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North America

There has been no turnaround in the slow market conditions of the fourth quarter of 2022 and the first quarter of 2023, with most people in this business believing it will simply be a case of more of the same. It seems as though this “soft” market is lasting much longer than it normally does during weak markets and downturns. While there has been some uptick in US domestic demand at paper mills, it is simply not enough to make for a significant change in demand. While the demand for domestic tonnage has improved somewhat, the needle hasn’t really moved that much.

Paper mills are cutting back on recovered fibre orders for the following reasons: they are seeing a slowdown in orders from their customers; they have full inventories after taking advantage of softer markets earlier this year and so have no room to take additional tonnages; and/or they plan to take additional downtime over the next few weeks. While shuts occur mostly at containerboard mills, these are happening at tissue mills too; in the past when the economy was soft and box demand was low, tissue mills would mostly be immune to these slowdowns - but not on this occasion.

Some operators have even decided to shut mills permanently: the most recent announcements have been from Sonoco, which is closing a mill in Kansas, and from Pactiv/Evergreen which is shuttering a mill in North Carolina.

In one way, supply is matching this demand as recovered paper generation is nowhere near the norm for this time of year. Virtually across the entire country, MRFs are stating that generation of inbound tonnages are down on last year by anywhere between 15% and 40%. In some cases, this reduction in supply has propped up prices to some extent; one example is ONP for which buyers have to bid up the pricing in order to obtain the few tons available.  

The economic slowdown is also significantly reducing demand for virgin pulp. This matters because there is some relationship between pulp and recovered fibre demand, especially for “swing” mills that can decide to lower the recovered fibre percentage of feedstock in favour of virgin pulp. Pulp pricing is being eroded worldwide as inventories continue to swell, with some grades having dropped US$ 100 per ton in just a few weeks.  

Conditions on the west coast are not quite as bleak as there are still export orders.  

Ocean freight rates have come down again as the container lines look for business. However, as imports continue to fall, there will be fewer ships heading to export markets and this could easily result in some higher pricing for containers. That may already be occurring in certain geographical pockets.  

The bottom line is that the prediction of an impending recession seems to be gaining more steam.