In late April, recyclers and material recovery facility (MRF) operators say paper prices have continued to surge in response to short supplies caused in part by the COVID-19 pandemic.
One recycler in the mid-Atlantic region says he thinks recovered paper prices have returned to more sustainable levels than they had been at in recent months.
“If you look at the past 12 years, the average price for cardboard was about $100 per ton,” he says. “Now, we’re not that much higher than the historical average. I think it’s a good thing that prices are coming to sustainable levels.”
“Recovered paper prices might be nice for a while; but, once we’ve plateaued, I worry that a bubble will burst.” – a MRF operator in the Midwest
Last year, many recyclers, MRF operators and brokers reported that prices for old corrugated containers (OCC) were unsustainable at historic lows of about $25 per ton for most of the year. Now, the U.S. average price of OCC hit about $104 per ton in the May buying period, according to Fastmarkets RISI’s PPI Pulp & Paper Week May 5 report.
The recycler based in the mid-Atlantic region says commercial generation has been off in April and May, adding that he thinks slow generation will be the new normal for a while in response to COVID-19-related shutdowns.
“I’ve never seen generation as off as it is now,” he says. “In some areas of business, we’re seeing increases, like in grocery, but then the entire retail sector is dead. With office paper, generation is only 30 to 40 percent what it was. Generation has been drastically down. Overall, we could see paper prices continue to remain high until COVID-19 goes away.”
Throughout April, mill operations were focused on securing supply. In late April, the International Molded Fiber Association, New York, hosted a webinar for manufacturers and packaging producers to discuss how COVID-19 has affected their businesses. One recycled pulp producer based in Canada stated that he was concerned about securing recovered paper. He said some Canadian MRFs had either shut down or reduced their output in April.
“We had to cast our net a little wider to try to buy paper,” he said, adding that it became a little easier to secure recovered paper supplies by the end of the month.
Some mills say they expect recovered fiber prices to continue to rise. Cascades, Kingsey Falls, Quebec, states in its first-quarter earnings report released May 7 that it expects its containerboard business segment to be affected by higher OCC prices in the second quarter of 2020.
Mixed paper prices also are on the rise—the U.S. average price rose to $11 per ton in the May buying period, according to Fastmarkets RISI’s PPI Pulp & Paper Week May 5 report.
However, some MRF operators and paper packers are concerned that recovered fiber prices are not sustainable.
“The economy is sloping downward,” a MRF operator in the Midwest says. “Recovered paper prices might be nice for a while; but, once we’ve plateaued, I worry that a bubble will burst. Once people are done hoarding material, will there be a drive for recovered paper if people aren’t buying as much?”
Recyclers say they’re not fully benefiting from the pricing increases with decreased commercial generation. “Commercial recycling generation was off for us exactly 30 percent in April,” a recycler based in the South says. “We have no reason to believe it won’t be off at least that much in May. Having prices up is a plus. But the price increases have not been enough to get us back in the black.”
COVID-19-related factors also challenged export markets in April and May. One broker based on the East Coast says many export orders slowed down because of the escalating prices.
“I think it’s a good thing that prices are coming to sustainable levels.” – a recycler in the mid-Atlantic region
“The export prices are too high,” he says. “Right now, things aren’t normal, and export markets are slow. A lot of paper is going to domestic markets.”
The recycler in the mid-Atlantic region says, “Export markets have kind of taken a backseat” with high domestic demand.
“Domestic mills are beating down our doors lately and will do everything they can to keep machines running,” the recycler in the South adds.