Corrugated holds its own

Despite domestic demand for some recovered fiber grades—from deinking grades to the continually dwindling old newspapers (ONP)—being distressed, the outlook for old corrugated containers (OCC) is bright.

Generation of OCC will pick up as is routine with the holiday season, says a broker based in the Northeast. “You’re going to see an increase with cardboard with the Amazon.coms of the world. Whatever is shipped to the house is less cardboard at the store, either way generation picks up,” says the broker.

He adds, “With all the other grades starting to come down a bit, corrugated is starting to hold its own.”

At the 2015 Paper Recycling Conference Europe, hosted by the Recycling Today Media Group Oct. 28-29 at the Eurostars Madrid Tower Hotel in Madrid, speakers said containerboard mills around the world are demand more OCC. The economists noted that while China’s tonnage of imported recovered fiber may have peaked in 2011 and 2012, the nation’s paper and board makers are still importing considerable volumes of recovered fiber. (For more information on this session, see the article “Ready to Ship,” beginning on page S6 of the Paper Recycling Supplement in this issue.)

“We are expecting that both [China and India] will rely more heavily on domestic OCC [by percentage], but that doesn’t mean that [net] imports will decline,” said presenter Riku Kallio of Finland-based Poyry Consulting, adding, “because the overall demand for recovered paper will increase more rapidly still.”

Poyry’s forecast calls for China’s demand for imported OCC to increase by 8 percent by 2020 compared with 2014, while India’s demand will increase by 22 percent from its smaller base.

However, until China’s economy picks up again, the broker says, “This industry will be a buyers’ market.”

He says, for the most part, recovered paper prices will stay depressed into the new year. “I’m not one of those firm believers that come Jan. 1 thinks magic happens,” the broker based in the Northeast adds.

Prices for nearly all recovered fiber grades either remained flat or dropped across the board for the November buying period, with sorted office paper (SOP) seeing the most dramatic decrease, according to Boston-based research firm RISI’s PPI Pulp & Paper Week pricing survey. In its Nov. 5 report, PPI shows that domestic SOP prices dropped from $5 in the Northeast and Midwest regions to $15 in the Los Angeles/San Francisco and Pacific Northwest regions.

Beyond SOP, all recovered paper grades related to mixed paper, brown grades and high grades saw decreases in domestic prices in the Los Angeles/San Francisco and Pacific Northwest regions for November orders.

The broker in the Northeast says, “Demand for deinking grades, like SOP, is off.”

Export demand also is down for recovered paper, the broker says, especially for deinking grades. “They’re overcapacity to a point, especially overseas, which is why you’re seeing that [reduced demand],” he continues.

According to PPI, mixed paper, OCC, ONP (old newspapers), SOP and other recovered fiber grades saw a drop in export prices to China out of every region of the U.S. reported. SOP again saw the largest decline in prices, with exports to China out of the Los Angeles and San Francisco/Oakland ports falling $30 and $42, respectively.

As for mixed paper, demand has been “very good,” the broker based in the Northeast says.

Despite this good demand, PPI reports that export prices for mixed paper heading to China declined by $7 in the New York, Chicago and Los Angeles regions and by $8 out of San Francisco/Oakland for November orders.