Demand for white paper grades dramatically shifts as three mills run low
OCC domestic prices hold but suppliers envision increase
The North American recovered paper market’s pricing spotlight dramatically shifted this week - from old corrugated containers (OCC) to sorted office paper (SOP) white grades. The market had focused on OCC’s big price run-up into last fall, including the highest domestic OCC pricing level in 30 years in September.
Now, contacts reported a zoom-like run-up the last several weeks in white grades, in which premiums doubled by $20-25 per ton to $40-45 per ton on average in the first 20 days of January and shot up as high as to $80 per ton, $90 per ton, and $110 per ton in a few cases. These triple-digit premiums for SOP have probably never occurred before in the US market, one contact thought.
“It’s a super-hot market now,” a Southeast supplier marveled modestly, on a conference call.
Fastmarkets’ PPI Pulp and Paper Week (P&PW) reported on February 4 increases of $20 per ton at the FOB seller’s dock for the suite of three SOP grades in the Northeast, Midwest, and South, and a $10 per ton increase in California. Export SOP prices also rose up similarly. Coated groundwood sections (CGS) and old magazines (OMG), ledgers, and pulp substitutes also increased - by $10 per ton in most of the USA.
Tissue mills ran low or out of recovered paper
These increases on white grades resulted from brisk demand to start the year from Away-from-Home tissue mills, and were further ignited by various factors, most notably that three tissue paper mills in the Midwest ran low or out of recovered paper in January. This seemed to set off a competitive frenzy on pricing and tons that included major tissue paper mill companies. Two of the largest five in North America also came out of the holidays needy for fiber, contacts said. All told, though, it was the lack of fiber at a seasonally low generation time that caused the fast and furious price run-up.
One supplier said a major tissue paper company representative claimed that “we want everything (white).”
Suppliers said mills further sought “hog book” and “blend” white grades, and deinked pulp. Unable to buy enough SOP and with virgin market pulp starting to increase in price, mills in need of SOP moved up the price chart at a rising cost per ton – from $210/ton for SOP at the FOB seller’s dock to ledgers and up again to pulp substitutes, at about a $400/ton at the FOB seller’s dock cost.
These white grades are just being eaten up.
“These white grades are just being eaten up,” a contact with a national supplier company said. “Demand is strong, competition is strong. … Some domestic mills are paying export prices (for white grades).”
“Every customer we have wants us to ship them more than we have,” another large Eastern supplier said.
The office waste is mostly gone
“The office waste is mostly gone,” one major mill system representative told P&PW, referring to the two-year shutdown of most offices because of the COVID-19 pandemic. It remains unclear when offices around North America will more than partly reopen.
Mills remained concerned late this week about their supply. A winter storm packed with wind chill and about a foot of snow pummeled a swath of America, from the Southwest up to the Northeast. ABC News early this week reported that the storm could affect 130 million Americans, starting February 2.
OCC domestic holds
For OCC, Midwest and South pricing was $150-160 per ton at the FOB seller’s dock. The Southeast and Southwest region prices dropped by $5 per ton. Various mills said they were very well supplied, and some even claimed they turned away tons or sold some of what they had in the open market. In California, suppliers struggled to find warehouse space, which one said was extremely expensive. They struggled to find homes domestically not only because of the lack of mills in California, but also because of delays trying to put their OCC on ships to Southeast Asia.
OCC for domestic mills reached the 30-year price of $167 per ton last September. For the fifth straight month as of February 4, OCC pricing on a national average basis dropped and was now down by about $40 per ton since October on a national average basis.
Lack of shipping containers slows supply distribution
One top 10 exporter of OCC in Southern California told of being stocked full with material but had nowhere to go with it. One laughed sternly, because of freight today likely touching $100 per ton from West to East in the USA, when it was asked if California OCC could be shipped across country to possibly Tennessee, as an example. Another large exporter said his company was only able to export 30% of its recovered paper that was booked in January for shipment.
Throughout the USA, contacts said they could only move about 30-50% of the tons they had bookings for, because of a shortage of shipping containers.
One in the Southeast told of pulling tons away from export, as a result, and back for the domestic market.
“We want to put (OCC) on the water but we can’t,” said one major US recovered paper company official in the East. “There’s not enough containers and so that means these tons (about half the time) are moved back to the domestic market.”
There’s not enough containers and so that means these tons (about half the time) are moved back to the domestic market.
Trucking rates increase because of a lack of truckers
The transport issue was not limited to ships and offshore shipments. For the domestic market, trucking rates increased in the New Year and remained a bigger problem for most than last year because of a lack of truckers, contacts said.
“It’s like a bidding war for freight,” said a large Material Recovery Facility company official. “You put out for 10 trucks to show up, and only four do (in an example in the Pacific Northwest).”
In the Pacific Northwest, pricing for OCC for domestic mills rose $5/ton at the FOB seller’s dock, in a bit of a surprise. Mill demand was called good, suppliers said, and the value of the OCC increased because of storms that limited loads reaching mills. Also, at the SeaTac (Seattle Tacoma) port, OCC to Asia had bookings for FAS $170/ton for OCC and double-sorted OCC was at FAS $180/ton to Asia, a contact said on February 3.
New double-lined kraft corrugated cutting prices were mostly unchanged across the country, as major integrated boxmakers returned their cuttings back to their own mills rather than the open market, contacts said.
Possible US OCC price increase coming in the Spring
Suppliers throughout the USA warned that they believed OCC pricing would increase in March/April. They pointed to India’s demand picking up. One described India late this week as “aggressive” for tons, with US FAS levels to India at the end of this week at $215 per ton FAS for OCC and $235 per ton for DSOCC, and at $165 per ton FAS for mixed paper, from the New York/New Jersey ports.
India has become the number one export destination for US recovered paper since China’s ban on recovered paper imports in 2018. Among other main destinations is Vietnam.
“The Southeast Asia mills are very short of OCC inventory, particular in Vietnam,” a large US exporter to Asia said on February 4, “and they are buying JOCC (Japan OCC) at higher price than USA No. 12 OCC. This will continue a little longer, because we don’t see any improvement on ocean logistics for a while from USA.”
Even with the shipping problems, OCC pricing offshore this week moved in different, unusual directions on the two coasts. FAS levels to Asia increased by $10 per ton and $15 per ton at New York/New Jersey ports to $212-215 for OCC and $222-225 for double-sorted OCC. FAS levels decreased by $5 per ton and $10 per ton at the Long Beach/Los Angeles ports. Long Beach/LA OCC to Asia was $182-185 and double-sorted OCC was $192-195. For the double-sorted OCC, New York/New Jersey port pricing was $30/ton more than at the Long Beach/Los Angeles ports, according to P&PW’s pricing survey this week.
The US East export increases, in the face of some decreases in OCC domestic pricing as well as at the Long Beach/LA ports, might be a precursor to higher export pricing in the next two months, some sources believe. Still, the problem with finding containers and space on a ship remained, as one exporter on the West Coast said near the end of this week, a “colossal disaster.”
He told of waiting four weeks for a ship after gaining an OCC export order and a booking.
Several large mill buyers in the Midwest scoffed at the suggestion that higher export OCC pricing on the coasts would influence domestic pricing.
“I’m not feeling any influence from export in the Midwest,” said one contact with a large mill company. “The Midwest, with the new (recycled containerboard machine) projects, showed that the country is moving the OCC market more to the domestic side.”
Suppliers believed export demand would rise, especially after Chinese Lunar New Year ends next week, and because of two new North American 100% recycled containerboard machine startups that are expected to begin buying OCC next month or in April. However, in China, packaging demand has been off for about the last three to four months. COVID conditions and dramatic port congestion problems continue to play their parts. The government in China also required extensive fourth-quarter 2021 downtime at board mills, in a lead-up to the Winter Olympics in Beijing.
In the USA, containerboard mills actively purchased in the first half of the month and then buying slowed in the second half, as mills appeared to have built stock, supplier contacts claimed.
Maintenance downtime could impact 2022 OCC demand
The largest three North American containerboard producers – International Paper (IP), WestRock, and Packaging Corp of America (PCA) – plan maintenance downtime in the first half this year. IP said it planned to spend $150 million on first-quarter maintenance at its containerboard board mills and WestRock expected 128,000 tons of first-quarter board mill downtime. PCA said it planned maintenance shuts at four of its board mills in the first half this year. During maintenance shuts, mills typically but not always reduce their buying of OCC.
There already were reports of rolling downtime this week at two major integrated containerboard companies, while board mills by and large purchased all they could, rather than face full-on a price-spiking moment as they did in late third quarter last year.
OCC premiums reached mostly $30-40 in fourth quarter and mills worked to reduce them to a range of $10 to $30 per ton this week, contacts told P&PW. The typical OCC premium the last 20 years was $10-15 per ton in the domestic North American market.
Mills were active for new double-lined kraft corrugated cuttings as well, but found that integrated majors kept box plant cuttings to themselves at their own mills rather than selling them in the open market, various players told P&PW.