Baled OCC for recycling.

Rising OCC prices led to a more expensive quarter for major fiber end users in the U.S. | Vitaliy Kyrychuk/Shutterstock

The third quarter of 2023 brought continued economic challenges that led another paper company to shut down a recycled fiber mill, joining a handful that did so early this year. But there were signs of positive fiber market changes coming.

These are some takeaways from quarterly financial reports and earnings calls for major publicly traded fiber end users operating in the U.S., in most cases for the quarter ending Sept. 30.

OCC markets: Export competition spurs ‘pressure on pricing’

For some end users, such as massive mill operator International Paper, buying OCC at higher prices and paying more for energy made it a more expensive quarter overall. The company anticipates higher OCC costs will contribute to a decrease in earnings in the coming quarter.

Mill operator Cascades noted a similar increase – on a Nov. 9 earnings call, Mario Plourde, company president, said OCC prices (average $59 per short ton) were up 26% from the prior quarter ($47 per ton). But he put it in context, noting the average OCC price dropped 46% compared to the same quarter a year earlier ($109 per ton).

“The OCC market saw a more active export market in Q3, with increased volume to Asia, leading to some pressure on pricing,” Plourde said. “Seasonal fiber generation remained good, albeit at a slower pace than recent years.”

Cascades has had “no problems supplying the needs of our operation,” he said, adding its OCC intake has increased with the ramp up of its Bear Island, Va. recycled fiber operation.

Plourde described a different situation for white recycled paper grades, like office paper, which his company uses heavily. Third-quarter prices (average $151 per ton) decreased 22% from the prior quarter ($193 per ton) and 42% from a year earlier ($260 per ton). Plourde noted those grades are harder and harder to source. There is “structural decline in market supply of these high-grade papers over the long-term given lower generation,” he said.

Closures and restarts

Mill operator Greif is closing its Santa Clara, Calif. containerboard mill that uses recycled fiber. According to a product specification sheet, the mill produced recycled corrugating medium, recycled linerboard and more. Company spokesperson TJ Struhs told Resource Recycling the mill had a capacity of 88,000 short tons per year. Greif informed state regulators about the closure in September, noting 74 employees would be laid off on Nov. 15. 

In a statement to the Silicon Valley Business Journal, the company said declining containerboard prices, rising feedstock costs and projected decrease in containerboard demand contributed to the decision.

The company described it as a permanent closure. (A separate recycled paper mill in Santa Clara was shut down by Graphic Packaging in 2017.)

Elsewhere on the West Coast, Packaging Corporation of America (PCA) in May announced it would idle its Wallula, Wash. paper mill, which uses recycled fiber and added more recycled feedstock capacity in 2021. The company cited a range of economic conditions contributing to the decision. Now, the company has brought one paper machine back online to produce linerboard, although it’s unclear whether the machine uses recycled fiber. (The mill has machines that use virgin and recycled feedstock.) Company executives said increasing demand is driving the decision, and they anticipate the machine will be back online for all of 2024.

“If we didn’t have the demand, we wouldn’t be talking about restarting Wallula, pure and simple,” said Tom Hassfurther, executive vice president of corrugated products at PCA, during the company’s Oct. 23 earnings call.

Perspectives on recycled feedstock

PCA CEO Mark Kowlzan discussed the company’s interest in recycled feedstock, which he said the company has invested in heavily over the last decade. Besides the Wallula facility, he noted the company has recycled fiber capacity at its DeRidder, La.; Jackson, Ala. and Counce, Tenn. mills. But he emphasized it’s primarily an interest in diversifying feedstock that drives recycled projects.

“We take advantage of it,” he said of recycled feedstock during the earnings call. “And it does give us some opportunity to flex the fiber cost and time of year and availability.” But he predicts in 10 years the company’s feedstock balance will look similar to today. In other words, don’t expect a huge shift toward recycled input at PCA.

It’s a different story at Graphic Packaging, where company CEO Michael Doss on Oct. 31 described the company’s enthusiasm for increasing recycled material use, an interest that is driven by consumer trends.

Doss noted a new 550,000 ton recycled paperboard machine in Kalamazoo, Mich. has allowed the company to increase its net coated recycled board capacity by 70,000 tons since the project began in 2019. (The company decommissioned a separate, older recycled paperboard machine at the Kalamazoo plant.) He also referenced Graphic Packaging’s current investment in recycled paperboard capacity at its Waco, Texas plant, announced earlier this year. He estimated the combined investment in both facilities totals $1.7 billion.

Doss said Graphic Packaging’s new coated recycled paperboard product, “PaceSetter Rainier,” which was announced in August, hit the market in October.

“This new grade of the highest quality recycled paperboard available will facilitate (coated recycled board) into more consumer packaging experiences across the food, health, pharmaceutical and beauty product applications,” he said.

Doss said the efforts reflect the trend of “growing consumer demand for packaging made from recycled materials.”

In other fiber end-user news:

  • WestRock sold its Chattanooga, Tenn. uncoated recycled paperboard mill during the fourth quarter. It also sold uncoated recycled paperboard mills in Eaton, Ind. and Aurora, Colo. during the fiscal year, the company reported in its annual 10-K report published Nov. 17. The company currently uses about 60% virgin and 40% recycled fiber across all its mill operations, according to the annual report, and it consumed 1 million tons of recycled fiber in the fourth quarter.
  • Georgia-Pacific announced it will invest $150 million at its Halsey, Ore. paper mill, which produces retail consumer tissue. Company spokesperson Kelly Ferguson confirmed to Resource Recycling that the mill uses recycled fiber as part of its fiber mix at the Halsey facility, but declined to disclose grades or volume used. The investment will increase production capacity at the mill, with the new production capacity slated to come online in 2025.

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