Staying strong for the summer

Departments - Commodities Paper

Packaging demand has helped to improve demand for recovered paper this year.

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August 2, 2021

Demand for recovered paper remained very robust in the July buying period, pushing prices up for most grades in the domestic and export markets.

“Demand is really good,” Bryce Stalcup, recycling operations manager at Waste Commission of Scott County in Iowa says in July. “The values of cardboard and mixed paper are going up. This month, it looks like prices will be in the $90 a ton range for mixed paper. We were selling it not too long ago for $2 a ton.”

Pete Keller, vice president of recycling and sustainability at Phoenix-based Republic Services, adds that he has not seen any major challenges related to movement of recovered paper. “Movement is good,” he says. “Markets appear like they are going to be good for a little while.”

“We have not seen this high of level for pricing since September 2017 prior to the beginning of China’s ban on imports.” – Kyle White, Deutsche Bank Securities Inc.

Packaging demand is helping to prop up demand for recovered paper. Kyle White is the equity research lead analyst on paper and packaging and environmental services at New York-based Deutsche Bank Securities Inc. He says strong packaging demand this summer is driving robust demand for old corrugated containers (OCC) in the U.S., with containerboard mills running as hard as they can.

White says domestic containerboard mills consumed 22.8 million tons of OCC in 2020, which represents 4 percent growth from 2019.

He adds that export demand for OCC is similarly robust—U.S. exports of the grade are up 18.4 percent year over year from January through April.

Strong demand has kept prices for recovered paper high this summer. White says OCC is averaging $129 per ton in July and has experienced at least eight consecutive months of price increases. “We have not seen this high a level for pricing since September 2017, prior to the beginning of China’s ban on imports,” he says.

Although supplies of OCC are tight compared with demand, White says it’s not a big concern. “I would assume there is still enough OCC supply to meet domestic demand, considering there will likely be north of 10 million tons exported this year,” he says.

White continues, “That said, I have seen reports of domestic containerboard producers looking for fiber alternatives, with mixed paper being a possible solution in some cases for corrugating medium.”

“Demand is really good. The values of cardboard and mixed paper are going up.” – Bryce Stalcup, recycling operations manager, Waste Commission of Scott County

Proposed mill projects in the works will be able to consume mixed paper. According to a report released by the Northeast Recycling Council (NERC), Brattleboro, Vermont, in mid-June, almost all projects on its list will consume OCC and mixed paper. NERC reports that NORPAC is converting existing production capacity to manufacture linerboard, corrugated medium, bags and specialty kraft paper using 400,000 tons of OCC and mixed paper per year. The conversion is expected to be completed in 2022. That same year, NERC says Kamine Development Corp. is opening a facility in Tampa, Florida, that will make 400,000 tons per year of recycled pulp from OCC and mixed paper. Additionally, Atlantic Packaging Products is opening a mill in 2022 in Whitby, Ontario, that will consume OCC and mixed paper, producing 400,000 metric tons of corrugated medium and linerboard annually.

 

Containerboard projects aren’t expected to slow down, either.

“Demand has been robust, with some unprecedented growth in box shipments for an industry as mature as this,” White says. “According to Fibre Box Association, box shipments increased 8.2 percent year over year in the second quarter of 2021, following an increase in the first quarter of 2021 of 5.5 percent year over year. That said, I would assume this [is the] peak for growth as we start having more challenging year-over-year comparables beginning in the third quarter. We already saw some slowdown as April was up 11.4 percent, May was [up] 8.8 percent, but June was up 4.6 percent, he continues.

White estimates containerboard capacity will grow by more than 4 percent in 2021, with just over half being recycled production and the rest being virgin kraft liner. He says much of this increase is the ramp-up of additions made in 2020.