Redefining OCC

Editor’s note: This article is an edited transcript of a presentation Myles Cohen made during the 2014 Paper & Plastics Recycling Conference session, “Redefining the PSI Definition and Specification for OCC,” hosted Oct. 9. Visit www.paperrecyclingconference.com for details.
 

A lot of recovered fiber grades have declined over the years: ONP (old newspapers), printing and writing grades, high grades, etc. [However,] OCC (old corrugated containers) are increasing. Paper mills are using a higher percentage of recovered fiber as their feedstock, and they are getting more diligent about what type of OCC to buy—nondomestic OCC, grocery OCC, postindustrial OCC, etc. And many suggest it is time to revisit [the specification] and have several grades of OCC.

This is the current specification: “(11) Old Corrugated Containers (OCC) – Consists of corrugated containers having liners of either test liner or kraft. Prohibitive materials may not exceed 1 percent. Outthrows plus prohibitives may not exceed 5 percent.”

About two-thirds of what we buy and sell as an industry is OCC, and we have about 15 words to describe two-thirds of what we buy and sell. Then there are about 3,000 words for everything else, many of which have since become irrelevant.
 

Taking a closer look

In North America in 2013, close to 50 million tons of recycled fiber were collected. It is about a 60:40 split in terms of U.S. versus export consumption: 29.9 million tons went to domestic mills, and 19.4 million tons went to export mills.

If we look at that 30 million tons of recovered fiber consumed domestically, guess what? Sixty-six percent of it is OCC; 34 percent is everything else combined. Two-thirds is one grade—OCC—and yet there are only about 15 words that explain the spec for OCC.

ONP is in its 15th consecutive year of decline; it is now less than 10 percent of recovered fiber. Only OCC and mixed paper are growing. (You can argue whether they are growing because it is slow growth of 1 or 2 percent per year.) High grades are declining 8 percent per year. OCC dominates and is now nearly eight times ONP [in terms of generation]. (If anyone would have told the people in this room 10 years ago that ONP was going to be one-eighth the size of OCC, we would have thought they were nuts.) OCC is the lifeblood of this industry.
 

Getting more specific

With nearly 30 million tons of OCC collected, bought, sold and consumed in the U.S. per year, we as industry leaders had better define a specification.

As an operator of MRFs (material recovery facilities) and a buyer of material that goes into our mills, these are the things we look at when considering pricing:

• long fiber content;
• domestic OCC content;
• truckload volume;
• bale weights;
• volume buying (The higher the volume the higher the price.);
• short fiber content;
• nondomestic OCC content;
• OCC from residential curbside content (OCC that comes from residential collection typically is dirtier than OCC that comes out of a distribution center or a grocery store.);
• moisture content;
• contaminants; and
• outthrows.
   

Some members within PSI (Paper Stock Industries chapter of ISRI) would argue that enough variability exists among the various sources of OCC that it is time to have multiple specifications.
 

Varying to much

I took a period of time during which we bought OCC for Pratt Industries’ internal mill consumption and averaged our buying price. If OCC was a true commodity, what we paid should fall in a very narrow band. However, the lowest price we paid was $28 below X. The highest price we paid was $45 above X. There was a $73 range between the lowest and the highest price we paid for this one commodity—OCC—for this one mill during the same exact “Yellow Sheet” (Official Board Markets) buying period. That says there has got to be perceived difference in material and that mill buyers either don’t know what they are doing or they are paying a premium for really good stuff and taking a discount for stuff that is not so good according to things like fiber length, contamination or moisture. Based on the current definition, I say OCC isn’t a [single] commodity because we have a $73 range between the high and the low that you are paying during, say, a three-month period with the same Yellow Sheet.

Maybe it’s time to get clarity and formality around different specifications within this 30-million-ton category that represents two-thirds of what we buy.

Myles Cohen is vice president of the Paper Stock Industries Chapter of the Institute of Scrap Recycling Industries, Washington, and president of Atlanta-based Pratt Recycling.