North American mill operators enjoyed a quarter of lower feedstock costs at the end of 2024 and are anticipating little OCC movement this year. But one operator says tariffs are contributing to so much uncertainty that the company can’t provide a detailed outlook.
Cascades CEO Hugues Simon during the company’s Feb. 20 earnings call described a quarter of positive trends for sourcing raw materials, allowing the company to cut costs by 13 million Canadian dollars ($9.1 million) on recycled fiber compared to the previous quarter.
“Fiber availability was good with strong seasonal generation and low overall export activity,” he said, translating to a 23% reduction in OCC prices compared to the prior quarter. The lower recycled fiber prices and higher prices for finished products outpaced lower sales volumes to drive a 16% increase in earnings compared to the prior quarter.
“We don’t expect any major change in these market conditions in the coming months,” Simon added.
Other end users are following similar assumptions: Sonoco is operating off guidance that OCC will average $100 per ton for the full year of 2025; Packaging Corporation of America is anticipating higher costs in almost every segment except recycled fiber prices, CEO Mark Kowlzan said; and Graphic Packaging CFO Stephen Sherger said the company is seeing “pretty neutral” input costs year over year.
But finished goods production and subsequently recycled material pricing could be disrupted by policies like tariffs, particularly if they lead to less consumer goods purchases or a wider economic slowdown.
The current unknowns led Cascades to suspend a previously standard forecasting practice.
“Cascades has always driven to be transparent, a key part of which has included providing a near-term financial and operational outlook with our quarterly results,” Simon said during the call. “Unfortunately, the high level of continued uncertainty surrounding the macroeconomic and political environment is such that we’ll pause this practice for now.
“The risk of bilateral tariffs being implemented has the potential to have broader implications on the economy and is difficult to predict,” he added.
Tariffs are a particular concern for Cascades, the Quebec-headquartered packaging firm and major recovered fiber end user. The company operates MRFs and mills in both Canada and the U.S., and about 11% of its overall sales comes from products made in Canada and sold in the U.S. The company also does a lot of cross-border inter-company material transfers, including of raw recycled fiber used at its paper mills.
Simon said the company is making changes to its raw material sourcing operations, reallocating production to minimize the need for cross-border transit, and more. He added the company has been considering the potential of tariffs since the last quarter of 2024.
“It’s something that is changing daily, the devil is in the details, but we have some pretty good action plans to mitigate as much as possible,” he said. That has involved many discussions between the company’s sales teams and the companies that buy Cascades’ packaging products.
“I think customers realize that a 25% tariff will mean that pricing will be somehow different,” he said.
The likelihood that tariffs will raise prices was a theme throughout the recent earnings calls.
Sonoco CEO Robert Coker was perhaps the most blunt about his view of tariffs and how the company will handle them.
“We don’t like them,” he said. “Certainly, it’s an impact here on our U.S. business. And we have mechanisms to pass through without issue.”
