love having stuff delivered to their door, and COVID has accelerated that.” – a MRF operator based in the Midwest

A material recovery facility (MRF) operator based in the Midwest says he suspects accelerating e-commerce demand is helping to boost demand for OCC in particular.

“The need for boxes has been going up by 2 to 4 percent every single year because people love having stuff delivered to their door, and COVID has accelerated that,” he says.

A broker based on the West Coast says, “There’s huge demand for OCC and mixed paper right now, and that’s because of a combination of things. With the economy reopening, there’s demand for packaging. In addition to that, agriculture is coming into season nationwide. So, there’s just really, really robust demand for containerboard and boxboard.”

The broker adds that export demand has retreated a bit. Export prices for recovered paper, particularly OCC, surged in the March and April buying periods, but pricing and demand seem to have cooled in the May buying period.

The MRF operator in the Midwest adds, “In mid-April, we felt the effect domestically that everybody was taking advantage of export going overseas. Today, that’s curtailed itself back a bit. That has to do with some of the challenges in India with COVID. But I don’t think it’s because of a lack of demand for fiber. I think that was more because there were so many actors taking advantage of sending materials export as long as they could make it happen.”

However, the broker on the West Coast says he doesn’t think the export market for OCC will stay cold for too long because of the global need for containerboard and boxboard.

During the Paper Spotlight at the Institute of Scrap Recycling Industries Convention & Exposition, ISRI2021, which was hosted online in late April, Megan Workman of Boston-based Fastmarkets RISI said recovered paper demand is expected to continue to grow. She shared information from Hannah Zhao, a senior economist at Fastmarkets RISI, that indicates recovered paper demand will continue to rise until at least 2025.

Currently, global recovered paper demand is slightly less than 250 million metric tons per year. By 2025, that figure could be closer to 260 million metric tons per year, according to Zhao’s forecast.

“OCC has appreciated in value over the last quarter, and that’s helped us.” – a recycler based in the South

The strong demand is welcome news for the recycling industry, but some challenges are present.

Transportation—securing trucking and space on ships—is expected to remain a challenge recyclers face at least in the near term. The West Coast-based broker, speaking in mid-May, says he thinks ocean shipping backlogs have gotten worse in recent weeks.

“There’s very limited space on vessels, and bookings are getting more difficult to come by,” he says. “When you do have bookings, they are seemingly constantly changing.”

He adds that trucking isn’t any easier. He says he’s heard of mills paying two and three times more in trucking costs than they had in the past year.

The availability of mixed paper also is tight and could become a bigger issue in the future.

The MRF operator in the Midwest says he has noticed much less inbound mixed paper this past year, adding that his MRF supplies Pratt Industries with the grade. He says he suspects schools not being in session in 2020 and 2021 has affected supply.