Prioritizing movement over price

U.S. paper mills are still full, and recovered paper prices are still low across the U.S. as of the second week of August. The national average price for old corrugated containers (OCC) increased very slightly to $26 per ton in the August buying period, according to the Aug. 5 Fastmarkets RISI PPI Pulp & Paper Week report. Prices for high grades, such as sorted office paper (SOP) and pulp substitutes, have continued to decline across the U.S., though.

“Mills are still full,” says a recycler based in the Upper Midwest. “They have terribly high levels of inventory they want to get back down. I don’t see them pressing for more inventory.”

The recycler in the Upper Midwest adds that OCC in her region typically sells for about $30 per ton, adding that she thinks OCC prices “will stagnate for a while.” However, she says some companies in her region are selling OCC for $15 or less simply to get it out of their yards.

A broker in the Midwest says pricing is almost secondary to movement. “It used to be, ‘What’s the price?’” he says. “Now, people are asking, ‘When can you pick it up?’”

Material recovery facilities (MRFs) continue to face difficulty moving recovered paper, and more communities are choosing to landfill this material when they are unable to move it.

“There’s a lot of material getting disposed of before or after it’s gone through processing facilities because it’s either unmarketable or the cost of disposal is less than processing,” a broker from the East Coast reports. “For instance, Surprise, Arizona, suspended its recycling program. I looked up the population of Surprise, and it’s over 100,000 people. They are sending material to landfill because it’s cheaper than processing.”

“Usually, at this time of the year, prices and demand are rising. This is just the opposite this year.” – Jean-Luc Petithuguenin, Paprec

According to news reports from the city of Surprise, the city is temporarily diverting recyclables as it researches cost-effective solutions to mitigate the impacts of increased recycling costs.

A MRF operator in the Midwest says landfill is a cheaper option in some parts of the Upper Midwest. He says a lot of recyclers and MRFs are trying to “ride the dime” until commodity prices improve. If markets continue to deteriorate and don’t swing up in the next few months, he adds, recycling fees to municipalities likely will increase and more recyclables could end up being sent to landfills.

The U.S. isn’t alone with weak market demand for recovered paper. Jean-Luc Petithuguenin, founder and CEO of Paris-based Paprec and the paper division chairman for the Bureau of International Recycling (BIR), Brussels, says Europe’s recovered paper market also is in “crisis” mode because prices are so low that it’s tough to sell recovered paper grades anywhere.

“Usually, at this time of the year, prices and demand are rising,” Petithuguenin says. “This is just the opposite this year.”

He adds that there is an overall lack of export demand and that some paper mills have shut down machines to control supply. Recovered paper prices are dropping in Europe and it’s difficult for recyclers to find buyers for some grades, such as old magazines (OMG), Petithuguenin says.

“I don’t see [mills] pressing for more inventory.” – a recycler in the Upper Midwest

“This summer is going to be complicated as we will have to deal with high stocks,” he adds. “Exportation to Asia is complicated; it’s not so easy to get orders. There are three markets: Indonesia, China and Southeast Asia. Demand to China is close to zero.”

While Indonesia is an option, Petithuguenin says the country’s new import legislation is “difficult.” He adds, “Regarding high grades, prices have kept dropping for several months after reaching peaks in 2018.”

U.S. SOP prices have fallen from $220 per ton in October 2018 to about $105 per ton in August. The broker from the Midwest says, “SOP has been very difficult to move. There has been a general decrease in the tissue business.”

Finding trucks to transport loads has eased somewhat this summer, the Upper Midwest recycler adds. “Early 2019, it was rough,” she says. “The rates were skyrocketing; availability of trucks wasn’t there. In the summer, that’s evened out.”