What’s in the mix?

Features - Mixed Paper Markets

Market conditions for mixed paper are sluggish today and quality remains a concern, but new demand capacity is expected.

April 14, 2020

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Mixed paper has been a particularly tough sell for recyclers and brokers in recent years. Ever since China implemented its National Sword policy in 2018, paper mills around the world have started to clamp down on mixed paper quality. When old corrugated containers (OCC) prices averaged $20-to-$25 per ton in the latter half of 2019, few mills were interested in taking mixed paper bales—even for free.

“When OCC prices are down, mills are less interested in mixed paper,” says Bill Moore, president of Atlanta-based paper industry consulting firm Moore & Associates. “Mixed paper requires more processing, and most mills anywhere in the world can’t really process mixed paper that has more than 5 percent prohibitives. It just takes the value down.”

A material recovery facility (MRF) operator based in the Northeast U.S. says mixed paper has sold for $0 per ton or at negative prices during other points in his career but never for more than a few months. “I’ve never seen it like this where for two years there has been such negative pricing [for mixed paper] and not much on the horizon showing me that it will get better soon,” he says.

With the mixed paper price already dipping into the negatives, Pete Keller, vice president of recycling and sustainability at Phoenix-based Republic Services, says he’s doubtful mills will be willing to pay more for that grade in the near-term future.

“There’s no need to push it lower,” he says. “Zero is zero. If they were to push it lower, there would be a real risk that supply would go away.”

Contaminating confusion

Inbound material quality is certainly having an impact on MRF operations and their outbound material quality.

Keller says he would argue that the quality of materials coming into U.S. MRFs has gotten worse in recent years compared with the past. Although public education is helping some communities improve inbound material quality, it “continues to be a bit of a challenge” on a national level, he says.

Dan Kurtz, director of recycling at The Woodlands, Texas-based Waste Connections Inc., says contamination levels are “relatively stable” at the company’s MRFs, but some challenges remain. Although some public education efforts with municipalities have been productive (and necessary to the viability of the industry), he says improvements in inbound material quality seem to have stagnated.

“We are also caught between seemingly conflicting goals: cleaning up the inbound material versus adding additional recyclable items to the curbside can,” Kurtz says. “As we try to limit potential contamination and only collect and process what has value and at the same time try to find new ways to recycle more of the [materials] we use every day, we must remember that diversion does not equal recycling,” he continues.

Lack of consistent education surrounding municipal recycling and poor collection methodologies are two reasons the quality of inbound material coming to MRFs has stagnated and deteriorated in some cases, says Cal Tigchelaar, president of Chicago-based Resource Management Cos.

“As communities move more and more to giving residents a big 96-gallon cart to put their recyclables in, and as collectors move to automated collection systems, there is little scrutiny in the quality of the material,” Tigchelaar says. “That material is dumped in a truck, and the driver doesn’t see what it is, so it’s up to the resident to determine what’s recyclable—and they think they’re doing a great job.”

However, MRF operators say the quality of the outbound mixed paper certainly has improved since 2018. To clean up this commodity, MRF operators report that they are decreasing throughput, adding labor and investing in new technology.

The MRF operator in the Northeast says his company has invested in new equipment to produce higher quality mixed paper. “Our facilities have done millions in retrofits to help clean up material to be sure we meet specifications, and that includes domestic [specifications], too,” he says.

Overall, many MRFs have managed to improve the quality of the mixed paper they produce, but Moore adds that he thinks quality “still has a ways to go.”

Market limitations

In 2019, very few mills were buying mixed paper. China backed out of buying any mixed paper from MRFs last year, and other nations raised their quality standards.

The MRF operator based in the Northeast says demand is “dismal” for mixed paper. “There’s a reason it’s selling at such low prices. There’s no demand from export or domestic,” he says.

“Most single-stream mixed paper is hard to export,” Tigchelaar adds. “China has regulations against [mixed paper], which is where it was all going in the past. To the extent that that’s shifted from China to other countries, such as India, Indonesia and Malaysia, even those countries are taking a second look [at mixed paper] and don’t want the contamination.”

“I’ve never seen it like this where for two years there has been such negative pricing [for mixed paper] and not much on the horizon showing me that it will get better soon.” – a MRF operator based in the Northeast

India had been a good alternative market, but that nation began reducing the amount of mixed paper it would accept in the fall of 2019. “India was creating some competition for available quality volume” in 2019, Kurtz of Waste Connections says. “India’s decision to change its quality specs and inspection protocols created some downward pressure.”

However, Adina Renee Adler, assistant vice president of international affairs at the Washington-based Institute of Scrap Recycling Industries (ISRI), says some of the stories about India’s restrictions are just “rumors,” and that India hasn’t officially put any mixed paper specifications into writing. “There is a 2010 regulation that outlines what the requirements are for recovered fiber to come into India,” Adler says. “It’s possible that the enforcement of that got more lax, but our recent inquiries with government officials leads us to believe there are mixed signals on what was driving the stepped-up enforcement. People in the government said they needed to make sure they are enforcing that [2010] rule. The rumors are that there will be a 1 percent contamination rate in India, but there are no plans to put that in writing.”

Export opportunities still exist for mixed paper, but domestic markets offer more opportunity, especially given shipping challenges related to the coronavirus pandemic. The MRF operator based in the Northeast says he expects container shortages related to the outbreak.

Mixed paper suppliers in the Midwest experienced some relief in October 2019 when Atlanta-based Pratt Industries opened its mill in Wapakoneta, Ohio, which consumes 400,000 tons of recovered fiber annually, much of which is mixed paper.

Also, Total Fiber Recovery, Eugene, Oregon, announced plans in late February to open a recycled pulp production facility in Chesapeake, Virginia, which will have the capacity to process about 300,000 tons of mixed paper and other recovered fiber once it’s open.

Our view is that there is more domestic demand for mixed in the next 12 to 24 months,” Keller of Republic Services adds. “It won’t be commensurate with what was lost from demand in China—nowhere near that—but there will be more.”

Ready for rebound?

Although prices for mixed paper have hovered at or below $0 per ton for a while, signs indicate prices could inch upward in the near term. Fastmarkets RISI’s PPI Pulp & Paper Week reports that OCC rose to an average price of $44 per ton in the March buying period, an increase of about $12 per ton since the February buying period.

Average mixed paper prices might have sunk a little bit lower in March to a national average of -$7 per ton based on the PPI Pulp & Paper Week index, but it’s possible those prices might get pulled up soon.

“While I think we’ve got a slug ahead before we get up in mixed paper prices, if OCC [prices] jump up, mixed will also get pulled up,” Moore says. “There is a light at the end of the tunnel with almost all the major mill projects out there that used mixed paper. That will certainly help.”

The author is Recycling Today’s managing editor and can be contacted at msmalley@gie.net.