Mixed paper and old corrugated containers (OCC) have long been connected, with mixed paper pricing strengthening when OCC pricing strengthens, explained Bill Moore of Moore & Associates, Atlanta. This correlation stems from board mill’s use of mixed paper to supplement their OCC consumption.
Moore spoke during the WasteExpo 2019 session Mixed Paper Bootcamp: Diving In, which was May 8.
In the U.S., Moore said, mixed paper use at board mills increased 2 percent from 2017 to 2018. In January and February of this year, these mills used 4.4 percent more mixed paper than they did in the first two months of 2018. This is in part because of the wide availability of this grade at low prices given China’s effective ban on the import of mixed paper from the U.S. However, Moore said, it is “not so easy to use mixed paper,” which is why so little of it is being sold domestically despite its wide availability and low cost.
Moore said the depressed pricing for mixed paper has caused some material recovery facility (MRF) operators to remove more OCC from their mixed paper bales, which reduced the amount of mixed paper being produced. However, this practice increased the supply of OCC, which lowered pricing for that material.
At the bottom of the pricing cycle, he said, mixed paper pricing is very soft because of its abundant availability. The U.S. produces roughly 2 million tons of this grade.
Moore said when OCC is “hot,” mixed paper pricing in the U.S. ranges from 50 to 65 percent of the OCC price. In an average market, mixed paper pricing tends to be 40 to 50 percent that of OCC. When OCC pricing is very low, however, mixed paper pricing tends to come in at 20 to 30 percent of the OCC price.
For the last 10 years, fueled by China’s hunger for mixed paper, pricing averaged 60 percent of the OCC price on a yield-adjusted basis, Moore said.
While demand and pricing for mixed paper have been depressed, Moore forecasts that OCC demand will outpace supply in the future and that other fiber grades, such as mixed paper, will be needed to make paperboard.
A couple of factors will help to contribute to increased consumption of mixed paper. U.S. MRFs will produce cleaner grades of mixed paper in time, he said, and mill stock preparation systems are improving to allow mills to consume more mixed paper.
In Europe, however, the situation is different. Mixed paper prices average 75 percent or more of the OCC price, Moore said. This is because Europe’s domestic board mills demand mixed paper, having continually improved their stock preparation systems in the last two decades, unlike U.S. board mills, he explained.
U.S. mills consumed 3.4 million metric tons of mixed paper in 2016, while 3.6 million metric tons were exported, Moore said. In 2017, those figures shifted slightly, with the U.S. consuming 2.6 million metric tons, while export demand declined slightly to 3.5 million metric tons. 2018 projections have domestic mills consuming 3.7 million metric tons of mixed paper and exports declining to 2.7 million metric tons, he said, with a minimum of 500,000 metric tons of U.S collected mixed paper having been disposed of.
Moore said announced U.S. board mill projects plan to consume 10 percent to 50 percent mixed paper in their furnish. Pratt Industries' mills in the U.S. use 50 percent of this grade in their containerboard production, while Nine Dragons plans to use 20 percent to 30 percent at its U.S. mills.
Among the U.S. projects announced, Moore said, 1 million metric tons of mixed paper will be consumed annually over the next two years. That still leaves an overhang of 1 million metric tons of mixed paper in the domestic market.
WasteExpo 2019 is May 6-9 at the Las Vegas Convention Center in Las Vegas.