OCC hits new lows

Departments - Commodities Paper

Recovered fiber prices slide in March.

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April 3, 2019

Pricing for most recovered fiber grades continued to decline in March across the United States. In particular, prices for old corrugated containers (OCC) reached a decade low in March. According to Boston-based Fastmarkets RISI’s PPI Pulp & Paper Week monthly recovered paper prices issued March 5, OCC averaged $51 per ton FOB (freight on board) at the seller’s dock.

The continual declines in OCC pricing have taken some recyclers and brokers by surprise. A source from a recycling company in the Midwest says he didn’t expect OCC prices to drop. However, he says he’s noticed mixed reactions from mills.

“There are pockets of demand where mills are looking for clean, good-quality OCC tons,” he says. “At the same time, other mills’ inventories are full, and they’re pushing back on shipments.”

“Hopefully things will pick up in three to six months. But, right now, prices are low.” – a major mill system source

A material recovery facility (MRF) operator also based in the Midwest adds that the low prices caught his company “completely off guard.”

He says, “We thought January would go down because of generation. But, February, when it dropped, we were shocked.”

With OCC prices averaging about $51 per ton, the MRF operator in the Midwest says some recyclers aren’t sure whether baling it makes economic sense. To maintain business, many recyclers that handle municipal contracts are having to increase collection and processing fees.

However, the Midwest-based MRF operator says if prices for OCC go any lower, the industry will run the risk of having to landfill this material in some parts of the U.S. He adds that many MRF operators are “barely making things work” given the current prices.

For a free trial of Fastmarket RISI’s PPI Pulp & Paper Week pricing, please visit www.risi.com/rt.

Mixed paper prices remained unchanged at -$3 per ton, according to Fastmarkets RISI’s PPI Pulp & Paper Week. Similarly to OCC, mixed paper is in abundant supply, but domestic and export demand are limited.

“There’s a lot of mixed paper available,” says the source from the recycling company in the Midwest. “That’s a loss leader today. Nobody can bale at $0, but it is what it is.”

According to a source with a major mill system, “things are very, very soft” for many paper grades. OCC is soft, he says, and companies have had to pay to get rid of mixed paper in instances.

“Operating capacity at mills is declining a bit,” he says. “Mills are taking downtime, shutting down for two weeks.”

Movement [of OCC] has been pleasantly steady in light of the sliding index.” – a recycling company source in the Midwest

With the excess downtime, recovered fiber grades are oversupplied in the U.S. Additionally, recyclers note that the economy has slowed, contributing to the slump in prices for recovered fiber.

However, many recyclers say OCC is still moving, despite the depressed prices.

“Movement has been pleasantly steady in light of the sliding index,” says the source from the recycling company in the Midwest.

A broker in the Southwest says he has been able to consistently move OCC in the 30 days leading up to mid-March, adding that demand for OCC and other recovered fiber grades in Mexico is healthy.

“As far as domestic mills, [movement] is consistent,” he says. “But mills in Mexico, we don’t have as much material as they want us to ship.”

The MRF operator in the Midwest says OCC is moving but not as strongly because of the oversupply. He adds that “the light at the end of the tunnel” is that Nine Dragons’ mill in Biron, Wisconsin, will start up sometime this spring to provide new production capacity for recovered fiber. Shanying International’s Phoenix Paper mill, Wickliffe, Kentucky, also is expected to start up this spring.

The major mill system source also predicts that demand for recovered fiber likely will pick up again by the second half of the year. “It will go back up,” he says. “It will be strong. There are some new mills in the U.S., and they will continue to provide demand for recycled paper. Hopefully, things will pick up in three to six months. But, right now, prices are low.”