BIR report indicates 'optimism' in recovered paper sector

Recovered paper markets in North America and Europe are beginning to stabilize and, in some cases, to show a modest strengthening, according to the latest Bureau of International Recycling (BIR) "World Mirror on Recovered Paper" released in mid-October.

USA-based Circular Ventures LLC founder Myles Cohen, writing on behalf of Marc Ehrlich of the Vipa Group, based in Switzerland, says while the high prices of 2021 and early 2022 have not returned, seven or eight consecutive months of small increases have created some optimism within the recovered paper marketplace.

For example, old corrugated containers (OCC) pricing is up $10 per ton in every U.S. region, lifting the average price for the seventh straight month as reported in the Oct. 5 edition of Fastmarkets RISI’s Pulp & Paper Week.

However, Cohen says that while OCC prices have doubled between January and September, it’s worth noting that prices in the early months of 2023 were as low as $29 per ton, so a doubling over the ensuing three quarters “is not earth-shattering.”

“The rising price trend is being driven by the same factors that have been in play over the past six to nine months, including low supply/collections,” Cohen writes. “Mills consuming OCC continue to be nervous that their demands will not be met because collections remain soft, and this nervousness is helping to drive up prices.

“Usually, if prices in the [U.S.] are moving up or down overall, one or two regions might be seeing the opposite trend, but not on this occasion; prices in all markets for OCC and mixed paper appear to be rising across the entire country.”

The BIR report also points to the startup of 100 percent-recycled mills that “support increased demand and, thus, higher pricing.”

In January, Domtar, based in Fort Mill, South Carolina, resumed operations at its mill in Kingsport, Tennessee, after the completion of a two-year, $350 million conversion from an uncoated freesheet paper mill to the company’s first 100 percent-recycled packaging plant. The site is projected to consume up to 660,000 tons annually of OCC.

Another major project, Conyers, Georgia-based Pratt Industries’ $700 million 100 percent-recycled paper mill and box plant in Henderson, Kentucky, opened in late September.

Cohen says the Kingsport and Henderson mills will consume “well in excess of 1 million tons per year.”

“On the flip side, however, is a weaker-than-normal domestic containerboard market, with some reports suggesting that corrugated box demand is down more than 10 percent versus 2022,” he continues. “There are myriad reasons for this softness, including low consumer confidence and, hence, spending, light-weighting and right-sizing of packaging in general. While none of these factors move the needle that much, the combination of all three is meaningful.”

While assessing the U.S. market, BIR Paper Division President Francisco Donoso of Spain-based Dolaf Servicios Verdes SL says as the holiday season approaches, mills are expected to stock up, leading to increased OCC demand and pricing across various regions in the U.S.

In the European market, in-demand grades like mixed paper and OCC witnessed stable pricing in late summer, Donoso says, attributing the stabilization to decreased production during the holiday period, reduced mill demand and favorable export opportunities.

But in September, particularly for lower grades, Donoso says prices began to tick upward again, the result of European buyers’ efforts to balance domestic and export prices. “European paper mills continued to face challenges owing to overcapacity and declining demand, leading them to maintain lower prices for their products,” Donoso writes.

“Overall, internal demand in Europe remained low, with paper mills grappling with weak order books and high price pressure owing to overcapacity in the sector.”