Generation lows heighten demand for North American old corrugated containers in May

US old corrugated container (OCC) prices recently increased across most of North America

For the second straight month, US old corrugated container (OCC) prices increased across most of North America in the first week of May, bumping up OCC’s average this month, according to Fastmarkets’ PPI Pulp & Paper Week (P&PW) May 5 pricing survey and market report.

Average pricing for US OCC has risen $12/ton since January’s average, yet remains well below year-ago pricing, when in May 2022 OCC averaged nearly three times as much, or $80/ton more, vs May 2023.

The OCC price increases at the start of May were reported in seven of nine regions tracked by P&PW. The $5/ton hikes at the FOB seller’s dock were in the US Southeast, Northeast, Midwest, Southwest, and in the Pacific Northwest. California was the only area of the country where domestic mill OCC levels decreased, by $5/ton at the FOB seller’s dock, as reduced pricing and buying for export OCC Nos. 11 and 12 FAS out of the Long Beach, CA, port fell in May by $5/ton FAS, leaving additional tons in this region.

All bulk grade prices fell in the Los Angeles and San Francisco regions, for domestic US mill business. This was the only region where supplies were said to exceed demand. Generation of bulk grades remains off, up to 25% across the US, for OCC and new double-lined kraft corrugated cuttings (DLK), contacts said.

A lack of cutup as box plants run at reduced rates, as well as major integrated mills internalizing their DLK, hiked up prices for the bulk grade by $10/ton in most US regions, save for the West Coast. DLK pricing dipped by $5/ton in the LA/SF regions in May as buyers “backed away,” one contact said. As for much of the rest of North America, several buyers and sellers described DLK as “hot.”

In one year, average DLK pricing in May, has fallen $76/ton, or 55%, vs the US average DLK held in May 2022.

A seller in the Southeast said of DLK: “A lot of the mills last month internalized their tons. I know WestRock pulled a bunch in, IP (International Paper) pulled a bunch in. A lack of generation has forced these mills to bring stuff back in internally. It is hot. No doubt.”

Mill groups are actively searching

Mills said their demand stemmed from a lack of supply rather than a reflection of finished goods orders. Slowed generation has been reported across the country and for all of this year. Some contacts don’t see a pickup in bulk grade generation until the end of summer.

Even with multiple mill groups with planned downtime in May and June, including Packaging Corp of America (PCA), Graphic Packaging, Greif, Sonoco, Essity, USG, DS Smith, as well as rolling downtime at mills owned by International Paper and WestRock, contacts said this week that the short supplies of bulk grades maintained movement as mills sought tons.

One mill contact in the East said: “As far as May, we … are aiming to bring up our inventory as we usually do this time of year for the summer period. This will be a challenge. We are not sure we will be able to do so with generation being (what) it is … and mill groups actively searching.”

Among those mills that are actively searching for OCC are players who recently added capacity. The buyers at the capacity startups have stepped on the toes of traditional buyers. PCA’s large Jackson, AL, kraft linerboard mill has been securing OCC tons that traditionally went to another major integrated containerboard and corrugated box company, contacts said this week.

So, too, has Domtar’s new large paper machine in Tennessee. Domtar’s Kingsport, TN, mill, that started up a 600,000 tons/yr recycled containerboard machine in January, has put a dent in demand. Contacts said the new paper mills (PMs) have “poached” tons that typically sold to a major integrated company in the Southeast.

ND Paper’s Biron, WI, mill has upped its demand for OCC in May, according to sellers. The converted PM is in startup mode, yet intermittently, and has yet to maintain a steady schedule, contacts said. Also in the Midwest, Pratt sought more OCC as well as mixed paper, contacts told Fastmarkets.

New Atlantic PM had some issues

In Whitby, ON, multiple contacts said Atlantic Packaging’s new 400,000 tons/yr recycled containerboard machine has “had some issues, as do most new startups.” The mill started up by the last week of February as planned, and the new PM is next to its recycled containerboard PM that has been running since 1990. The startup is expected to use DLK from its own corrugated converting box shops as well as No. 11 OCC and eventually mixed paper.

Finally, in Virginia, Cascades started up its Bear Island mill in Ashland on May 1, and produced its first roll of recycled containerboard. Having stocked up on 20,000-plus tons of raw material, market players said they have yet to see the new Cascades PM make a difference in OCC demand unlike the other startups so far this year.

“When (Cascades) starts Bear Island full throttle, we’ll see OCC go up higher in price in the Southeast than in the Midwest,” a contact claimed.

Recent pricing hikes have pushed up OCC’s pricing in the Southeast above prices in the Midwest, by $5/ton, at a high side at the FOB seller’s dock, respectively. In the Southeast, where significant volumes of containerboard production have historically been the highest, contacts described this region as the strongest for OCC prices in May, along with the Northeast region. Pricing for OCC increased in the Northeast in May, too.

Mixed paper up $5/ton

Mixed paper prices also increased in May, by $5/ton in every North American region, save for in California. Contacts told of premiums tacked on to mixed paper in some trades for May as reduced supplies vs increased demand hiked up prices. The US average for mixed paper in May remains well off from one year ago when mixed averaged in May 2022.

“Pratt is out buying all the mixed they can,” a seller in the Midwest claimed.

For No. 56 sorted residential papers and news (SRPN), supplies met demand, and pricing held firm in May.

“We’re buying news, SRPN, and we’re getting it all (that we need). We haven’t changed our news price in months,” a mill contact said.

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