Lousy market conditions for recovered fiber grades

Lousy market conditions for recovered fiber grades

Recyclers, brokers report that most grades of recovered paper are increasingly difficult to move.

May 20, 2019

In the recovered fiber market, movement is key today as prices are reaching new lows. According to the latest PPI Pulp & Paper Week, old corrugated container (OCC) prices declined for a fifth consecutive month in May. Some sources say it’s also possible for high grade prices to fall further. A mill operator in the Southwest says high grades like SOP are moving “but not effortlessly like they used to.”

“[Prices] seem to be free-falling,” the mill operator in the Southwest adds. “No one knows when end is in sight. Prices reflect the difficulty of movement, and it’s certainly difficult to move material right now.” 

Many domestic mills are still taking downtime. A mill operator in the Southeast says many customers are asking the mill to take more loads. She adds that all the extra downtime could be an indicator for the state of the overall U.S. economy.

“The economy is slow right now. With a lot of mills taking downtime, some people think there could be a downward swing in the economy soon … that’s the feeling from some experts,” she says. 

The mill operator in the Southwest adds that mills also are spending a lot of time managing their inbound loads. “Containerboard mills are being disciplined and are producing to their demand for the rolls of containerboard. They’re trying not to build inventories,” he says.

Recyclers and brokers across the U.S. say the current market conditions are possibly the most challenging conditions they have seen in years. “I’ve been doing this for 44 years and I have only twice seen [the market] this hammered in 1974 and in 2008,” says a broker on the West Coast. “You have movement now, but pricing is beyond lousy.”

The broker on the West Coast adds that it’s even hard to move good, clean postindustrial materials. “These numbers are so bad,” he says. “From an economic standpoint, it’s hard to justify moving anything that’s not clean and segregated.” 

Steve Sargent, director of recycling at Rumpke, Colerain Township, Ohio, says the current conditions are the most challenging he’s seen in his 35-year career. While the industry has faced lows like this before, he says the industry has never faced lows like this with poor export markets.

“We don’t have the export market anymore to absorb this excess supply,” Sargent says. “What we have to do is change the way we do business and become more dependent on markets and get back to the basics of recycling. We have to be careful not to contaminate what we have. We’ve had many face-to-face meetings with people who produce plastic packaging and cups, but right now is not the time to add all new products that don’t have long-term markets.”

Mixed paper seems to be stuck because mills do not have as much incentive to take mixed paper with low OCC prices. Some communities are landfilling residential mixed paper. Also, the city of Lexington, Kentucky, reported in mid-May that its Lexington Recycle Center temporarily suspended paper recycling.

“We let the public know that environmentally speaking as well as fiscally speaking, it makes more sense not to bring the material in rather than to pay a processing fee and added fee to throw it away,” says Barry Prater, plant manager at the Lexington material recovery facility (MRF).  

The temporary suspension will affect several municipalities surrounding Lexington in central Kentucky. Prater says the city will likely revisit paper recycling in a few months.

Nancy Albright, Lexington’s commissioner of environmental quality and public works, adds that the Lexington Recycle Center is still seeking new outlets for its paper. “At least three new nearby mills are expected to begin receiving materials by late fall of 2019,” she says.

Export demand for recovered paper also is low. China continues to reduce the number of import permits it is issuing for recovered paper. Byron Luo of Winfibre US Inc., formerly Ralison International Inc., said that with China’s permit quota decline, only 10 million to 12 million metric tons of recovered paper are estimated to be permitted for import this year. He spoke during the session Post China & the Current Status of Recycling at WasteExpo 2019, which took place May 6-9 in Las Vegas. 

“I think China is going to hold true to the threat that they won’t take recovered paper next year,” Sargent adds. “They’re banning it and will probably import only pulp paper, which is a much cleaner process. We take that seriously—we always have.” 

With an oversupply of most grades of recovered fiber, Sargent says it will take time to use the extra material that had previously gone to export markets. At Rumpke, Sargent says the company has only been exporting about 2 percent of its material. The company is also hopeful for several mills coming online in the next year in the Midwest.

“It will take us time to catch up,” he says. “We think it will take a two- to three-year period to go through this and come out the other side where we’ll be stronger. Mills are coming online; they’re just not here yet.”