Weird times for recovered paper

Departments - Commodities Paper

Demand for sorted office paper and other high grades dropped in the August buying period, while demand for old corrugated containers increased.

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August 26, 2020

Market conditions for recovered paper have gotten a little strange this summer because of a variety of factors. Prices for sorted office paper (SOP) and other high grades of recovered paper dropped significantly in the August buying period, driven in large part by the COVID-19 pandemic. Although generation of high grades is low with more people working from home, demand for that material is even lower.

“No one is staying at motels or going to airports,” a recycler in the mid-Atlantic region says, adding that paper mills that produce tissue for away-from-home markets have been taking much more downtime this summer.

“These are some of the most unique markets I’ve ever seen. It’s very weird to see the high grades as weak as they are, while you see the strength in cardboard.” – a recycler in the mid-Atlantic region

“These are some of the most unique markets I’ve ever seen,” he adds. “It’s very weird to see the high grades as weak as they are, while you see the strength in cardboard.”

A recycler in the Southeast says newsprint was easier to sell than SOP in early August, adding that newsprint has been in demand to make insulation for homes in his region.

A recycler on the West Coast says he thinks market demand for SOP will normalize quickly once the U.S. gets the pandemic under control. “But we’ve not been successful at that.”

On the flip side, market conditions were better for old corrugated containers (OCC) compared with high grades in the August buying period. Domestic markets for OCC were mediocre at best, however, and prices only increased slightly to $58 per ton in the August buying period, according to Fastmarkets RISI’s PPI Pulp & Paper Week Aug. 5 edition. Yet the recycler in the mid-Atlantic region says export markets were paying much higher prices for double-sorted OCC in August.

“I think there was a $100 gap between domestic and export pricing” for double- sorted OCC, he says.

The increased export demand for double-sorted OCC was driven by China trying to meet its recovered fiber import quotas. China’s 10th batch of import quotas for 2020 as reported by the Bureau of International Recycling, Brussels, July 24 allowed for 56,650 metric tons of recovered paper to enter China.

“[China is] buying everything they can get their hands on that will hit quality specs.” – a recycler on the West Coast

“China is on the last gasp for the ability to import waste paper. They’re buying everything they can get their hands on that will hit quality specs,” the recycler on the West Coast says.

The recycler in the Southeast says he suspects export markets for recovered paper will struggle as soon as China stops buying later this year. “If you compare China’s pricing now to the same time last year, nothing was moving then, and China wasn’t buying,” he says. “That’s closer to what I think you’re going to be seeing in the later part of the third quarter or early fourth quarter of the year.

“India is back in the game a bit, but they don’t pay the prices China pays for material,” the recycler in the South adds. “So, once China goes away, the price is going to come down.”

Despite the uncertainty related to the pandemic and China’s buying, some domestic paper mills have remained committed to expanding their ability to consume recovered paper in the near-term future. During a Resource Recycling webinar July 29, Ron Sasine, project developer at Salt Lake City-based Crossroads Paper, indicated that everything is “on track” for Crossroads Paper to begin mill operations by the second quarter of 2022. In July 2019, the company announced plans to build a paper mill to consume OCC and residential mixed paper to make boxes.

“There are a few things that have become a bit more difficult,” Sasine said. “There are things that may take longer. But nothing has deterred us from the project or slowed us.”

During the same webinar, Jay Simmons, manager of packaging products development at Longview, Washington-based North Pacific Paper Co. (NORPAC), said NORPAC’s capacity expansions also were moving forward. In August 2019, the company said it would add capacity to recycle more than 400,000 metric tons of recovered paper.

“Now that people are coming back out, enjoying some sense of normalcy, we’re getting in track with financing for the project,” he said.