Shifting the focus

During the cardboard box recession over the last several years, nearly half of the 5 million tons of recycled containerboard capacity in the United States was shut down in response to plummeting box demand.

According to data presented by Bill Moore, president of Atlanta-based consultancy Moore & Associates, between 1998 and 2010, the U.S. corrugated box business had a -1.1 percent compound annual growth rate because manufacturing operations went offshore.

“Fast forward to 2010 and e-commerce starts to come in and we start climbing back up the mountain,” Moore said. “We [grew] about 1 percent a year for a number of years.”

It took until 2021 for the box industry to produce the 400 billion square feet per year it was producing in 1998, but after the e-commerce boom during the COVID-19 pandemic, the box business plummeted, and the U.S. officially entered the box recession.

In late 2022, the Itasca, Illinois-based Fibre Box Association reported the lowest cardboard manufacturer operating rate since 2009 at 80.9 percent in the fourth quarter of that year, and throughout 2023 and into 2024, the situation did not improve much.

“For two years, we lost almost all the corrugated business that was gained during the pandemic,” Moore said.

He spoke during the Bulk Buying: OCC & Packaging Grades session at this year’s Paper & Plastics Recycling Conference in Chicago in October and was joined by Vincent Leon, a New York-based principal at Swedish advisory firm Afry Management Consulting; Greg Rudder, regional managing editor, Americas, at Fastmarkets; and Evan Barrett, director of recycling commodity sales at Ontario-based GFL Environmental. For the first time in years, the talk around old corrugated containers (OCC) and box making was slightly more positive.

This year, Moore’s data indicate the U.S. box business will see around 0.8 percent growth and, looking ahead, will be a little more than 1 percent—reminiscent of the growth seen in the early 2000s, he said.

As far as recovered fiber consumption, Moore noted that in 2017, U.S. OCC consumption was around 34 million tons, and he forecasted an increase to 38 million tons in 2027.

“[Paper] recycling has been a good story around the world … and in the U.S.,” he said.

Now, the story is turning to mixed paper: Will the grade continue to be used to furnish containerboard mills or is it becoming obsolete?

Product vs. byproduct

The recovered paper industry has been questioning the future of mixed paper for a while. As sorting becomes more efficient, will fewer and fewer mixed paper bales be produced? And how much mixed paper will mills continue to take in?

Rudder said the 2.4 million tons of new recycled containerboard capacity that have been brought online in the U.S. in the last year are actually a good sign for mixed paper markets.

“Those mills are going to use mixed paper; the question is whether it’s 30 percent or 10 to 15 percent,” he said, adding that he doesn’t think the grade is necessarily going away.

From a material recovery facility (MRF) perspective, Barrett describes the commodities as being sorted into “two buckets”—a product or a byproduct—and as MRFs more efficiently sort their fiber, the mixed paper byproduct becomes less relevant.

“What’s happening is new advancement in our optimization and recovery rates means we’re targeting the products, so … we’re reducing the byproduct,” he said.

“If your mixed paper byproduct has 30 percent OCC in it, that’s 30 percent OCC that, if you recovered as OCC, you’d get a higher value for it. If your system isn’t optimized to collect all the products you’re after, you’re losing that in your byproduct. There was so much of this byproduct for so long the industry reacted to it and has formed itself around the use of the byproduct, finding it to be a useful product or feedstock in that way. But as MRFs are incentivized ... to collect and optimize the products they’re after, the byproduct isn’t the same. If we’re getting all the containers out, if we’re getting all the brown out, when that byproduct comes out, now it’s SRPN [sorted residential paper and news]; it’s no longer mixed paper.”

According to Moore’s data, almost all new containerboard mill projects that were commissioned over the last five years consume at least some mixed paper, ranging between 5 percent up to 30 percent, with the average around 20 percent.

“Usually, it takes a few years to get things up and running where you can use those higher numbers,” Moore said. “Pratt has used up to 60 percent mixed paper, and Cascades’ Bear Island [mill] is equipped to do the same. Atlantic in Ontario is the same, to use more than 50 percent, but many containerboard machines, recycled machines or blended version and recycled machines don’t use any mixed paper.”

“It’s just an interesting situation to see how that’s going to go,” Rudder added. “Keep in mind, it’s just a few years back when mixed paper was being landfilled.”

When asked why more companies like Conyers, Georgia-based Pratt haven’t used large amounts of mixed paper, Barrett said it also has to do with a company’s asset base.

“If we’re doing a comparison of Pratt, as an example, versus the existing companies, Smurfit Westrock, [International Paper], they have a long history of acquiring companies and their assets were not set up in that [way]. You’re talking about a massive capital overhaul to change that system around. So, Pratt, being sort of a newer player with a new approach and a new vision, came into it in a certain direction, whereas now you’d have to basically strip these assets down to the studs to come up with a new method.”

“Investing in pulp assets has been increasingly expensive over the past few years, so this is a hurdle for the existing players, but for the new projects, we might see more of this type of approach,” Leon added.

Staying in your lane

Mill operators also are confronting whether it’s more efficient and cost-effective to purchase the OCC that feeds their machines or to invest in MRFs and vertically integrate, and from a MRF perspective, Barrett was straightforward: “I believe we are better off as a supply chain if we all focus on what we’re good at.

“I’m speaking on behalf of the section of this supply chain that does the sortation, [and] I don’t even think we are close to the potential of where we can get to,” he continued. “I believe if we all focus on what we’re doing and improve upon that, then [we] use the momentum and the knowledge that we’re gaining in that aspect. Dilution is not the solution in this case.”

Moore, who consults on projects that address this issue, said the two businesses are vastly different and often don’t find success dabbling in both areas.

“The front end, the MRF business, it’s so different than the mill business that very few people have been successful in running both,” he said. “Also, if you’re only containerboard and you’re only into one grade, you’re not going to make it. The only mill companies that were successful with the processing business are the board guys who use half a dozen grades [as well as] some high grades. … Those people really know the front end.”

Barrett said he’d rather mills invest capital against the value of material and incentivize higher-quality products as MRFs continue to invest in sorting optimization and emphasize recovery.

“We’re seeing a very interesting advancement in our recovery and our focus on it,” he said. “We’re watching our residuals and we’re doing audits and we’re looking for ways to improve under the same footprint or under the same roof.”

“I believe we’re best off doing what we’re best at. Let the sorters be the sorters; let the marketers be the marketers. When you look at what you gain through … having lived it, worked in it and having experts in it all the time, you have a better ultimate product and supply chain. [If not,] all we’re going to do is continue to fragment [the supply chain] into smaller and smaller and smaller pieces, and we could potentially inflate cost and inflate expenses and not gain the values of being more centralized and consolidated.”

The author is managing editor of Recycling Today and can be reached at mmcnees@gie.net.