Recovered paper continues to enjoy robust demand

Supply and demand for most recovered paper grades appear to be benefiting recyclers and brokers slightly, particularly in the domestic market. In the May buying period, the domestic price for old corrugated containers (OCC) increased for the sixth consecutive month, according to the latest information from Fastmarkets RISI’s PPI Pulp & Paper Week. Mixed paper is on a similar trajectory, though its price hasn’t been rising as steadily as that of OCC. 

Recyclers and brokers say they are enjoying the seller’s market for the time being.

“OCC has appreciated in value over the last quarter, and that’s helped us,” says a recycler based in the South. “There’s a lot of demand” for the recovered fiber grade, he says.

A material recovery facility (MRF) operator based in the Midwest says he suspects the accelerating e-commerce demand is helping to boost demand for OCC in particular.

“The need for boxes has been going up by 2 to 4 percent every single year because people love having stuff delivered to their door, and COVID has accelerated that,” he says.

A broker based in the West Coast adds, “There’s huge demand for OCC and mixed paper right now, and that’s because of a combination of things. With the economy reopening, there’s demand for packaging. In addition to that, agriculture is coming into season nationwide. So, there’s just really, really robust demand for containerboard and boxboard.”

The broker adds that export demand has retreated a bit. Export prices for recovered paper, particularly OCC, surged in the March and April buying periods, but pricing and demand seem to have cooled in the May buying period.

The MRF operator in the Midwest adds, “In mid-April, we felt the effect domestically that everybody was taking advantage of export going overseas. Today, that’s curtailed itself back a bit. That has to do with some of the challenges in India with COVID. But I don’t think it’s because of a lack of demand for fiber. I think that was more because there were so many actors taking advantage of sending materials export as long as they could make it happen.”

“OCC has appreciated in value over the last quarter, and that’s helped us.” – a recycler based in the South

However, the West Coast broker says he doesn’t think the export market for OCC will stay cold for too long because of the global need for containerboard and boxboard.

During the Paper Spotlight at the ISRI2021 Convention & Exposition, which took place online in late April, Megan Workman of Boston-based Fastmarkets RISI said recovered paper demand is expected to continue to grow in the near-term future. She shared data from Hannah Zhao, a senior economist at Fastmarkets RISI, that indicates recovered paper demand will continue to rise until at least 2025.

Currently, global recovered paper demand is slightly less than 250 million metric tons per year. By 2025, that figure could be closer to 260 million metric tons per year based on Zhao’s forecast. This is a shift from 2018 to 2019, when world recovered paper demand declined because of the reduction in global paper and board production in China.

“There was a bit of a contraction in 2018 to 2019 because of China’s reduction in board and paper production, but going forward, this is going to rise,” Workman said.

The strong demand is welcome news for the recycling industry, but some challenges are present.

Transportation—securing trucking and space on ships—is expected to remain a challenge at least for the short-term future. The broker in the West Coast says he thinks ocean shipping backlogs have “gotten worse” in recent weeks, not better.

“There’s very limited space on vessels, and bookings are getting more difficult to come by,” he says. “When you do have bookings, they are seemingly constantly changing.”

He adds that trucking in the domestic market isn’t any easier. He says he’s heard of mills paying “two and three times more trucking costs” than they had in the past year.

Availability of mixed paper and sorted office paper also is tight and could become a bigger issue in the long-term future. The MRF operator in the Midwest says he has noticed much less inbound mixed paper this past year, adding that his MRF supplies Pratt Industries with the grade. He says he suspects schools not being in session in 2020 and 2021 has affected supply.

“COVID had an effect on that in the last year,” the MRF operator says. “It’s coming back a little, but long-term, mixed paper might be more like boxboard or carrier stock. I think, long-term, mixed paper as we know it will decline in generation, and the people who are heavily dependent on mixed paper will have to find alternative fibers to continue to make their products.”