Done with double-sorted OCC

Departments - Commodities Paper

With double-sorted OCC declining in value, the price differential between that grade and the lower quality No. 11 OCC has lessened.

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October 26, 2020

Recyclers and industry consultants say export pricing for double-sorted old corrugated containers (OCC), or No. 12 OCC, has decreased by $40 to $50 per ton as of the first week of October. Export prices for that commodity escalated quickly in August and September but have fallen almost as quickly as they rose.

This year, China has been a big consumer of No. 12 OCC, and the price decrease in October indicates that China is winding down its recovered paper imports. China’s Ministry of Ecology and Environment has stated that it will no longer accept and approve applications for imports of “solid waste,” including recovered paper, starting Jan. 1, 2021.

“Shipments to China are rapidly winding down,” says Dan Gee, president of Recovered Paper Consulting LLC in Richmond, California, and a senior associate at Atlanta-based Moore & Associates. Gee adds that he has heard that some West Coast suppliers of double-sorted OCC are still shipping that material to China but that no more East Coast suppliers are doing so because of the timing of logistics.

“Shipments to China are rapidly winding down. Some shipping lines are even just arbitrarily stopping shipments to any Chinese ports.” – Dan Gee, senior associate, Moore & Associates

“Some shipping lines are even just arbitrarily stopping shipments to any Chinese ports,” he says.

A national broker says he has noticed that many steamship lines have drawn “hard stops” for sending No. 12 OCC to China because of the time it takes to move material overseas. “Even if you could get an order, you would be crazy sticking it on a boat” to China, he says. “Unless you’re shipping direct [to China] out of [Los Angeles], you have to be really careful.”

Several recyclers are expressing concern that the declining value of double-sorted OCC could have an adverse impact on No. 11 OCC pricing.

A recycler based on the West Coast speculates that the price differential between No. 11 OCC and double-sorted OCC will not be nearly as extreme in the future. “The differential between [OCC] No. 11 and No. 12 is going to diminish significantly,” he says.

He adds that demand is still good for double-sorted OCC. “There are certain destinations that require close-to-China specifications, like Indonesia or India, but those are much smaller markets.”

A broker on the East Coast says his company had success in exporting No. 12 OCC to India, Thailand and Vietnam. However, he adds that those countries are not paying the same premiums China had paid.

A national mill buyer says that it was a “sigh of relief” for him and some other mill buyers to see double-sorted OCC prices come down this month. With China just about out of the market for No. 12 OCC, he says, more high-quality, reasonably priced material is available for domestic paper mills.

The West Coast-based recycler adds that with China soon to be out of the market for No. 12 OCC, domestic buyers will have the upper hand when purchasing this material.

Gee says it is still a little early to know what will happen to demand for OCC in response to China shutting its doors on all recovered paper imports in 2021. He adds that the ongoing pandemic also has made it tough to predict future mill buying patterns.

“Unless you’re shipping direct [to China] out of [Los Angeles], you have to be really careful.” – a national broker

The national mill buyer says he expects domestic paper mills to continue to purchase double-sorted OCC for linerboard production, especially at mills that might lack new technology to handle dirtier materials.

Although Fastmarkets RISI reports that domestic OCC prices did not change much in the October buying period in its Oct. 5 PPI Pulp & Paper Week Report, several sources tell Recycling Today that the published price assessments for domestic OCC are a little low compared with what they have been experiencing in early October.

The broker on the East Coast says domestic demand for OCC is holding steady and that domestic mills seem to be “running well.”

“Some large integrated mills had announced containerboard price increases,” he says. “That certainly gives me good hope in that the demand for boxes is large enough that they feel good going up with the price increase domestically.”