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Demand for US old corrugated containers (OCC) surpassed supplies in August, hiking up OCC prices for the fifth consecutive month, by a range of $5-10/ton at the FOB seller’s dock in the Northeast, Southeast, Los Angeles and San Francisco regions, according to Fastmarkets’ PPI Pulp & Paper Week Aug. 4 pricing survey and market report.
The Southeast region was reported as the “strongest” for mill buying this month and a $10/ton rise put OCC’s price at $65-70/ton at the FOB seller’s dock in August. OCC’s premium in most regions is $25-35/ton, with the highest premiums and prices in the US Southeast.
OCC pricing also moved up by $10/ton out of the two aforementioned West Coast regions in California, to $50-55/ton, and $40-45/ton, respectively, and by $5/ton out of the Northeast region, to $55-60/ton.
In the Midwest, pricing held unchanged at $50-55/ton in August. Mills in the Midwest have market-related downtime in August, as well as scheduled maintenance outages.
Pricing also remained unchanged for OCC in the Pacific Northwest (PNW), at $35-40/ton FOB. WestRock’s announcement this week that it plans to shut its Tacoma, WA, mill by the end of September had yet to affect markets in that region. While OCC demand on the domestic side was “flat,” contacts described an active export market that moved additional tons for August. Out of the Pacific Northwest, sellers said they had OCC orders this month to India, Vietnam, Malaysia, and Taiwan, among other countries.
“OCC is still strong in the PNW,” a contact said on Aug. 4. “Overall demand is flat, despite WestRock’s announcement to close their (Tacoma) mill Sept. 30 and export OCC demand and pricing is definitely up in August.”
The tightness in new double-lined kraft corrugated cuttings (DLK) has eased some into August, yet contacts confirmed the $30/ton spread between DLK and OCC in most US regions, except for on the West Coast, remains reflected in August trades. Pricing for DLK moved up by a range of $5-10/ton FOB with OCC this month.
Part of the slight pushback on DLK demand has been driven by the new startup capacity that are “running more corrugated,” as one contact said. Since the new paper machines have been running for months now – from Atlantic Packaging’s Whitby, ON, new PM, to Domtar’s Kingsport, TN, 400,000 tons/yr mill, and Cascades’ Bear Island, VA, mill – their need for DLK has declined as “their startup period is over.”
Most of the new capacity anticipates adding mixed paper to their furnish in 2024, according to contacts. For now, the focus is on bulk grades consumption.
Mixed paper pricing was unchanged in August, save for $5/ton hikes out of the Los Angeles and San Francisco regions, as mostly steady demand met supplies.
Slowed generation is part of the picture for increased orders, contacts told P&PW. Supplies of bulk grades are short in the US and mill demand has been steady, and even increasing, with the added containerboard and paper and board capacity this year. Mill and recycled plant contacts this week continued to pin their year-over-year decline in inbound recovered tonnages at 20-30% this summer.
Contacts said major mill groups have maintained, and even increased, premiums to secure bulk grades for August orders.
Upcoming capacity startups are on sellers’ radars, too. From Pratt’s new project in Henderson, KY, which is to start up by the first week of October, to Total Fiber Recovery (TFR) of Chesapeake, an Oregon-based joint venture with CellMark, contacts said bulk grade buys increased. That TFR joint venture in Virginia will open its first, $80 million recycled brown pulp mill by the end of December 2023, and contacts told P&PW this week that the mill is “looking for new orders.” The mill is expected to consume 300,000 tons/yr of OCC and mixed paper from material recovery facilities.
“We have no issue moving cardboard,” a seller said. “IP (International Paper) is asking us to increase our order with them. … The variety of mills that are out there and buying (has increased). … Everyone is firing ahead just fine on the OCC grade.”
OCC’s rise in orders vs slumped supplies pushed up the bulk grade’s US average by $5/ton month-over-month in August compared to July. Since January, average pricing for US OCC has risen by 86.2%, or $25/ton. Compared with one year ago, OCC’s average has decreased by $55/ton, or 50.5%, from a $109/ton US average in August 2022.
What a swing in a year for OCC demand. This time last year started the fall in OCC orders and pricing. US recovered bulk grades prices had plummeted in August 2022 on both domestic and export markets as demand outpaced supplies, and rampant mill downtime last summer had mills turning away tons.
Also, in the third-quarter of 2022 and especially in September last year, both mill production and US actual box shipments started to downshift in a demand decline that now is almost a year old.
P&PW reported at the time that mills that had taken downtime in July 2022 had issues starting up again, while many others planned downtime in August, including IP, WestRock, Packaging Corp of America, Pratt Industries, Greif, Sonoco, Cascades in Niagara Falls, and Port Townsend in the Pacific Northwest, among others.
This summer, signs could be pointing to progress. While major containerboard and paper and board mills reported for the second quarter in a row production rates in the mid-80%, company leaders in their recent earnings calls touted a better start to their runability in July, as well as an increase in bookings for orders.
At the same time, export demand has put pressure on domestic mills in August, contacts said.
A contact in the Northeast said: “Domestically, (OCC is) up here in the Northeast. Things are moving, premiums are unchanged. Things are fairly stabilized. The only thing we’ve seen is the export demand creep in, which is putting a little bit of pressure on the domestics because they’re losing some tons to the export orders with the bump up in price.”
This article was taken from PPI Pulp & Paper Week, our newsletter for pulp, paper and packaging market news and prices for North America. Speak to our team to learn more about our news and market analysis, prices, forecast and more.