Supply of and demand for old corrugated containers (OCC) seem to be in equilibrium as of mid-December. Recyclers and mills alike are saying market conditions for this material are “stable.”

“No one is calling for additional tons, but loads are getting picked up. It’s stable that way,” says Marty Rusk, the Dallas-based vice president of North America recycling operations at Smurfit Kappa.

He adds that containerboard operating rates have been high in recent weeks. Rusk references the 98.1 percent operating rate as reported in the American Forest & Paper Association’s (AF&PA’s) “October 2020 Containerboard Monthly” report.

“Fortunately, in the Northwest, we have a lot of domestic mills here that are running very strong.” – Steve Frank, president and CEO, Pioneer Recycling Services

A broker based in the Midwest says mixed paper demand also has increased because of the strength in containerboard production. Mixed paper is moving steadily, he says, and generation is up partly because of the holiday season, so supply is good.

In hindsight, a large independent recycler says 2020 recovered paper markets were far better than in 2019. “We’re optimistic on particularly OCC and things that are around packaging for 2021.”

But the bigger issue at hand, the recycler says, is transportation.

Many recyclers and mill operators alike expressed concerns about trucking and ocean shipping throughout most of November and December of last year. Sources contacted by Recycling Today in December 2020 generally agree that trucking is the larger of these two transportation-related headaches. Mill operators tell Recycling Today that securing trucking, particularly with the end-of-the-year holidays, is difficult, and moving material requires much more time and planning.

Generally, trucking has been challenging in recent years as that industry faces a driver shortage. The broker in the Midwest says he thinks the driver shortage worsened during pandemic-related shutdowns. Early in 2020, Bureau of Motor Vehicles offices closed or restricted hours in response to the pandemic or government mandates to shut down, making it harder for potential new drivers to get commercial drivers’ licenses to get them on the road.

The broker based in the Midwest says his company is in a decent position and has been able to control its freight, but adds, “Mills are having a hard time getting trucks to pick up on time.”

With the driver shortage, Rusk says he has noticed a dramatic decline in the level of service provided by trucking companies, while the costs have gone up.

Sources say shipping containers have been hard to come by in November and December. It has been tough securing space on sailings, too.

“Space is tight,” says Steve Frank, president and CEO of Pioneer Recycling Services, which has material recovery facilities in Tacoma, Washington, and Clackamas, Oregon. “Even though you have a booking, at the last minute it can get rolled. It is very challenging in the Northwest. I’m hearing about this all over in our area.”

“No one is calling for additional tons, but loads are getting picked up. It’s stable that way.” – Marty Rusk, vice president of North America recycling operations, Smurfit Kappa

Sources based on the East Coast say they have had the same challenges securing containers. The container shortage is partly related to the holiday season, but another cause is the global reworking of shipping lanes to Southeast Asia since China stopped importing recovered paper Jan. 1.

“Southeast Asian economies are rebounding fast,” Frank says. “They’re trying to get containers, and maybe in some cases, they are happy to take them back empty.”

With the container shortage and trucking issues, Frank says movement is “choppy.” He adds, “Fortunately, in the Northwest, we have a lot of domestic mills here that are running very strong.”

The Brussels-based Bureau of International Recycling (BIR), also notes that U.S. recyclers are facing a “lack of truck drivers and containers,” in a Dec. 8, 2020, news release.

Transportation is tough in other parts of the world, too, including Canada and the United Kingdom, the association says. BIR says recyclers based in the U.K. have experienced container shortages and freight hikes.

A number of recycled resins are ending 2020 on a high note despite the difficult first half of the year, sources say. This has reprocessors feeling positive about markets heading into 2021.

“We are hoping for a strong kick-off for 2021,” says a contact with a reprocessor primarily of postindustrial material that has operations in the Southeast.

2020 got off to a bad start, she says, and remained difficult through the first half of the year. In the second half, the reprocessor says conditions improved considerably.

Early in the pandemic, she says her company was able to work off of its inventory as inbound material slowed down. It also sourced scrap from other recyclers.

“Quality is outshining availability issues. If they can’t produce a high-quality repro, they are not going to mess with it. Quality is more important than price.” – a reprocessor based in the Midwest says of lower quality plastic scrap

Since August of last year, however, she says her company has been “extremely busy” as manufacturers “got back to work and started making scrap.”

In fact, in September and October, she says her company did more business than in those months in 2019. While November and December were a little slower than September and October, they also were busier than in 2019.

She attributes some of that strength to manufacturers trying to catch up after pandemic-related shutdowns. But hurricanes that affected the Gulf Coast also disrupted virgin plastic production to the benefit of recycled resins.

A Midwest-based contact with a global plastic recycler and distributor says polycarbonate (PC) and acrylonitrile butadiene styrene are in short supply, and “prices have gone crazy.” He says reprocessed PC is 30 cents more per pound in mid-December than it was in August, with orders 12 weeks out.

Prices for all polyolefins also have increased, the Midwest-based reprocessor says, and supply has tightened. “The pyrolysis guys are poking around, too,” he adds, noting that they are after lower grade material that might need secondary processing to make it desirable to mechanical recyclers.

For reprocessors, “Quality is outshining availability issues,” he says. “If they can’t produce a high-quality repro” from the scrap on offer, “they are not going to mess with it. Quality is more important than price,” he adds.

The reprocessor based in the South says demand for recycled polypropylene “has been crazy this year,” while injection-grade high-density polyethylene (HDPE) and fractional melt HDPE also have been in high demand. Recycled low-density polyethylene (LDPE) has been in demand for film applications as states such as California mandate recycled content in these products.

The reprocessor based in the Midwest affirms the recycled LDPE demand.

Shannon Dwire, president of Millennium Recycling Inc., which operates a material recovery facility (MRF) in Sioux Falls, South Dakota, says markets for the plastics her MRF is generating seem relatively strong. “I think, overall, the plastic market is doing OK,” Dwire adds. “More brokers are calling, and that tells me there is some more use going on, so it’s better than it was.”

Pricing for HDPE is strong, she says. “With HDPE, we sell everything we have right here in the Midwest. It’s been a steady flow, and markets for HDPE seem to have held.”

She says demand for Nos. 3-7 plastics also has improved relative to last year. “More companies are interested in it,” she says of that material.

In the aluminum scrap sector, contacts report that it’s a seller’s market, as generation remains somewhat lighter than normal though demand has picked up.

“Consumers want to ensure a steady flow of material heading into 2021,” says Chad Kripke, executive vice president of Kripke Enterprises Inc., Toledo, Ohio. The company is a nonferrous scrap brokerage firm that specializes mainly in aluminum. “There is a larger than normal mix of sellers who decided to weigh heavier on the spot market versus contract business for 2021,” he adds. “Scrap processors are feeling confident that 2021 will be the year to regain some leverage. With spreads remaining tight, it is still a seller’s market for the foreseeable future.”

A trader for a multilocation scrap processing and brokerage company headquartered in the Midwest shares Kripke’s enthusiasm for the year ahead. “If we can keep manufacturing humming through COVID, you can argue that demand for scrap will be really strong next year,” he says.

“Scrap processors are feeling confident that 2021 will be the year to regain some leverage. With spreads remaining tight, it is still a seller’s market for the foreseeable future.” – Chad Kripke, executive vice president, Kripke Enterprises Inc., Toledo, Ohio

A contact with a scrap brokerage and trading company with operations primarily on the West Coast also mentions the shift to a seller’s market, noting that also is the case with export. “Reduced flows of scrap have caused spreads to tighten across the board.”

While nonferrous scrap generation has been increasing since the summer, it is not quite back to prepandemic levels. The Midwest-based trader says industrial flows are at 90 percent as of the end of 2020.

Kripke describes obsolete generation as “spotty,” though he adds that it appears to be increasing. “It is difficult to determine what is coming out of the woodwork due to the rise in the market versus what would have otherwise been available had prices stayed stagnant.”

The Midwest-based trader says aluminum scrap is in high demand at secondary smelters that supply the automotive industry. He adds that these consumers have been competitive on mill-grade aluminum scrap, as well. Rolling mills also are demanding aluminum scrap. “Even segs have gotten hot again,” he says, referring to segregated low-copper clips.

According to surveyed pricing data from Fastmarkets AMM, segregated low-copper clips were selling for a U.S. monthly average price of 42 cents per pound in the December 2020 buying period, up from nearly 30 cents per pound in the November buying period.

Kripke says, “Demand for extrusion and common alloys are very strong, and spreads remain very tight. Prices also are rising sharply for secondary grades.”

Red metals demand, whether from domestic or international consumers, is not as robust as that for aluminum. The Midwest-based trader says, “Domestic consumers have been able to buy at whatever spread they think is right.”

Some red metals consumers have been out of the market for the last couple of months, the trader says in mid-December, and another consumer has announced that it will be out of the market in February. Despite that, he adds, “We’re able to sell what we need to.”

Since China began accepting “furnace-ready” nonferrous scrap shipments as of Nov. 1, 2020, the Midwest-based trader says he’s been watching to see how customs clearance is progressing. He explains that he’s not sure how closely inspectors will adhere to the published specifications. His company is not quite ready to begin shipping material there until it has more clarity in this area, the trader adds.

The COVID-19 pandemic has grounded holiday travel plans for many Americans, but it has contributed to high-flying ferrous scrap prices in the late 2020 holiday season, as overseas and domestic demand outstripped supply.

In late November, overseas demand began putting upward price pressure on U.S. ferrous scrap supplies as governments around the world funded steel-intensive infrastructure plans. By the time domestic mills started making offers in early December, they encountered a loftier market that began rising some more.

“The export market is on fire, and it even caught me by surprise a little bit,” Nathan Fruchter of New York-based Idoru Trading tells Recycling Today in late November. Fruchter says in addition to the usual purchases from Turkey, buyers in Latin America and the Indian subcontinent were bidding aggressively for American scrap.

“Business has really slowed down the last month or so. It’s definitely not because of pricing.” – Midwestern scrap processor

Fruchter says many Turkish buyers have shifted their attention to the lower priced European and Black Sea markets, but those options are not available to Central and South American mills. Buyers for these mills have been willing to pay up to $20 or $30 more per ton to secure supplies from U.S. shippers to feed furnaces in their rebounding steel sectors.

“Buyers from Mexico, Peru, Ecuador and Brazil are all out there buying en masse,” Fruchter says of the late November market. “Over the years, we have seen all these countries buying scrap, some on a regular basis, others on and off, and some even—like Brazil—often off. But I cannot recall seeing so many [Latin American] buyers converging simultaneously on the market during the same month,” he adds.

Mills in those nations, Fruchter says, were “buying domestic scrap in their own markets, but there simply isn’t enough to go around. So, they look to the U.S. and are offering figures considerably higher than what the Turks are able to pay.”

He says that while East Coast and Gulf Coast shippers entertain the higher Latin American offers, for West Coast exporters, “Prices in Asia, from nations including Bangladesh and Vietnam, are strong enough, so they keep looking in that direction.”

A Dec. 3 report from the United Kingdom-based Seatrade Maritime News describes a “bull market in Bangladesh,” with prices there nearing $400 per long ton for containerized scrap. The surging market was likely to mean “recycling yards in both India and Pakistan will have to raise their price ideas.”

The ripple effect of the overseas demand was clear by the time Fastmarkets AMM settled its Midwest Index prices Dec. 10. Pricing for two of the three Midwest Index grades (No. 1 busheling and No. 1 heavy melting steel, or HMS) rose by more than $80 per ton, while the price of the third (shredded scrap) rose by nearly $76 per ton.

That outpaced the average export prices as tracked by Fastmarkets AMM. The publication had early December East Coast export prices settling at just under $340 per ton (about a $75 per ton increase over November) and West Coast prices averaging $316—only about $20 higher than November.

While the rising prices created the potential for a healthy margin for scrap processors, the bad news is that seasonal and public health factors limited the amount of scrap flowing into yards.

“We expect our flows to settle in at or return to 70 percent of pre-COVID levels,” says a processor on the East Coast about his company’s volume levels heading into the new year.

A processor in the Midwest says, “Business has really slowed down the last month or so. It’s definitely not because of pricing; I just don’t think there is as much scrap out there. I’m hoping for an uptick soon, but it might be a few months.”

The East Coast processor continues, “Domestic bids kept rising as mills couldn’t get their fill. We sold domestic plate and structural at up $65 early in December but could get another $20 now.”

Export demand, likewise, seems poised to continue, the processor says. “Container shred prices started November at less than $300 per metric ton but are now at $365 per metric ton.”

Regarding containerized ferrous scrap shipments, Fruchter says a constraint has taken shape as container and booking shortages are factors affecting several U.S. and Canadian port regions on the East and West coasts.

Winter weather, seasonal factory retooling programs and virus-related restrictions in economic activity contributed to the late 2020 spike in ferrous prices. “We have been fortunate to have been involved in some good demolition projects in November, but some of that is slowing down,” the East Coast processor says as of mid-December.