No sign of relief

Strong demand for high grades at the start of this year has pushed sorted office paper (SOP) prices higher once again as mills remain concerned about securing what sources say is limited supply.

According to Fastmarkets RISI’s Feb. 4 PPI Pulp & Paper Week report, SOP prices rose between $10 and $20 per ton in nearly every region as a result of “brisk demand” that was exacerbated by three major tissue mills in the Midwest running low or out of recovered paper in January.

A paper recycler based in the mid-Atlantic confirms the high SOP demand and says the mills he does business with are seeking white ledger and office paper, in particular. He notes that one mill group is behind on orders. While normally material is sent from Washington, D.C., to North Carolina, now it’s going as far as Canada, the recycler says.

Many in the industry report similar instances of mills pulling material from farther distances than they normally would, especially for high grades, because they need the limited material that is available currently.

”The cost of warehousing is so expensive now, it’s not worth putting it in there and hoping the market goes up to cover it. You’re better off to dump it.” – a mill buyer based in the South

“Anything that can be deinked and turned into toilet paper, paper towel, stuff like that, there’s heavy demand for right now,” the recycler says.

Further complicating the situation is trucking. The recycler says, “Domestically, obviously trucking is a disaster.”

Suppliers of old corrugated containers (OCC) are facing a different issue. While they say supply is available, a lack of container availability and clogged ports have kept the material from moving offshore.

According to RISI’s report, the OCC national average price is down by approximately $40 per ton since October of last year.

A mill buyer based in the South says he spoke with someone who received an order for 100 containers and ordered them but expected to get 25 at the most. “So what good is a price?” he asks. “There’s a perception out there all the prices are rising [and] rising … but if you can’t ship it, what does that mean?”

The mill buyer adds that he doesn’t expect the transportation bottlenecks to free up any time soon, if at all in 2022. “The bottom line is that equipment availability is going to be short all year.”

Another broker based on the West Coast says at a given time more than 80 cargo ships can be docked in the Port of Long Beach, and a lack of labor is exacerbating the shipping backlogs. “It used to take 45 minutes to get in and out,” he says. “It’s three hours now. So therein lies the issue, and you’re never going to get what you need through ports for the foreseeable future.”

The domestic market has been flooded with OCC that normally would go overseas, and mills and recyclers alike have had to decide whether to pay increasing warehouse costs to store the material or send it to landfill.

“There’s only so much warehouse space and only so much tolerance that a recycler or paper mill will even warehouse,” the mill buyer in the South says. “The cost of warehousing is so expensive now, it’s not worth putting it in there and hoping the market goes up to cover it. You’re better off to dump it.”

One mill buyer called India the “pressure relief valve” for the U.S. as it has become the top export destination for recovered paper since China’s ban on imports in 2018. He adds, “The mills in Southeast Asia need paper.” But there’s not much relief so long as the material can’t make it overseas.

Some sources are optimistic, however, that when the shipping issues eventually are resolved, demand from India and elsewhere overseas will remain, allowing some of the overflow material to move more seamlessly through the domestic market to these overseas destinations.

“You name the grade overseas, and they want it badly, which is great news for us,” one recycler says. “There’s heavy demand out there. … [But] domestically, they’re getting all that extra overflow from export that can normally take it. That’s why you’re seeing slight downward trends with the OCC price …even though the export price is going up,” he explains.

“What eventually will happen is as freight overseas becomes easier, the stuff that has been moving domestically as overflow will go out overseas, and the domestic need for cardboard will come back,” the recycler adds.