Just take the tons

Recovered fiber movement tends to slow down in late January and early February as a result of decreased shopping coming out of the Christmas season and mill closures in China during Chinese New Year. However, movement seems to be especially slow, even for this time of year.

“In November, I was pretty optimistic about 2019,” says a broker in the Northwest. “By December, you started reading from analysts following the paper industry, saying, ‘The run rates at containerboard mills dropped from 98 percent to 94 percent.’ And that was a big red flag.”

Since December, the broker says analysts’ predictions of slowdown have proven to be correct. Domestically, he says many mills nationwide are full to the point where they can’t take more recovered fiber. During the start of 2019, many mills lacked space to store additional material, which has had a particularly negative impact on old corrugated containers (OCC) sales.

“When people sell tons, they’ll be saying pricing doesn’t matter as much … just take my tons.” – a broker in the Northwest

Higher grades of recovered fiber are moving slightly better, a recycler in the South reports. “Pulp and deinking are moving domestically,” he says. “Inventories are high, so some [mills] have curtailed their prices somewhat.”

The recycler in the South adds that his company has been able to keep moving material as a result of long-term contracts with several domestic mills.

“We’ve been pretty fortunate we’ve been able to move our tonnage,” he says. “We’ve had long-term relationships with some mills, so they’re taking care of us. They take care of us in tough times, and we’ll take care of them in challenging times.”

The broker in the Northwest says export demand for recovered fiber is “no better” than domestic demand. “Mills in Asia and China are taking extended downtime past Chinese New Year because business is slow. Many mills are saying they don’t want anything to arrive before April,” he adds.

Across the board, recovered fiber prices declined in February. For the first time since May 2018, the average price of mixed paper dipped into the negative. As of the Feb. 5 Fastmarkets RISI’s PPI Pulp & Paper Week, mixed paper prices averaged about -$3 per ton.

“If you’re not near a Pratt mill or boxboard mill, you’re probably selling [mixed paper] at a negative number,” the broker in the Northwest says. He adds that he has heard stories of some recyclers selling mixed paper for as low as -$20 per ton in areas with very high landfill rates in the past month.

The recycler in the South says his business can “feel the ripple effects” of declining prices for mixed paper, even though he doesn’t handle mixed paper or other postconsumer grades.

"At this time of year, right after the holidays, movement is key.” – a recycler in the Northeast

A recycler in the Northeast says mixed paper prices are between $0 to -$5 on average in his area.

“[Mixed paper] was going strong—about $20 in the export market—about two to three months ago,” he says. “Since then, it’s taken a considerable drop. It wouldn’t surprise me if we stay at $0 [for mixed paper] in 2019.”

The average price of OCC also dropped by $13 per ton in the February buying period, according to PPI Pulp & Paper Week.

The recycler in the Northeast says he lost about $10 to $15 per ton on his OCC, but he estimates OCC prices could bounce back by the second quarter of 2019.

With the current market conditions, moving material is crucial. The recycler based in the Northeast says quality is always his No. 1 concern, closely followed by movement. “Most domestic mills have high inventory,” he says. “At this time of year, right after the holidays, movement is key.”

The broker concludes that U.S. recyclers and brokers need to focus mostly on “moving tons” during this first quarter of 2019.

“It’s going to be challenging, certainly,” he says. “It’s going to be mostly about moving tons, not so much about getting a better price. When people sell tons, they’ll be saying pricing doesn’t matter as much … just take my tons.”