This article appeared in the February 2024 issue of Resource Recycling. Subscribe today for access to all print content.

Recovered fiber values have marched upward over the last half year, driven by a shift in demand for corrugated boxes and other key end markets. Whether that demand continues to grow—and how fast the ramp-up in box production leads to more available old corrugated containers (OCC) in the recycling stream—will determine how long prices will continue to rise.

Factors guiding the current North American recovered paper market were discussed during a January panel discussion hosted by the Institute of Scrap Recycling Industries (ISRI), a trade association, and the Davis Index, a material pricing index that reports recovered commodity values.

“We’ve been on what I’ll call a typical industry roller coaster ride,” said Johnny Gold, a recovered paper market specialist with the Davis Index. “But since July of 2023, we’ve seen the low-grade market heading on an upward trend.”

According to (see “Market Analysis,” page 36), U.S. average OCC prices tanked in late 2022, plummeting from $131 per ton in July 2022 to $29 per ton by the end of the year. Mixed paper similarly fell, collapsing from $70 per ton in June 2022 to negative $1 per ton in October 2022, where it hovered for the rest of the year.

But the tide has shifted in recent months, with prices for both grades on the rise: OCC steadily increased in the latter part of 2023 and continued early this year, hitting $87 per ton in January, according to Mixed paper similarly climbed throughout 2023, and in January, it reached $48 per ton.

According to experts, most signs point to continued strength in pricing. In particular, end market demand is improving and poised to continue that trajectory.

“We have good market fundamentals for long-term growth, for the key segments that consume recycled paper grades, which is really encouraging and something to look forward to,” said Jose Gonzalez, director at AFRY Management Consulting, which provides market research.

Packaging leads the way

Containerboard, cartonboard and flexible paper packaging markets appear to be primed for growth in the months and years to come, Gonzalez explained. That growth will be global, and each region will see varying dynamics, he added. The packaging demand will contribute to what AFRY projects will be 77 million short tons of global recovered fiber demand increase from 2020 through 2035. 

“All of these things are encouraging for demand for recycled paper,” he said.

So how do those long-term trends play into North American recycling markets for 2024? It depends, of course, on how fast the demand developments come to pass. Gonzalez projects demand for corrugated boxes in the first quarter of 2024 will be better than it was during that period a year earlier. That’s already visible in moves by packaging producers to increase their stock of boxes, suggesting “demand will start picking up this year,” he said.

For cartonboard, Gonzalez sees signs of a positive first quarter of 2024, compared to both the same period a year earlier and the last few months. Those factors include resiliency in consumer spending as well as brand owners looking to meet sustainability initiatives.

“These are good ingredients for cartonboard also to perform well in the first quarter of 2024,” Gonzalez said.

In the tissue market, also a significant sector for recovered fiber feedstock, demand is “back on track to the pre-pandemic levels,” Gonzalez said, especially in the away-from-home markets. That’s driven by Americans traveling and going out to restaurants at higher levels again.

Gonzalez added that after some mills idled paper machines or even closed facilities altogether during the COVID-19 pandemic, demand for growth in markets including tissue is leading some fiber end users to invest in these areas once again.

He pointed to a recycled paper mill in Duluth, Minnesota, that was closed by Verso Corporation in 2020 early in the pandemic. Verso had been producing both graphic and packaging paper products at the mill. In 2021, ST Paper & Tissue, a mill operator with facilities in Virginia and Wisconsin, purchased the shuttered facility. ST Paper restarted the mill in 2023, producing tissue, paper towels and napkins from post-consumer recycled paper converted on an Andritz paper machine. 

Then, in January 2024, Italian paper company Sofidel Group purchased the Duluth mill, which has a current capacity of 72,000 short tons per year and 80 employees. In announcing the purchase, Sofidel said the recycled paper mill helps the company meet the “growing demand” for tissue, “which saw a significant upturn in 2023.”

Outside of tissue and packaging, the outlook is less sunny: Printing and writing grades are projected to continue suffering from declining demand, Gonzalez said. The pandemic heightened some of the trends damaging printing and writing grades. Office closures, for example, meant a sudden drop in demand on top of the long-term trend downward. These sectors are not seeing a recovery to pre-pandemic levels.

Gonzalez shared figures indicating publication papers saw a 34% drop in North American demand from the third quarter of 2022 to the third quarter of 2023 and a 27% drop in uncoated freesheet demand during the same time. Both categories are projected to decline further in the months to come.

Examining OCC’s march upward

Demand growth is one part of the OCC pricing equation, but it doesn’t tell the whole story.

“Obviously, the prices have firmed up,” said Leonard Zeid, president of the paper brokerage division at Midland Davis. “But, unfortunately, it’s firming up because of lack of supply of material.”

Generation of OCC in the recycling stream is down, he said. Collection has been softening in certain areas of the country, and that’s a sort of delayed result of an earlier drop in corrugated box demand, leading mills and box plants to slow down.

“They’re making less boxes because people are buying less things,” Zeid said. “[When] they’re buying less things, there’s less scrap in the stream. Less scrap in the stream, there’s less generation.”

That creates a struggle for mills to get enough recovered fiber to meet flat demand levels, let alone to meet box demand when it starts to rise again. Zeid noted the containerboard mills are projecting sales to increase in the near future, although not to reach pre-pandemic levels quite yet. As they look to meet that demand, constrained feedstock is driving prices higher. And it will take time to get OCC collection back where it needs to be to meet the demand.

“The containerboard business has firmed up a little bit, but there’s going to be a lag in the pipeline,” Zeid said. “Until they’re making boxes that are out in the market, there’s a three-month lag at least between the time that happens and the time it gets to the recycling stream.”

Prices will continue to push upwards during that lag time and likely further as long as demand continues to rise. 

“If that happens, we’re great,” Zeid said. “If it doesn’t, if you start seeing some downtime by the mills, then we may see some collapse in the [OCC] market.”

Cleaner stream is the new norm

If quantity of recovered fiber generated in the recycling stream is down, the quality of that material has only been increasing.

That’s been a trend ever since the U.S. recycling system was shocked by China’s move to restrict imports of recovered fiber and other recyclables from 2017 onward. The country, once by far the largest buyer of recovered commodities exported from the U.S., also enacted strict quality requirements for select materials it didn’t outright ban. OCC, for example, was required to be 99.5% free
of contaminants.

The changes China spurred in the U.S. recycling system—
investments to improve sortation—appear to be having a lasting impact on bale quality.

“The quality is the best it’s ever been,” said James Derrico, vice president of new business development at CellMark, a MRF
operator and recovered materials trading company. A major recovered material exporter, the company receives fewer quality complaints from overseas buyers than ever before, Derrico said. 

Derrico tied the quality increase directly to China’s exit from the bale-buying market. When China was still a huge consumer of U.S. recyclables, Chinese mills bore the task of cleaning up bales once they reached the mill for processing.

“Since that’s changed, a lot of money has been going into new equipment, building better facilities, better optics, and that’s just cleaning up recycled content,” Derrico said.

The equipment installations have also given MRFs more flexibility in the bales they create, he said. In the past, it wouldn’t make sense for a MRF to spend extra money cleaning up a load of OCC, particularly when China’s mills would accept any quality, but that has completely shifted.

“Now, people are very open to those changes,” Derrico said. “Really, there’s no low-grade OCC that we used to see, that would cause all this trouble with machines overseas, anymore in the U.S. for the most part.”

There’s another component of the quality shift: the amount of virgin fiber U.S. box producers include in their corrugated materials. AFRY’s Gonzalez noted virgin fiber makes up nearly 60% of total containerboard production in the U.S. and Canada. That virgin content makes for a higher-quality of OCC when those boxes enter the recycling stream, he and Derrico explained.

Meanwhile, Chinese product imports into the U.S. have dropped significantly in the last year—from January through November 2023, imports from China were down 21% compared to the same period in 2022, according to the latest data from the U.S. Census Bureau. That means fewer Chinese-made corrugated boxes, which are typically made from high recycled fiber content, entering the U.S. recycling system as low-quality fiber.

Derrico noted the difference in virgin and recycled fiber quality means virgin material will continue to play a key role in the corrugated sector.

“People associate a good-quality box with good-quality products, and brands know that,” he said. “They’re not going to move to a highly recycled content box for all of their products.”

Improving capture at the bin

Although OCC generation is lagging in part because of less fiber available to enter the recycling stream, it’s also true there is good-quality OCC being lost to landfills. That’s something MRF-level equipment improvements cannot address—it requires upstream improvements at the point of collection or even earlier.

Speakers pointed to recent research indicating more corrugated material enters landfills than is typically reported by the U.S. EPA and industry groups. The National Renewable Energy Laboratory in December published findings indicating as much as 56% of recoverable OCC in the U.S. was landfilled in 2019. That equates to about 62 million metric tons, compared with the 16 million metric tons the U.S. EPA reported was landfilled the prior year.

“There’s just too much area of the United States that does not have sufficient recycling capacity,” Derrico said.

The Recycling Partnership, an industry group focused on advancing the U.S. recycling system, recently published a number of key statistics, reporting that although 73% of U.S. households have access to recycling, only 43% of households participate in recycling programs. And the access varies by housing type: Only 37% of multifamily households have access to recycling service. (See Data Corner, page 11.)

Those statistics help to explain The Recycling Partnership’s findings that 7 out of 10 corrugated boxes discarded in U.S. households are lost to the trash stream and that just 21% of residential recyclables are actually entering the recycling stream.

Improving those rates may require more responsibility on the part of consumers and/or brands, Derrico noted. But there are other financial factors pitting the recycling system against disposal.

“In Texas, one of the biggest competitors we have in recycling is the landfill,” said Kathy DeLano, vice president of Dallas-headquartered Texas Recycling, which handles OCC and other recyclables generated in commercial sectors. “I do see a lot of paper going in the landfill.”

Landfilling is cheap, especially in areas with a lot of available land, and the recycling process can add costs that some customers might prefer to avoid.

“By the time you pick it up, bale it, process it, store it, sell it, you’re upside down to the customer,” DeLano said.

Of course, recovered fiber prices play heavily into that financial equation, DeLano noted. And if prices continue to push higher, it could have an upstream impact on the capture rate, said Gonzalez.

“I think the demand… is going to also incentivize some of this collection as well,” Gonzalez said. 

Colin Staub is an associate editor at Resource Recycling and can be contacted at [email protected].

This article appeared in the February 2024 issue of Resource Recycling. Subscribe today for access to all print content.