Tissue grades continue to tumble

While low U.S. box demand has grabbed the attention of those in the paper and packaging industry throughout much of last year and into the first half of this year, tissue grades are facing their own challenging market condition. Unlike with bulk grades, it seems little hope is on the horizon.

Prices for high grades fell for the ninth-straight month, according to the July 6 edition of Fastmarkets RISI Pulp & Paper Week, which shows sorted office paper (SOP) falling by $15 per ton in every region but the Pacific Northwest, which had a modest $5-per-ton decline.

SOP pricing reached a historic high last summer but has been spiraling downward ever since. Currently, prices are down by about 37 percent from July 2022, when the average price per ton in the U.S. was $226. The average price per ton of SOP this July was $146.

”Sorted office paper and pulp substitutes are very, very hard to move right now.” – a recovered paper analyst based in the South

“Sorted office paper and pulp substitutes are very, very hard to move right now,” a recovered paper analyst based in the South says. “Because of the economy and everything else going on, virgin pulp prices are down. These paper mills are saying, ‘Why should I be paying these higher, inflated prices that I had to pay a year ago for SOP when I could buy virgin?’”

Mills haven’t found much relief in the export market, either. SOP prices plummeted $30 per ton out of the New York and New Jersey ports, while the Los Angeles and Long Beach ports were down $20 per ton.

“Recovered materials are truly a global marketplace,” the analyst says of the export implications. “One-third of the paper collected in this country is exported. … There’s nothing that comes close to recovered fiber in terms of tonnage that leaves this country, so when you talk about these commodities, you’re really talking about global economic conditions.”

The bulk grades market feels just as dire in some respects, but with the back-to-school and holiday seasons approaching in the second half of the year, there’s some optimism that the old corrugated container (OCC) market, in particular, will pick up.

U.S. mixed paper and OCC prices have slowly increased after mixed paper dipped into the red at the start of the year, while OCC was less than $30 per ton in January. Mixed paper still is down by 81 percent from last year’s pricing, and OCC is down by 61 percent, but Myles Cohen, principal of Atlanta-based advisory firm Circular Ventures LLC, predicts higher prices by the end of the year.

“Even with low generation, if export is down, that’s why we see $50 [per ton] to $60 [per ton] OCC right now,” he says. “My prediction is you will see OCC go up in the third and fourth quarter of this year. Maybe not in August, but I think September through December, you’ll see OCC [prices] go up.”

Cohen notes material recovery facilities are having an easier time moving mixed paper because of low generation and not because demand has increased.

The containerboard business still is rebounding from the first half of the year when a number of mills took downtime to reflect the market. Cohen says the sector was “way, way, way down” during that quarter.

Among the companies taking significant downtime were Grief, Delaware, Ohio; WestRock, Atlanta; ND Paper, a subsidiary of Chinese company Nine Dragons Paper (Holdings) Ltd.; Packaging Corp. of America, Lake Forest, Illinois; and International Paper, Memphis, Tennessee.

“Corrugated boxes are still going to be the No. 1 category of paper manufactured,” the analyst based in the South says. “[It’s not] doom and gloom for corrugated boxes, but there are a lot of factors that are going to limit the long-term growth.

“There’s been this downturn in the containerboard business for virtually all of 2022. The market was down last year and the first half of this year, and usually these downturns don’t last more than 18 months or so. People are looking at history and thinking it’s going to turn around the second half of this year,” the analyst adds.