Domestic recovered paper demand stayed strong in September, and prices for all grades of recovered paper have increased slightly as well. But a few recovered paper brokers say generation is off from where it usually is this time of year.

“Summertime traditionally tends to be a little slow anyway because people are on vacation,” a broker based on the West Coast says. “If you look at the seasonality, in the fall, generation should be picking up. I don’t know if that’s going to happen or not.”

He says domestic buyers’ demand for tissue grades, such as sorted office paper (SOP) and coated book stock, is strong, but the broker adds that demand also could be the effect of the extremely soft level of generation.

“The historically strong box demand has led to a surge in OCC demand, which is why OCC prices are near historic highs.” – Adam Josephson, managing director of equity research at Cleveland-based KeyBanc Capital Markets Inc.

“People aren’t really going back to the office yet, and the shredders are slow. The deinking grades, the tissue mills are struggling to get supply because the big shredding companies are slow,” the broker says. “There’s less coated book being generated. There’s less material coming from printers and less SOP being created for lack of people being in the office. There’s a real supply shortage.”

A broker in the Midwest says he has noticed the same trend with tissue grades.

“SOP remains very strong with good premiums and same with coated book stock. Consumer demand for tissue products ticked up again, especially on the postconsumer side, since restaurants and stadiums are doing better,” he says. “But there’s still a lack of supply. People are back to school, but office buildings aren’t all back.”

Domestic demand for old corrugated containers (OCC) has remained very strong as of September. Adam Josephson, managing director of equity research at Cleveland-based KeyBanc Capital Markets Inc., says demand for corrugated boxes that has persisted since last summer is driving strong OCC demand.

“OCC prices are very much tied to domestic box demand. Domestic box demand has been strong since last June, but it took a while for that box demand to be reflected in OCC prices,” he says, adding that OCC prices have risen for the past 11 months and are now at the highest point they have been in several years.

“The historically strong box demand has led to a surge in OCC demand, which is why OCC prices are near historic highs,” Josephson says.

Containerboard mills that consume OCC have been busy this year, but they also are dealing with substantial cost inflation. He says all the major containerboard producers implemented price increases three times this year. Containerboard prices have risen by almost 23 percent in less than a year, he adds.

“Containerboard prices rarely rise so dramatically in such a short period of time,” Josephson says. “And it’s possible that producers could attempt yet another price increase later this year. … Demand remains good, supply chains remain effectively broken and cost inflation for containerboard producers appears to be intensifying as each month goes by, particularly for those that use a significant amount of recycled fiber.”

Domestic demand for recovered paper has fared better than export demand in recent months. The broker based on the West Coast says mills in Southeast Asia have slowed down their orders lately.

“Export is slow,” he says, adding that mills in Southeast Asia are not competing with domestic mills on price. “This should be the time of year they are running really strong. But you have COVID going on in a lot of countries—Vietnam, Malaysia, Indonesia, Korea. … Domestic mills are paying far more than the export market is willing to pay.”

While mills are still hungry for recovered paper, the broker in the Midwest says their inventories seem to be “getting more in balance” than they had been earlier this year. He says more mills are expected to take downtime this fall.

The broker on the West Coast says he thinks recovered paper prices might plateau in the coming months, adding that recovered paper prices did not increase as dramatically in the September buying period as they have in previous months this year.

Josephson adds that he thinks OCC prices hit their peak in September, with demand appearing to have softened in late August. “We think OCC prices have peaked, though we don’t know when they’ll fall and how rapidly,” he says.

Secondary aluminum scrap demand and pricing continue to be weighed down by the semiconductor shortage affecting the automotive sector.

A nonferrous trader with a scrap processing company based in the Northeast says demand for secondary grades of scrap is not as strong as demand for primary grades. This has been the trend throughout much of 2021 as the automotive industry has had constraints imposed on its production in light of the semiconductor shortage, affecting its demand for cast aluminum products made from secondary aluminum.

Colin Denihan, vice president of Wabash, Indiana-based Metal Source, which operates scrap yards and produces 356 aluminum sow and ingot, de-ox products and 380 aluminum sow and ingot, says demand has been consistent for the aluminum scrap grades his company procures and consumes: aluminum wheels, engines, old cast, turnings and foundry dross. He adds that the company is “pretty competitive” in terms of pricing.

Denihan says he sees spreads widening for secondary grades of aluminum scrap in the last quarter of the year in light of the ongoing chip shortage. “A lot of our contracts are taking the minimum. The spot market pricing isn’t as attractive based on the automotive demand.”

“Everyone’s eyes were too big a few months ago, so now the delivery windows are tight with tighter grading.” – a trader based in the Northeast says of aluminum scrap consumers

He says export demand for aluminum scrap is stronger than it has been in the last three months as of mid-September. “They need scrap,” Denihan says. “They are nervous with this price run. They are trying to source anything with silicon or that is a prime equivalent, not just secondary grades.”

In the domestic market, the contact based in the Northeast says, “UBC (used beverage can) pricing is great, but there are very few delivery appointments.

“Everyone’s eyes were too big a few months ago, so now the delivery windows are tight with tighter grading,” the trader says of aluminum scrap consumers. “I think it’s mostly a factor of capacity constraints and they bought too much fearing being left out of the market.”

He says export markets are still looking for red metals and aluminum grades that are difficult to move domestically. “It’s a boon for peddler yards,” the trader in the Northeast adds.

Nonferrous scrap generation has been ticking upward slowly, the trader says, though demolition activity is showing signs of softening. “Demo [scrap] is waning as we get closer to winter. It’s mostly seasonal around here.”

Material movement is hampered by the ongoing issues in the trucking sector, and high costs are affecting scrap processors’ profits.

“If you primarily rely on third-party carriers, you’re getting killed right now,” the trader says. He says it’s easier to absorb the high costs when shipping high-value copper or nickel/stainless scrap. “Aluminum, not so much. It hurts.”

The trader adds that the number of dropped loads has increased while pricing has increased 50 percent over the last nine months.

Denihan says freight is a considerable factor for Metal Source when it comes to procuring metal. “Logistics has been a huge struggle for everybody I would say,” he adds.

After a year of upward momentum, scrap processors had to contend with ferrous inventory that lost some value in the September buying period.

A hectic summer’s worth of supply combined with tepid overseas demand and domestic mill buying that has plateaued brought downward price pressure to the ferrous scrap market.

The steel industry received attention in the wider financial press in late summer, with output cutbacks in China (by far the world’s largest steel producer) putting downward pressure on the price of iron ore globally and finished steel in much of Asia.

Flattening steel production patterns contributed to Fastmarkets AMM Midwest Index prices in early September that saw prime busheling scrap drop from roughly $650 per ton in August to about $600 per ton in September.

Contrary to the prevailing trend of the previous two decades, output in China declined in July, while production in the rest of the world increased. Figures collected by the Brussels-based World Steel Association showed China with July production of 86.8 million metric tons, down by more than 7 million tons from the June figure of 93.9 million metric tons.

A government effort to reduce carbon emissions has been cited as the predominant reason for the steelmaking decline in China. Economists are keen to determine whether a retreat from the massive infrastructure spending and apartment tower building of the previous two decades also could be contributing to a steel slowdown.

In the run-up to the early September mill buying period reflected in Fastmarkets AMM surveyed pricing, weekly U.S. steel output measured by the Washington-based American Iron and Steel Institute (AISI) portrayed an industry in which the revival from previous COVID-19-related woes could be sputtering.

AISI says U.S. raw steel production in the week ending Sept. 4 checked in at 1.866 million tons, which is down 0.4 percent from the previous week, when production surpassed 1.873 million tons. In the first two weeks of August, U.S. weekly raw steel production also fell by 0.2 percent compared with the week before.

The flattening production patterns contributed to Fastmarkets AMM Midwest Index prices in early September that saw prime busheling scrap drop from roughly $650 per ton in August to approximately $600 per ton in September.

Obsolete grade prices also dropped in September, with shredded scrap losing about $10 per ton in value and No. 1 heavy melting steel (HMS) declining by about $20 per ton in the Midwest.

The fate of obsolete grades was not helped by skittish behavior from overseas buyers in August and early September. That trend might have started reversing in mid-September, with the Davis Index news service reporting that buyers in India and Bangladesh were beginning to bid up imported HMS and containerized shred prices (though Davis Index indicates the Turkish market remained soft).

Also offering better news to ferrous scrap dealers is the relative strength of the domestic steel sector compared with last year. Despite a mild downtrend in late summer domestic steel output, the sector remains well-ahead of its pace in 2020, when COVID-19 disruptions caused mill output to plummet.

Production the week ending Sept. 4, 2020, was 1.51 million tons, representing 23.5 percent less output compared with the comparable week this year. In early September 2020, the mill capability (capacity) utilization rate was 67.4 percent compared with 84.5 percent in early September this year.

Ferrous scrap prices going forward remain tied to the prospects for the U.S. economy, including the steel-absorbing automotive and construction sectors.

The auto industry continues to suffer from a lack of access to the microchips used in increasingly computerized car and truck models. Toyota Motors announced cutbacks in North America in August and September, delaying the assembly of about 150,000 vehicles. Argus Media calculated, in a mid-September news item, that since the average North American vehicle consumes nearly 1 ton of steel, per AISI, the Toyota cuts could mean some 250,000 tons of steel that otherwise would have been consumed will not be needed.

Ford Motor Co. has reported a 33 percent decline in sales in August 2021 compared with August 2020, based not on falling customer demand but on a lack of fully assembled vehicles to deliver.

The construction sector, which is less affected by the global microchip shortage, instead is expressing frustration with trends in the domestic metals market.

The Arlington, Virginia-based Association of General Contractors of America, in a mid-September email, cites its producer price index, which shows that steel mill products have increased by 123 percent in price compared with last August, while copper, brass and aluminum product prices have risen by from 35 to 45 percent.

Photo courtesy of Evergreen

Every Bottle Back, Closed Loop Partners invest in Evergreen

The American Beverage Association and the Ohio Beverage Association, in partnership with Closed Loop Partners, are investing $5 million toward Evergreen’s $22 million expansion of its polyethylene terephthalate (PET) recycling plant in Clyde, Ohio. Half of the $5 million investment is from the American Beverage Association in partnership with Closed Loop Partners through the beverage industry’s Every Bottle Back initiative, and the other half is from Closed Loop Partners’ Infrastructure Fund.

Earlier this year, Evergreen announced its plans to double production capacity at its plant to 80 million pounds of recycled PET (rPET) annually by 2022.

Greg Johnson, Evergreen corporate vice president, told Recycling Today at the time of the announcement that the investment will include upgrading four of the six optical flake sorters on its wash line with equipment from Tomra Sorting Recycling, Germany, as well as the addition of 54,000 square feet to its existing 240,000-square-foot building in Clyde to accommodate a third pelletizing line to be supplied by Vienna-based Starlinger. Evergreen also will install two solid-state polycondensation (SSP) reactors from Starlinger, on two of its pelletizing lines. The SSP reactors decontaminate the flakes and increase the intrinsic viscosity of the rPET pellets the company produces, according to Starlinger.

In a news release issued by Every Bottle Back, Omar Abuaita, CEO of Greenbridge, the Mentor, Ohio-based parent company of Evergreen, says, “Evergreen is pleased to partner with the Ohio Beverage Association and Closed Loop Partners to expand our Clyde recycling and manufacturing facility and accommodate the heightened demand for rPET.”

Abuaita adds that the facility’s expansion will “create new jobs while building on our company’s commitment to recycling, sustainability and closed-loop solutions.”

“We are excited to support Evergreen’s expansion, which will help Ohio’s beverage companies close the loop on its 100-percent-recyclable beverage containers,” says Kimberly McConville, executive director of the Ohio Beverage Association, Columbus, Ohio, in the news release. “This is the second Every Bottle Back investment in Ohio, building on our industry’s commitment to strengthen recycling infrastructure, increase the collection of our plastic bottles and work towards using more recycled content.”

Every Bottle Back previously partnered with The Recycling Partnership, Falls Church, Virginia, and Solid Waste Authority of Central Ohio (SWACO) to invest in Ohio’s Pleasant Township and the city of Whitehall. Those communities received grants to purchase new carts and to deliver recycling education materials to every home as part of SWACO’s ongoing “Recycle Right, Make a Difference” program.

Lead by the American Beverage Association, Every Bottle Back is an initiative by The Coca-Cola Co., Keurig Dr Pepper and PepsiCo designed to reduce the beverage industry’s plastic footprint by getting back more of the industry’s recyclable plastic bottles to be remade into new bottles. This latest investment will help finance the new building at Evergreen’s Clyde plant.

“Through our partnership with Evergreen and Closed Loop Partners, this project—along with several others throughout the region and country—will help capture and process more of our valuable, 100-percent-recyclable plastic bottles so they can be remade into new bottles,” says Katherine Lugar, president and CEO of the American Beverage Association. “This project is another example of the power of private-public partnerships created through Every Bottle Back to build a circular economy for plastic and keep it out of the environment.”

Ron Gonen, founder and CEO of Closed Loop Partners, New York City, says, “To build a truly circular economy and meet the demand for food-grade recycled content, bottle-to-bottle recycling is critical. This investment in Evergreen helps strengthen the market for recycled plastics and inspire other local markets and states to participate in building a waste-free future. Together, Evergreen and the American Beverage Association have pooled key resources to make this project a priority, underscoring the importance of working across the public and private sectors to reduce the use of new plastic and protect the planet for future generations.”

The Washington-based American Beverage Association says the Evergreen investment is the 10th of 13 initial projects the beverage industry has committed to fund under Every Bottle Back. To date, through Every Bottle Back the industry has committed $10.6 million in funding to projects that it says will yield an estimated 647 million more pounds of PET over 10 years.