Recovered paper bales
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An optimistic outlook for paper markets in 2022

Although demand and pricing softened for most recovered paper grades in December, paper packers and traders anticipate recovered paper markets will remain robust in the first quarter of 2022.

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December 10, 2021

Looking back at 2021, recovered paper demand stayed robust for much of the year. Containerboard mills ran strong, driven largely by e-commerce demand.

A material recovery facility (MRF) operator based in the Midwest says mills seemed to have an “insatiable appetite” for recovered paper in August and September. At that point, generation was lower, while demand remained particularly strong for old corrugated containers (OCC) and mixed paper.

“[Mills] had called and asked for more material, and we had to turn people away,” he says of those months. “Our phones were off the hook.”

But in the last two months of 2021, the MRF operator says demand from mills had softened. He notes he is still moving OCC and mixed paper bales to mills as of early December but that they aren’t requesting additional tons as they had in late summer.

“What we’re hearing is now mills are full and phones are not ringing for additional loads,” he says.

As a result of softer demand, domestic prices for most recovered paper grades have dipped in the December buying period.

Recyclers and mill buyers alike say the softer demand is seasonal in part. With the Thanksgiving and Christmas holidays at the end of the year, generation of OCC is higher than in the summer.

A broker based on the East Coast says even retail generation has been much better in the fall than it was earlier in the year.

A buyer for a large mill group adds that domestic supply has increased partly because of challenges with export. As of December, securing container space was still problematic for recyclers and traders hoping to ship recovered paper overseas. The mill buyer says, “It’s leaving more material in the domestic market.”

Despite shipping issues this year, U.S. recyclers and traders managed to export more recovered paper in than they had in 2020. During the 10th Asian Recycled Fiber and Containerboard Conference hosted in early December in Wuhan, China, by Boston-based Fastmarkets RISI, Brett Biggers, senior economist with the Washington-based Institute of Scrap Recycling Industries reported that scrap paper exports from the United States increased by 14 percent in the first nine months of 2021 compared with the same time frame in 2020.

India serves as the largest volume buyer of recovered paper exported from the U.S. That nation is importing more fiber not only to feed its own paper and board mills but also to produce rolled recycled-content pulp that is being exported to China.

Mexico and Canada also were among the 10 largest buyers of recovered paper buyers from the U.S. in the first three quarters of 2021, and seven other Asian countries join India on that list. Buyers in Thailand and Vietnam purchased more than 1.3 million metric tons of paper scrap in the first three quarters of 2021. Even though recyclers and traders face delays exporting, demand for recovered paper from overseas mills remains strong.

“Export demand is there, but the ability to ship and get containers is difficult,” a broker in the Midwest explains. “It’s slowing the outflow of paper. It’s not like demand isn’t there if you got a container.”

Demand also remains strong for sorted office paper (SOP) and printing grades, yet supplies are lower. A recycler based in the South says many printers are short on paper, which has led to less printing scrap generation this past month. As a result, prices have continued to increase for SOP and other tissue grades.

The broker based on the East Coast says office scrap generation also had been soft throughout 2021.

“It’s been interesting to see office waste generation has still not come back. That is just not good,” he says. “I can tell you that every domestic mill and export mill is looking for office waste and coated bookstock to make toilet paper. It will be like that for a while.”

While most recovered paper grades took a slight hit in price to end 2021, recyclers and mill buyers alike think prices could inch upward again in the first quarter of next year.

“New capacity is coming online in 2022 and prices might come up a little bit,” the recycler in the South says.

NORPAC, Celadon, Sonoco, Graphic Packaging International, Atlantic Packaging and Cascades all have plans to add capacity to consume recovered paper this year.

Although contacts are optimistic about this new year, another factor that is still to be determined as of early December is whether the COVID-19 omicron variant will adversely impact scrap paper markets.

“I hope it’s not a big deal and that people don’t start staying at home again,” the broker on the East Coast says. “But you just don’t know what is going to happen.”