Starting to see a slight boost

Departments - Commodities Paper

Domestic demand for recovered fiber increased slightly at the start of 2020.

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February 4, 2020

Old corrugated containers (OCC) prices inched up slightly in the January buying period, providing some optimism for recyclers at the start of 2020. OCC hit a national average price of $24 per ton in January, according to Fastmarkets RISI’s PPI Pulp & Paper Week “Recovered Paper Price Watch” published Jan. 6. Asia is importing U.S. OCC for about $67 to $75 per ton, which is a $10-to-$15 per ton jump from last month, Fastmarkets RISI’s PPI Pulp & Paper Week reports.

Yet, export conditions remain somewhat challenging for recovered fiber in the first month of 2020. In early January, India announced that it is clamping down on mixed paper quality, according to a report from the Arlington, Virginia-based National Waste & Recycling Association (NWRA). India plans to reduce the amount of allowable contamination to just 1 percent for mixed paper, with random inspections of five bales of mixed paper from each containerload. NWRA reports that the most significant impacts are being felt on the eastern seaboard.

“The U.S. economy is good, and mills have been running consistently. But, by and large, mills aren’t looking for additional tons.” – a broker based in the Southwest

A broker based on the East Coast reports that many companies have stopped shipping mixed paper to India as a result of this announcement.

However, movement of recovered fiber to domestic mills seems to be going a bit more smoothly than it had in the latter part of 2019. A broker based in the Southwest says he has noticed that domestic mills are not taking much downtime at the start of 2020.

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“The U.S. economy is good, and mills have been running consistently,” he says. “But, by and large, mills aren’t looking for additional tons.”

Recyclers and brokers report conditions remain generally tough for moving recovered fiber as of the start of 2020, but new domestic capacity is on the horizon for OCC that could help alleviate conditions slightly this year.

In the near-term future, the broker based in the Southwest says Mexico-based Grupo Gondi is expected to start up operations in Monterrey, Mexico, at the end of this quarter. He adds that International Paper has a mill in Selma, Alabama, starting in the first quarter. Mexico-based Bio Pappel’s McKinley Paper mill in Port Angeles, Washington, is still slated to come online in the first quarter. Additionally, Verso Corp. has converted its mill in Duluth, Minnesota, to produce about 90,000 tons per year of recycled packaging products.

“Plant runtime equates to minimizing our processing costs, which is critical in today’s depressed market slump.” – a MRF operator based in the Midwest

The capacity additions certainly are good news for recyclers, but the broker based in the Southwest says it’s uncertain how much it will affect OCC prices. “Capacity is coming online, but we just don’t know and can’t speculate if it will make a rift in the market,” he says.

Toward the end of December 2019 and into early January, recyclers and material recovery facility (MRF) operators say they experienced an influx of holiday packaging at their plants.

“Holiday packaging is always a challenge and causes us to often slow down the lines or add more sorters until this material passes through our plants,” a MRF operator in the Midwest says.

The broker on the East Coast says domestic demand for recovered fiber increased slightly. “Mills started to buy some extra inventory because the way the holidays fell was a little bit disruptive to generation and transportation,” he says. “Compared to what we had seen the last 12 to 18 months, pricing and movement have been better.”

The MRF operator in the Midwest adds that prices are still challenging.

“We feel the demand in our Midwestern service area will continue into 2020,” he says. “[Prices are] not covering the cost to process material. Therefore, we are forced to seek financial support from our customers until this market can rebound.”

The MRF operator from the Midwest adds that his company has made adjustments because of the poor market conditions. He says the company is focused on maintaining good material quality and improving its plant maintenance programs. “Plant runtime equates to minimizing our processing costs, which is critical in today’s depressed market slump.”