Recovered paper demand is expected to grow worldwide in the near-term future. According to data from Hannah Zhao, a senior economist at Fastmarkets RISI, headquartered in Boston, global recovered paper demand will rise gradually between now and 2025.
Currently, global recovered paper demand and usage is at just under 250 million metric tons per year. By 2025, that figure may 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,” said Megan Workman, price reporter and editor at Fastmarkets RISI, during the Paper Spotlight session at the ISRI2021 Convention & Exhibition, which took place online April 20-22 and April 27-29.
Demand for old corrugated containers (OCC) will rise most steeply compared with other recovered paper grades, driving that global increase, Workman said. From 2015 to 2020, all countries increased their imports of U.S. OCC, except for China, which decreased its OCC imports by 55 percent, she said.
Along with China’s ban on recovered paper imports, Workman said the market has seen a “shortening of the spread” in both double-lined kraft and OCC prices, as well as a shortening in the spread between No. 11 and No. 12 (double-sort) OCC since China drove demand on those grades. She added that “double-sorted is not going away. … It is in demand. It’s just that other countries didn’t pay up as much as China was, so that spread has tightened a bit.”
A main driver behind the boost in OCC demand is China’s need for brown recycled pulp.
“OCC is the main component in brown recycled pulp,” Workman said. “This brown recycled pulp is where China’s demand has gone. They banned the imports of recovered paper, but they haven’t banned or really set any specifications at all on this brown recycled pulp.”
With the new demand for brown recycled pulp emerging, she said Fastmarkets RISI just launched brown recycled pulp pricing in January. She said brown recycled pulp pricing was at $520 per ton CIF (cost, insurance and freight) to China in March. For comparison, brown recycled pulp prices were at $480 per ton in February, $450 per ton in January and $370 per ton in December 2020.
Fastmarkets RISI’s Zhao also forecast that recycled pulp demand from China will hit 5 million metric tons per year by 2025. In the session, Workman described that as “a huge jump from nil in 2017.”
The demand for brown recycled pulp has been one factor helping to boost pricing for U.S. OCC. Workman said the April prices for OCC are up compared with figures in April 2020, and the April 2020 figures were up from April 2019.
She added that mixed paper prices also are up significantly from one year ago, when prices were negative for that grade.
Another factor driving demand is domestic consumption. Workman said U.S. consumption domestically hit “the highest point in a decade” in 2020. “That is a great sign of our market,” she said.