Trying to find the bottom

Departments - Commodities Paper

Paper recyclers prioritize movement over price.

June 26, 2019

With continued declines in recovered fiber prices, movement is the main concern among recyclers and brokers.

“Movement is about all anyone cares about,” a national broker says of current recovered fiber market conditions. “Everyone would like to see the best price, but it’s not a consideration. It’s about moving tons.”

Old corrugated containers (OCC) prices declined for a sixth consecutive month in June. Average U.S. OCC prices are $25 per ton in the June buying period, according to PPI Pulp & Paper Week.

“I’ve done this [for] 35 years and been here awhile, and this is probably one of the most challenging times in my time.” – a MRF operator in the Midwest

A broker in the Southwest U.S. says the current prices for OCC and mixed paper are concerning for small recyclers. “If prices keep getting lower, a lot of the small recyclers won’t be able to make it,” he says. “Unless they can start charging to pick up material, I’d say even short- to midterm future, there’s concern.”

Several recyclers and material recovery facility (MRF) operators say the current market conditions for recovered fiber are some of the worst they have seen in their careers.

“I’ve done this [for] 35 years and been here awhile, and this is probably one of the most challenging times in my time,” says a MRF operator in the Midwest. “We don’t have the export market anymore to absorb this excess supply.

“I think we’ve now hit a critical stage in residential recycling,” he continues. “We’re trying to determine where is the bottom of this? We thought we hit bottom last month. We found now that we’re at a 25-year low in OCC pricing.”

The MRF operator in the Midwest adds that aluminum pricing also is depressed. He says low aluminum and OCC prices are negatively affecting contracts used in residential recycling programs. He says, “This last price drop pushed numbers down so low that landfill rates are lower than processing rates.”

Prices for recovered fiber look particularly depressed on the West Coast, but the national broker says things aren’t “as bad as they look” in the latest PPI Pulp & Paper Week report. The Pacific Northwest is home to many paper and containerboard mills, so corrugated is still moving.

A recovered fiber market analyst says the current low prices for OCC “suggest that whatever demand exists is not keeping up with supply side.”

He says both China’s restrictions on importing recovered fiber as well as a general slowdown in economic growth across the globe have “no doubt affected demand for recycled fiber.”

“If prices keep getting lower, a lot of the small recyclers won’t be able to make it.” – a broker in the Southwest

The MRF operator says way too much supply is available in the marketplace. “We have got to stop where we’re at and focus on the demand side,” he says. “We’ve got to increase the recycled content in our products.”

Sorted office paper (SOP) prices also took a hit in June. Average domestic SOP prices declined about $20 per ton in the June buying period, PPI Pulp & Paper Week reports.

The national broker says SOP and newsprint grades have been very difficult to move. He attributes some of the slow movement to the recent fire at Georgia-Pacific’s paper mill in Muskogee, Oklahoma. May 13, the mill’s warehousing and converting area were damaged in the fire, and the mill shut down temporarily.

“They consume enormous amounts of deinking grades,” the national broker says of the Georgia-Pacific mill in Muskogee. He adds, “Seasonally, there’s high generation [and] one of the biggest consuming mills has a fire that put them out for a few weeks.”

However, he says the decline in SOP prices wasn’t as steep as many in the industry had anticipated. “We dodged a bullet, but I’m not sure if July will be ugly.”

The MRF operator says domestic demand will need to make up for the excess supply. He says “mills are coming. They’re just not here yet.”

The national broker says, “The recycling community is resilient. These [downturns] don’t happen very often. It hurts, but most know how to hang on and survive.”