Unseasonable highs

Mills are running full as pricing for old corrugated containers (OCC) and mixed paper jumped again from the month prior, setting records in December.

At $77 per ton, mixed paper reached the highest pricing point it has seen since Recycling Today began publishing Boston-based research firm RISI’s pricing in July 2014. (Mixed paper pricing topped its previous high of $73.06 for the first time in August 2016 and then again in November.)

For OCC, RISI reports this is only the third time in the last two decades that OCC pricing increased at domestic mills in early December. Pricing climbed for OCC in seven of the nine U.S. regions, according to RISI’s Dec. 6 PPW Yellow Sheet. Out of the Northeast region—in the New England and Buffalo, New York, areas—OCC pricing was steady from the month prior.

A material recovery facility (MRF) operator based in the Midwest says the packaging sector is unseasonably strong. “Which may be an indicator that the economy is improving as [mills] are still running strong filling orders,” he adds.

OCC has seen improved demand as a result of “good run times at mills,” the recycler says. He continues, “Expect OCC generation to continue to increase in December as we unwrap presents.”

While mills typically take downtime at the end of the year, sources say an improved U.S. economy has been good for secondary fiber markets. There is often softer demand at the end of the year and more supply. As 2016 came to an end, mills maintained operations, while demand played a large role.

“Very few mills are taking downtime because our business is pretty strong. The economy is strong,” says a paper and packaging recycler based on the East Coast.

In addition to greater demand for domestic mills, an uptick in export demand also has affected the recovered paper sector. Demand from mills in China and India is high, the East Coast-based recycler says.

“Inventories in Asia got a little dangerously low and some paper mills are just sort of panicking right now,” he says. “And that has driven the price up, but that won’t be long lived.”

For the second consecutive month, export pricing climbed from the prior month for every secondary paper grade shipped out of U.S. ports, with the exception of unchanged pricing out of the New York region for sorted office paper (SOP).

Mixed paper pricing soared $12 to $14 per ton FAS (free alongside ship, meaning the seller must deliver goods to a named port alongside a vessel designated by the buyer), while OCC increased $5 to $7 per ton FAS.

The Midwest-based recycler says most of his company’s shipments are heading to China. Mexico, he notes, is not reaching out too far for material in light of the currency exchange rate.

With China seeking less recovered paper overseas because of quality concerns, there’s talk of that country becoming more self-sufficient in that area. Fifteen years ago, the Southeast-based source says, China recovered 10 million tons of secondary fiber yearly, depending heavily on the U.S., Western Europe, Australia and Japan to supply its paper mills. However, that figure is much higher today. In 2015, he says, China recovered 50 million tons of secondary paper domestically.

“At what point will China not buy from the U.S. anymore? Then what do we do with all of that paper?”

The MRF operator has a positive outlook for recovered fiber for the first six months of 2017. He predicts even stronger pricing and demand throughout the year.

“If the economic indicators are true at this time, we are in store for some recovery in the first half of 2017,” he says. “First quarter could be sluggish with increased generation in January and coming off a strong quarter; but, by second quarter, we should see continued gains in value of commodities.”