Paper mills across the globe have been reporting high sales volumes and pricing for containerboard. In their latest earnings reports released in February, North American packaging producers Cascades and Greif were among them.
In its earnings report released in late February, Nine Dragons Paper Holdings Co., Hong Kong, also reported healthy demand for containerboard. The company announced that it will invest 5.4 billion renminbi (or about $8.3 billion) in Malaysian paper mills that will manufacture corrugated products.
This strength in containerboard sales has helped to increase demand for recovered paper in recent months, with most mills hungering for the material. In response, domestic and export old corrugated containers (OCC) prices have risen, and mixed paper pricing has held its ground.
”Transportation is a headwind, but it does look like for recovered paper and many commodities right now there are a lot of good tailwinds.” – Steve Frank, owner, Pioneer Recycling Services
Prices for high grades, such as sorted office paper (SOP), have risen as well.
Material recovery facility (MRF) operators say generation of OCC has not quite kept up with the demand from mills.
“We could sell more OCC if we had it,” says Steve Frank, owner of Pioneer Recycling Services, which operates two MRFs in Clackamas, Oregon, and Tacoma, Washington. “We’re not lacking demand.”
However, Frank says the paper coming into his MRFs has been slightly dirtier than it was prepandemic.
“Supply [of recovered paper] really decreased after we got through the holidays,” adds Miriam Holsinger, vice president of business intelligence and operations at Minneapolis-based Eureka Recycling. She says OCC generation was slightly steadier than mixed paper generation in February.
As of early March, MRF operators and brokers alike say recovered paper prices are rising much more quickly in export markets than in domestic ones.
A broker based on the East Coast says he noticed OCC prices double in a 24-hour period during the first week of March. “Everyone who’s bought OCC from me ever is calling, raising their prices daily. I’ll get an email from the same person five days in a row offering an increased price each day.”
”India has been a driving force ever since China left the market last year.” – a broker on the East Coast
He adds that paper mills in India are helping to drive recovered paper demand this year. “India has been a driving force ever since China left the market last year,” the broker says. “They just can’t get material fast enough there.”
A MRF operator based in the South says mills in other parts of Southeast Asia, including Malaysia and Vietnam, also are buying recovered paper at high prices. He adds that domestic mills will need to increase their buying prices to remain competitive.
“Mills everywhere are busy,” he says. “I’ve been trying to ship more export because of the pricing differential,” the MRF operator adds, noting the higher export prices in the March buying period.
However, the broker says, high export prices don’t matter if securing freight is impossible, citing difficulties he’s encountered. The broker adds that it’s also important to maintain relationships with domestic mills.
Securing trucking and freight have been challenging for the past few months and have not improved. Recyclers and brokers say these problems were exacerbated in mid-February when a winter storm hit most of North America. As a result, the broker on the East Coast says, some piers in his area temporarily closed.
Additionally, according to a March 6 article in the New York Times, a lack of dockworkers and truck drivers—in part because of the pandemic—has slowed container shipping at ports in Los Angeles and Long Beach, California. Gene Seroka, the executive director of the Port of Los Angeles, said in one of the port’s board meetings recently that he suspects ports will remain backlogged until midsummer.
Although transportation has been difficult, Frank says it’s the only detriment to his business right now. “Transportation is a headwind, but it does look like for recovered paper and many commodities right now there are a lot of good tailwinds,” he adds.