The recovered paper market in the USA continues to show a modest strengthening. While nobody is saying we are back to the good times of prices ramping up significantly, seven or eight consecutive months of small increases have created some optimism within the recovered fibre marketplace.
As an example, OCC prices doubled between January and September this year, although it should be remembered that prices in the first month of 2023 were so low - at around US$ 30 per ton - that a doubling over the ensuing three quarters is not earth-shattering. In most regions, in fact, OCC pricing in September this year was still lower than in 2022.
The rising price trend is being driven by the same factors that have been in play over the past six to nine months, including low supply/collections. Mills consuming OCC continue to be nervous that their demands will not be met because collections remain soft, and this nervousness is helping to drive up prices. Usually if prices in the USA are moving up or down overall, one or two regions might be seeing the opposite trend, but not on this occasion: prices in all markets for OCC and mixed paper appear to be rising across the entire country.
In addition to softness in collections, 2023 has seen the start-up of 100% recycled mills which support increased demand and thus higher pricing. Earlier this year, Domtar started up its Kingsport mill in Tennessee which was converted to the manufacture of 100% recycled containerboard with a capacity to consume a whopping 660,000 tons of recovered fibre per year. And in the same general geographic region of the USA, Pratt Industries last month opened its new 100% recycled mill in Henderson, Kentucky. These two mills alone will consume well in excess of 1 million tons per year.
On the flip side, however, is a weaker-than-normal domestic containerboard market, with some reports suggesting that corrugated box demand is down more than 10% versus 2022. As reported in previous months, there are a myriad of reasons for this softness, including: low consumer confidence and hence spending; light-weighting; and right-sizing of packaging in general. While none of these factors move the needle that much, the combination of all three is meaningful.
US export prices for the bulk grades are naturally trending higher too, apparently from both coasts. Most US exporters experienced an unprecedented reduction in their tonnages during the first eight months of 2023 when compared to 2022, with total volumes exported declining by 15 to 20%. Year on year, virtually every major country has purchased less recovered fibre from the USA so far in 2023; the one exception, Thailand, recorded an increase in purchases during the year to July and is now the USA’s second-largest export market for recovered fibre.
However, it seems that the general tide may be turning and that the fourth quarter of 2023 may not be as anaemic in export terms as the previous three.
Other developments that will impact the recovered fibre markets in the long term include, firstly, MRFs that have recently been announced or are under construction or newly-opened. The most significant ones are Rumpke’s MRF in Columbus, Ohio, which is expected to be one of the largest in the USA; WM’s new MRF in Cleveland, Ohio; and a new MRF to be built in Lucas County, Ohio. Ultimately, these additions should add to collections of recovered fibre.
The second important development is the merger between Smurfit Kappa and WestRock to create the world’s largest containerboard manufacturer; only time will tell what impact this will have but a close eye needs to be kept on how it affects global volumes. Thirdly, the big news to emerge from last month’s PackExpo, which drew 30,000 attendees, is the race for companies to try to convert plastic packaging to paper. This is already happening to some extent but, if it continues, there will be a long-term increase in demand for recovered fibre to manufacture new paper.