Change for the better

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Paper scrap generation, end markets and pricing all changed in the past year.

December 3, 2021

Change was the name of the game for scrap paper recyclers this past year. The pandemic affected material generation levels, end markets for recovered paper changed and recovered paper pricing spiked compared with pricing in 2020.

Similar to 2020, the pandemic affected scrap paper generation. Material recovery facilities (MRFs) saw an increase in residential generation, but commercial generation remained softer than normal as many office and school buildings were closed as they operated remotely during the first half of the year before COVID-19 vaccines began rolling out to the general population. While some recyclers say commercial generation is normalizing as of the end of 2021, it tends to remain below prepandemic levels in much of the United States.

End markets for recovered paper also shifted in 2021 when China implemented its ban on recovered paper imports Jan. 1. Many in the industry were concerned that China’s exit from the marketplace would have an adverse effect on recovered paper demand and pricing. Yet, China’s exit from the international market had very little effect on recovered paper markets, which was a pleasant surprise for many recyclers and traders of paper scrap.

“I think we and other exporters and traders were bracing for this collapse when China backed out,” a broker with several U.S. offices told Recycling Today in early January. “China dropped out without much of a word, and the number of boxes that people needed did not change.”

Instead of markets collapsing, domestic demand for old corrugated containers (OCC) and mixed paper rose steadily throughout most of 2021. Domestic demand grew in response to the increased need for containerboard to produce boxes globally. As a result, OCC and mixed paper prices rose until leveling out in the October 2021 buying period.

Adam Josephson, managing director of equity research at Cleveland-based KeyBanc Capital Markets Inc., told Recycling Today in September 2021 that historically strong box demand led to a surge in OCC demand, pushing OCC prices up. Containerboard mills remained busy in 2021, with many reporting increased earnings compared with 2020. Josephson said containerboard producers published price increases throughout 2021 because of inflation seen during the year.

Although domestic demand for recovered paper strengthened throughout most of 2021, export demand was soft partly in response to logistics-related headaches that persisted throughout the year. Securing containers and space on ships presented challenges, and freight rates skyrocketed. One broker based on the East Coast told Recycling Today in October 2021 that he suspected some mills overseas held back on recovered paper imports, waiting for ocean freight rates to stabilize or decrease.

Looking ahead to 2022, many recyclers and mill operators say they suspect domestic demand for recovered paper could cool down, therefore prices for OCC and mixed paper could dip slightly. Despite the expected cooling, recyclers seem optimistic that demand and pricing won’t hit the lows experienced in 2019, and many forecast more stable demand and fair pricing. Time will tell whether that prediction is accurate.