Demand and pricing for most recovered fiber grades are continuing to trend upward as of the February buying period. Although domestic mixed paper prices remained mostly stagnant from the January buying period, most other recovered paper grades saw pricing rise.

Recyclers say domestic and export demand for old corrugated containers (OCC) are healthy. One recycler based in the Southeast adds that OCC markets have been strong and improving for nearly a year.

“There is limited generation currently, so, as consumer demands increase due to reopenings, pricing for recovered paper should go up.” – Kari Talvola, president, Shred Works

“We had a blockbuster year. In fact, 2020 was our best performing year ever on the books,” the recycler in the Southeast says. “We started managing our margin closely, becoming smarter on how to buy and sell. Everything came into a nice tidy bow at the end of the year.”

She continues, “To start this year, you’ve got demand for OCC, and it feels like more demand because there’s less supply of it.”

In late January and into February, paper mills reported strong containerboard demand in their latest earnings reports and calls, saying they expect that to be the case into the next quarter, which is good news for OCC demand.

“Demand in our Packaging segment remained very strong as sales volumes in both our containerboard mills and our corrugated products plants set all-time records,” says Mark Kowlzan, chairman and CEO of Packaging Corp. of America (PCA), Lake Forest, Illinois, in the company’s fourth-quarter 2020 earnings report that came out the last week of January. He says, “Even though we postponed a large discretionary outage during the quarter, as well as utilized our Jackson, Alabama, mill for additional containerboard production, we again ended the period with inventory levels lower than planned.”

Looking to the first quarter of 2021, Kowlzan says he expects PCA’s Packaging segment demand to remain strong, with shipments exceeding those of 2020’s record first quarter. “This will require us to continue producing containerboard at our Jackson mill in addition to an appropriate amount of white paper to maintain optimal inventory levels for servicing our paper customers,” he says. “We expect to realize the majority of our recently announced Packaging segment price increases during the first quarter, and we expect average export prices to move higher as well.”

Sonoco, Hartsville, South Carolina, also announced that it would implement a $50 per ton price increase for all grades of uncoated recycled paperboard in the U.S. and Canada, effective with shipments beginning March 1. The company says a continuation of order backlogs at its mills along with continuing inflation of input costs—particularly freight—are driving the price increase.

“To start this year, you’ve got demand for OCC, and it feels like more demand because there’s less supply of it.” – a recycler based in the Southeast

While export demand for recovered paper is good, securing containers and sailings is challenging. The recycler based in the Southeast says many recyclers and brokers still are “scrambling for container space” as of mid-February.

Recyclers and mill operators say they also expect to see a similar spike in pricing and demand for tissue grades as the away-from-home market rebounds when pandemic-related restrictions lift globally and people start eating out, traveling and attending events in greater numbers.

“There is limited generation currently, so, as consumer demands increase due to reopenings, pricing for recovered paper should go up,” says Kari Talvola, president of California-based Shred Works, a document destruction company.

Yet with many offices being closed or only partially opened since March 2020, some mill operators are concerned tissue grades such as sorted office paper (SOP) and coated book stock (CBS) will be in short supply to fill away-from-home market needs. As of mid-January, a national mill operator says mills “are concerned” about the future supply of office paper to serve away-from-home markets.

As a result, he says, some mills are turning to virgin pulp, pulp substitutes and deinking grades to meet their needs. (For more on market conditions for tissue grades, see “Substitution problem.”)

Pricing for natural and mixed-color high-density polyethylene (HDPE) has been increasing to the point where it could test the limits of some buyers, sources say.

Ajit Perera, vice president of postconsumer operations at Talco Plastics Inc., a reprocessor and compounder based in Corona, California, says the rising price of mixed-color HDPE could test demand from some consumers that tend to buy recycled material because of the cost advantage it offers to virgin. “The haggling will happen next month,” he says in mid-February, referring to manufacturers of nursery pots and similar items that are not as committed to using recycled content as other companies are.

Perera says natural HDPE bottle bales are selling for 60 to 65 cents per pound in California in mid-February, while the material is priced closer to 75 cents per pound on the East Coast where the competition is fiercer.

“In some cases, depending on the distance to a buyer and load weight, the increased sales price for materials has not kept up with transportation cost increases.” – a MRF operator based in the Midwest

Mixed-color HDPE bottle bales are selling for 12 to 14 cents per pound in California as of mid-February, a modest increase from the 11 to 13 cents they sold for the previous month, he adds. Prices for mixed-color HDPE bales on the East Coast are higher, Perera says, having reached the mid-20-cent range in mid-February. East Coast mixed-color HDPE bale prices had been in the low-20-cent range since December.

Perera says he anticipates pricing will continue to increase for HDPE bales, particularly as demand from the pipe and automotive sectors grows.

A contact with a Midwest-based material recovery facility (MRF) that processes residential and commercial material says generation has been steady from both sectors. “Normal seasonal variations appear to track historical trends,” he says, citing lower production of polyethylene terephthalate (PET) bottles and HDPE dairy bottles.

He says pricing for polypropylene (PP) and HDPE bales is trending upward. “PP is hot, with pricing moving up from $140 per ton in early January to over $500 per ton currently. Natural dairy bottles are over $1,500 per ton.”

The MRF operator also says PET pricing is beginning to increase in anticipation of summer demand. He describes scrap demand as solid, though some grades, including natural HDPE, are testing the limits on pricing.

The MRF operator says, “Color HDPE, LDPE (low-density polyethylene), PP, ABS (acrylonitrile butadiene styrene), HIPS (high-impact polystyrene), PC (polycarbonate) and PET are all moving well with increasing pricing.”

Both men point to challenges with transportation.

“There’s been a driver shortage due to COVID issues for almost 10 months, and prices for domestic shipments have increased significantly,” the MRF operator says. “In some cases, depending on the distance to a buyer and load weight, the increased sales price for materials has not kept up with transportation cost increases.”

He adds, “The price of material is increasing quick enough that an order taken now, but delayed two weeks or more for shipping, may not be competitive.”

Perera predicts that trucking issues will continue after the pandemic ends. He says Talco Plastics is itemizing shipping costs and discounting its recycled material where possible. “We are doing what we can to mitigate the cost to the customer.”

Aluminum scrap continues to enjoy strong demand as of mid-February, with one trader who’s based in the Midwest saying primary mills are buying on the spot market. He says that is different than in the recent past, when these mills purchased much of their scrap based on contracts.

He attributes the increased spot buying in part to primary mills determining that the spreads in recent years did not make it advantageous to engage in contracts. “Demand is pretty strong as well,” he adds.

The trader says even secondary mills are offering more for aluminum scrap. “That tells me housing starts and automotive are strong,” he says.

“I am bullish on Comex copper pricing as there are many positive indications of demand for copper as the year moves along.” – Brian Shine, president of Manitoba Corp.

One potential concern for aluminum producers and the scrap dealers who supply them is the automotive production problems that have arisen because of the semiconductor shortage. In 2020, the automotive industry experienced fluctuations in production and demand related to the pandemic, reducing its demand for semiconductors, while demand from other sectors increased. Semiconductor manufacturers now have capacity constraints that have been exacerbated by the quick recovery in car sales and production, which the automakers did not foresee.

The shortage of semiconductors has led automakers to shut down plants temporarily or reduce vehicle production. For instance, Ford has reduced production of its popular F-150 by temporarily cutting the number of shifts at its Dearborn, Michigan, and its Kansas City, Missouri, plants.

However, an aluminum scrap buyer tells Fastmarkets AMM, “The chip impact is affecting domestic demand, but I do not think it will completely translate to the scrap market. I do think the auto demand will affect domestic twitch consumption, but we’ll see if export comes back stronger after the Chinese New Year,” which runs from Feb. 11 to Feb. 17.

While delivery appointments are readily available with some aluminum scrap consumers, the trader says orders are 30 to 45 days out with copper consumers. SDI LaFarga, the only domestic consumer of No. 2 copper, is supplied through April, he adds.

“Delivery dates are being pushed out as consumers are balancing inventory levels,” says Brian Shine, president of the copper scrap processing company Manitoba Corp., based in Lancaster, New York.

“The Comex pricing is excellent, which is keeping copper flowing,” he adds.

As of Feb. 12, the Comex copper price was $3.80 per pound. That is an increase of 23 cents per pound from the Jan. 29 price of $3.57.

The trader in the Midwest says spreads have not widened relative to Comex for No. 1 copper and bare bright, which tells him there is ample demand. “There is strong demand on the primary side, and that will continue to be strong.”

However, No. 2 copper spreads are widening because of the lack of domestic consumption. He says spreads for this and other secondary grades likely will continue to widen.

Shine says copper demand is “pretty weak so far” but adds, “I believe it will improve.”

Export buying is quiet in light of challenges associated with obtaining containers, the Lunar New Year and the high quality requirements, he adds.

Despite “weak and flat” short-term demand for copper scrap, Shine says, “I am bullish on Comex copper pricing as there are many positive indications of demand for copper as the year moves along.”

Overseas buyers of American ferrous scrap maintained a minimal presence in late January and early February, pushing prices on the U.S. East and West coasts down during that time frame.

Surveyed pricing calculated by Fastmarkets AMM shows the downward price pressure eventually moved inland for two of the three major ferrous scrap grades—shredded scrap and No. 1 heavy melting steel (HMS)—while prompt grades held onto the value they had gained in the previous three months.

“Flow has been good, but we’ve been hit pretty hard by inclement weather, and that will slow things down for a bit.” – a scrap processor in the western U.S.

Trade press reports throughout late January and into February pointed to a lack of bulk cargoes heading to Turkey off the East Coast. Demand on the Pacific Coast also was reported to be sparse as mill buyers around the world pulled back from buying American scrap that had gained some $150 to $200 per ton in value over the previous 60 days.

As of mid-February, ferrous trader and consultant Nathan Fruchter of New York-based Idoru Trading says where the export market heads next remains uncertain. “I see demand in other regions, but it’s hard to tell with Asia being slow this week because of the Lunar New Year.”

U.S. steel output paints an encouraging picture. The Washington-based American Iron and Steel Institute (AISI) reports that 1.74 million tons of steel were produced in the U.S. during the week ending Feb. 13, with mills operating at a capability utilization (capacity) rate of 76.9 percent.

That weekly figure is 5.5 percent smaller by volume compared with the same week in 2020, showing output is climbing steadily closer to pre-COVID-19 levels in the U.S. steel sector.

U.S. steel output for the week ending Feb. 13 grew by 2.2 percent compared with total production during the previous week, ideally pointing to stable or growing finished steel demand.

On the supply side, recyclers say higher scale prices yielded the expected result of increased volumes. “It has gotten stronger and definitely is picking up to what we expect and want,” a processor in the West says of flows into his company’s yards.

“Things have been busy in the yard, especially with the current market,” says a recycler in the Northeast. “I had locked in some decent pricing in January and was rushing to fulfill that order.”

The increase in obsolete scrap flows abetted by higher scale prices created a disparity in movement for monthly index prices Fastmarkets AMM released Feb. 10. While the Midwest Index price for shredded scrap fell by about $70 per ton, and No. 1 HMS scrap dropped by about $55 per ton, prompt grades held onto their value.

The role of export markets in the price disparity between obsolete and prompt grades can be seen in the Fastmarkets AMM East and West coast index prices for early February. Those export markets, which largely buy HMS scrap, fell by about $47 per ton on the Pacific Coast and by $50 per ton on the East Coast.

Scrap processors will be keeping an eye on whether overseas buyers return to the market now that prices have fallen back to a level they find more palatable. In the meantime, overseas buyers might not find huge inventories of scrap to purchase even though they stayed away from the market for 30 days.

The West Coast processor who describes his scrap flows as stronger adds, “Flow has been good, but we’ve been hit pretty hard by inclement weather, and that will slow things down for a bit. There is still room to improve, as flows are still down from our averages before the pandemic.

“Demand seems to be strong for February,” the processor continues. “Buyers are wanting material across all commodities,” he adds.

Parts of the U.S. have experienced heavy snowfalls in February. The northeastern processor says severe weather has not affected his operations but adds that late winter tends to be a slow period regardless. “We have not seen as much coming in, [and] this is often a slower time for us anyhow,” he says. “We continue to receive scrap from our bigger customers, but local smaller foot traffic is much slower.”

In the third week of February, reports from Fastmarkets AMM and Davis Index indicate Turkish mill buyers are beginning to make more frequent bids and raise their prices for imported scrap.

As of Feb. 16, Davis Index reports, “Turkish mills are expected to continue ferrous scrap purchases this week as they require cargoes for March and April shipment.” Prices for scrap shipped from the United States to Turkey are rising as a result, according to Davis Index.

On the domestic steelmaking front, the AISI in late January expressed support for early Biden administration decisions on “Buy America” requirements and increased infrastructure spending.