U.S. packaging paper has increased by 183% in one year, and prices in the global packaging market have increased significantly

Fastmarkets RISI's pricing survey and market show that the 11-month continuous price increase trend of American used corrugated boxes (OCC) stopped in October. The reason was the partial decline in demand from US factories, which depressed the national average monthly month-on-month ratio of the US OCC.

The U.S. OCC national average price in October was US$164 per ton, which was a decrease of US$3/ton from the peak of US$167 per ton in September. The previous peak of OCC of $167/ton in September was the fourth highest among the 30-year average of the United States. Compared with the same month a year ago, the average price of OCC per ton in the United States increased by US$106 from US$58 in October 2020, an increase of about 183%. Since the beginning of this year, the average price of OCC has been US$91 per ton, an increase of 125%, which is higher than the average price of US$73 per ton in January.

Compared with October 2020, the average prices of OCC, mixed paper, cardboard shavings and DLK in October 2021 have increased by more than 150%. The price of mixed paper in the United States is an average of US$98 per ton, which is a 300% increase from the US$24 per ton in October 2020.

In addition, the average price of waste paper for each grade in the United States is rising year by year. For high deinking grades, another increase in October increased the average price of classified office paper to US$164 per ton, which was one of the highest prices in two and a half years. The average price in May 2020 was 170 per ton. Dollar. The price of deinking grade has been rising for 10 consecutive months.

According to relevant sources, compared with the tight supply situation in domestic factory demand and historical corrugated box demand in the United States, the continuous increase in the past 11 months has continued to raise prices. Although the demand from US factories lasted until October, the current "panic" "Sexual buying" has faded. In general, most of the paper mills that consume OCC maintained healthy inventories in October.

The downtime of some large paper mills has also partially weakened the demand for paper. Green Bay Packaging, International Paper and WestRock stopped work in September, which transferred their original OCC tonnage to other buyers. Since the beginning of this year, the integrated plant that has been internally digesting DLK has pushed these original tonnages to the market, thereby adding some supply to the market. These DLK tonnages have been welcomed by other major buyers. "Due to the shortage of SCN, we are looking for alternative fibers and have to use different types of materials to keep the factory running," said a buyer.

Graphic Packaging will start its new US$600 million recycled coated linerboard machine with an annual output of 500,000 tons at the company’s Kalamazoo, Michigan plant on November 1. After full production in 2022, the new machine is expected to recycle and use about 500,000 tons of waste paper each year. The plant currently reserves enough OCC raw materials for the operation on November 1.

The sellers also stated that they signed a three-year long-term contract to lock in prices. An OCC supplier in the Midwest stated that they confirmed a three-year contract with an OCC premium of up to $35 per ton. In the past 25 years, the OCC premium sold by domestic paper mills in the United States has been almost entirely US$10-15/ton. "This is crazy," the seller said when talking about the OCC premium. "I just think this is because of the long-term factory capacity in the next 3-5 years, and the recycling volume of OCC can't keep up with the development of the factory."

Several relevant people said that the upcoming production capacity in the United States is the primary consideration, and supply concerns still exist. According to related research, from 2022 to the end of 2023, a total of 3.1 million tons of new capacity will be added each year. Of this 3.1 million production capacity, 2.397 million tons are made of 100% recycled paper. These six capacity increase projects will start from the second quarter of 2022 to the end of 2023. Of these, five are in the United States and one in Canada.

According to Derek Mahlburg, North American Graphic Paper and Packaging Director of Fastmarkets RISI, it is this additional capacity that may increase the carton factory's cardboard inventory, thereby increasing the demand for OCC. Mahlburg delivered a speech at the 36th Fastmarkets RISI North American Forest Products Conference in Boston on September 27-29 and warned that there are still "significant risks" in the surge in OCC prices.

Fastmarkets RISI recycled paper economist Hannah Zhao said at the North American conference that the share of recycled cardboard paper production capacity will increase globally. She said that waste paper is used as raw material in containerboard production capacity, but the share will increase from 77% in 2020 to 78% in 2023. This increase in proportion is to maintain the tightness of the global OCC market.

In the United States, the demand for OCC is obvious. Allegedly, OCC had a premium of US$30-40 per ton in most transactions in October, and a few reported a premium of US$50-70 per ton. The OCC premium reached US$70 per ton for the first time in August. This high premium continued until September. The transaction volume in October decreased, but there were still some transactions that maintained this level.

SCN also has a premium. The tight supply of SCN has prompted buyers to try to use other recycled fibers in their ingredients to keep the machine running, including DLK and some high-grade paper. "Even non-traditional consumers are using it (high deinking level)," said a person with a factory in the Midwest. Finally, the pull of export trade also increased the stable demand this month.

According to reports, due to the prevailing demand in India in October, the prices of No. 11 OCC and No. 12 Double Sorting Used Corrugated Carton (DSOCC) remained unchanged, but prices in Southeast Asian countries did not increase. Paper mills in Mexico and Canada continued to import waste paper from the United States, and Mexico paid a high premium. Contacts said that Grupo Gondi's demand for US OCC in October was the same as for most of this year. The price of the New York/New Jersey port of No. 11 OCC remained high at US$235 per ton, the price of No. 12 DSOCC was US$250 per ton, and the price of Los Angeles/Long Beach Ports was US$225 per ton for No. 11 OCC and 240 per ton for No. 12 Dollar.

Mexico also has some demand for deinking grades. Increased demand from India has helped increase the pricing of classified office paper (SOP) exported from the East Coast. This demand pushes the New York/New Jersey pricing of SOP up to a high of US$10 per ton for FAS to US$270 per ton.

In China, shipments from Southeast Asian countries are measured in tons, and factory energy-saving efforts have led to a slowdown in production in many industries, including packaging. "Currently, the average downtime is about 5-7 days," said a major exporter. "We don't know how long this will last. The downtime will affect China's packaging box demand market."