Demand for recovered paper remains high

Paper mills across the globe have been reporting high sales volumes and pricing for containerboard.

In their latest earnings reports released in February, North American packaging producers Cascades and Greif were among them, helping to increase demand for recovered paper in recent months.

According to its latest earnings report in late February, Hong Kong-based Nine Dragons Paper Holdings Co. also report healthy demand for containerboard, announcing that will invest 5.4 billion renminbi (or about $8.3 billion) in Malaysian paper mills that will manufacture corrugated products.

As a result of strong containerboard markets, most mills are hungry for recovered paper. In response, domestic and export old corrugated container (OCC) prices have risen, and mixed paper pricing has held its ground. Prices for high grades, such as sorted office paper (SOP), have risen as well.

MRF operators say generation of OCC has not quite kept up with the demand from mills.

“We could sell more OCC if we had it,” says Steve Frank, owner of Pioneer Recycling Services, which operates two material recovery facilities (MRFs) in the Pacific Northwest. “We’re not lacking demand.”

“Supply [of recovered paper] really decreased after we got through the holidays,” adds Miriam Holsinger, vice president of business intelligence and operations at Minneapolis-based Eureka Recycling. She says OCC generation was slightly steadier than mixed paper generation in February.

Frank says the recovered paper coming into their MRFs has been slightly dirtier over the past year compared with before the pandemic.

“The dirtier material can be a challenge for operators,” he says. “But we have invested in paper sorting optics, so our quality outbound after we sort is very good.”

As of early March, MRF operators and brokers alike say recovered paper prices are rising much more quickly in export markets than in domestic ones.

A broker based on the East Coast says he noticed OCC prices double in a 24-hour period during the first week of March. “Everyone who’s bought OCC from me ever is calling, raising their prices daily. I’ll get an email from the same person five days in a row offering an increased price each day.”

He adds that paper mills in India are helping to drive recovered paper demand this year. “India has been a driving force ever since China left the market last year,” the broker says. “They just can’t get material fast enough there.”

A MRF operator based in the South says mills in other parts of Southeast Asia, including Malaysia and Vietnam, also are buying recovered paper at high prices. He adds that domestic mills will need to increase their buying prices to remain competitive.

“Mills everywhere are busy,” he says. “I’ve been trying to ship more export because of the pricing differential.”

The broker based on the East Coast adds that it’s better to move export than domestic right now in terms of pricing. But, he says, current freight-related issues can make export sales difficult.

The broker adds that high export prices don’t matter if securing freight is not possible. He adds that it’s important to also maintain relationships with domestic outlets as well.

Securing trucking and freight has been challenging for the past few months. Recyclers and brokers say these problems were exacerbated in mid-February when a winter storm hit most of North America.

As a result of the mid-February storm, the broker based on the East Coast says some piers shut down temporarily.

According to a March 6 article in the New York Times, a lack of dockworkers and truck drivers—in part because of the pandemic—has slowed container shipping at ports in Los Angeles and Long Beach, California. Gene Seroka, executive director of the Port of Los Angeles, reported in one of the port’s board meetings recently that he suspects that ports will remain backlogged until midsummer.

Although transportation is very tough Frank says it’s the only detriment to his business right now. He says, “Transportation is a headwind, but it does look like for recovered paper and many commodities right now there are a lot of good tailwinds.”