Counting on corrugated

A number of recovered fiber grades enjoy strong domestic demand.

Demand for U.S. old corrugated containers (OCC) hit a record level in 2015, and mills today continue to order bales of the brown grade, which, along with deinking grades, are in strong demand domestically.

OCC (blue circles); Mixed Paper (black squares); *Average U.S. dollars per short ton for open market purchases by mills for delivery in June as reported by RISI’s PPW Yellow Sheet July 7, 2016. Prices used with permission from PPW Yellow Sheet. Free trial available: www.risi.com/rt.

A trader based in the Southeast says mills have been requesting more OCC and tissue grades. He says Georgia-Pacific, headquartered in Atlanta, mills in Georgia and in Muskogee, Oklahoma, specifically have asked for more sorted office paper (SOP). Deinking grades, the trader says, are in demand in the Northeast, Southeast and Midwest.

“Deinking or tissue grades have been for the last two months in strong demand,” he says.

In late June, the Corrugated Packaging Alliance (CPA), Itasca, Illinois, reported that the domestic recovery of OCC increased by 3.7 percentage points in 2015, pushing the figure to a record 92.9 percent. The gain, the CPA reports, was driven by a 3.5 percent increase in domestic consumption of OCC and a 10.6 percent jump in OCC exports.

Beyond online shopping, the trader in the Southeast says the back-to-school and agriculture seasons are why so much OCC in the recovered fiber stream.

Throughout June, U.S. containerboard inventories showed their biggest drop for the month in more than a decade, according to Boston-based research firm RISI, which cites recent statistics from the Fibre Box Association (FBA), Itasca, and the American Forest & Paper Association (AF&PA), Washington. Inventories fell 152,000 tons on box shipments and linerboard exports.

“Mexico is our biggest player by far. We do more with Mexico than China.” – a Midwest-based recycler and broker

RISI’s July 7 PPW Yellow Sheet reports pricing for OCC increased $5 to $10 per ton in each domestic region it tracks compared with June.

Despite pricing for SOP remaining fairly stable from June—pricing rose $5 per ton in the Pacific Northwest and Southwest regions and remained unchanged in other regions, according PPW Yellow Sheet—demand for the grade is strong, says a broker and recycler based in the Midwest.

“SOP is without a question very strong right now,” the Midwest broker says. “Mills are looking for more, and the supply is not necessarily there,” he adds.

The broker attributes the slump in supplies to seasonality. During the summer, the Midwest recycler says, supplies typically drop a bit.

As far as exports, the Midwest broker says “we’re seeing very healthy demand” from Mexico, despite the high value of the U.S. dollar relative to the peso. Export buying is slowly increasing, he says, with many purchases coming from China. However, “Mexico is our biggest player by far. We do more with Mexico than China,” the recycler says.

The Southeast-based trader says mixed paper has become a “very attractive export” to China.

*U.S. dollars per short ton for open market purchases by mills. Domestic prices are FOB seller’s dock for delivery in June as reported by RISI’s PPW Yellow Sheet July 7, 2016, while export prices are FAS port of origin. New York includes ports in northern New Jersey and LA includes Long Beach and LA ports. Prices used with permission from PPW Yellow Sheet. Free trial available at www.risi.com/rt.

“When you compare New York domestic mixed or OCC pricing, there’s a $50 spread or more between the domestic and export,” the trader says, adding, “so that tells you that the demand is really for the export.”

“Deinking or tissue grades have been for the last two months in strong demand.” – a Southeast-based trader

The trader points to upcoming changes at two Southeast facilities that will affect domestic recovered fiber markets. In November 2015, Resolute Forest Products Inc., Montreal, announced its acquisition of Atlas Paper Holdings Inc., a manufacturer of tissue products based in Miami, for $156 million. The trader says later this summer, the Atlas facility will begin using more virgin pulp than recycled materials as feedstock.

Conversely, Orchids Paper Products Co., Pryor, Oklahoma, will start up its Barnwell, South Carolina, mill in January 2017, the trader says. While the facility will open using virgin pulp, by March 2017 recovered fiber will be used. This November, the Southeast trader says the Orchids Paper mill will begin building its inventory of recycled paper.

“You’ve got one mill in Florida, the Atlas mill, that is going to be using less recovered fiber,” the trader explains. “But, at the same time, you’ve got the tissue mill opening in South Carolina that is going to be using more.”

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