Current Situation and Prospect of Global Waste Paper Market
According to the latest analysis report released by the Bureau of International Recycling (BIR), the current outlook for the waste paper industry is relatively optimistic, especially as prices in North America and Europe have stabilized in the second half of this year, and in some cases have strengthened slightly.
Overview of the global waste paper market
Paper prices in major European recycling markets were stable in August, especially for demand grades such as mixed paper, cardboard and OCC. This stability was attributed to lower production during the holiday period, reduced demand from paper mills, and favorable export opportunities. However, prices started to change again in September, especially in the low-end product market. Market professionals in the UK and continental Europe reported higher prices, mainly due to European buyers' efforts to balance domestic and export prices. European paper mills continued to face challenges due to overcapacity and falling demand, resulting in lower prices for their products.
Meanwhile, exports to regions such as South East Asia have affected price adjustments in Europe. Overall, domestic demand in Europe remains low, with paper mills facing high price pressures due to weak orders and overcapacity. Factory inventories remain high, while waste paper inventories are low. The drop in waste paper collection after the holidays has surprised some, suggesting that people may be spending less.
U.S. OCC exports fell 14.8% from January to July 2023, with blended paper and ONP falling even more at 26.8% and 30.4%, respectively. Despite the year-to-date decline, exports of OCC and blended paper increased month-on-month in July. India remains the largest importer of blended paper to the U.S., and although imports are expected to slow in November due to Diwali, orders were high in September. In addition, North American unbleached and bleached kraft paper prices remained stable in September due to stable demand.https://www.risedongsheng.com/
Continued increases in OCC prices this year have led to a sharp rise in the national average for bulk paper in the United States. Despite the increase in demand, the rate of bulk paper production has slowed. Newly launched recycling bin cardboard machines have brought more demand for waste paper, and paper groups are competing for the already limited amount of waste paper. At the same time, actual carton shipments in the United States fell sharply in the first half of the year. As the Christmas sales season approaches, paper mills are expected to stock up, which has led to increased demand and prices for OCC in various regions of the United States.
The overseas sourcing arm of China Paper Group is stepping up efforts to source brown-grade products from the US and Europe for shipment to Asia, while seeking to raise import prices in South East Asia and Taiwan. In recent deals, they paid heavily for OCCs in the US and Europe. As procurement costs continue to rise, suppliers in these regions have had to adjust prices accordingly, and some even stop purchasing when prices exceed certain thresholds.
End users, especially major paper mills in South East Asia and Taiwan, have responded to rising OCC prices by reducing imports and switching to cheaper alternatives, such as locally collected waste paper. Some smaller mills have even suspended or stopped production due to reduced demand. In addition, increased reliance on domestic OCC has also pushed up prices.
There are questions about the sustainability of the high purchase rate, with some speculating that this will stop by the end of October. However, the purchased materials are expected to be shipped to South East Asia within the next two months, processed and then shipped back to China to produce the finished product, especially with the Lunar New Year expected in February 2024.
The situation is further complicated by the depreciation of the RMB against the US dollar, which has led to lower packaging material exports to China from South East Asia and Taiwan. The market demand has also shifted from the high-priced US OCC to more affordable options such as Europe, Japan, Australia and New Zealand. However, due to the recent low waste paper collection rates, the supply in these regions is dwindling, and the situation in India remains unclear.
Although there is demand for local waste paper due to the impact of the monsoon season, Indian paper mills are cautious about pricing and are reluctant to stock up on high-priced US waste paper. While US OCC prices have risen, Japanese OCC prices have fallen due to aggressive buyer negotiation tactics. OCC sellers in Europe had hoped to raise prices, but market dynamics may have dashed their hopes.
North America
The U.S. waste paper market continues to show slight strength. While no one is saying it's back to the good old days of big price increases, seven or eight consecutive months of small increases have created some optimism in the waste paper market. For example, OCC prices doubled from January to September this year, but the first month of 2023 was so low (around $30 per ton) that doubling over the next three quarters is unlikely. In fact, OCC pricing in September this year is still lower than in 2022 in most regions.
The upward price trend is driven by the same factors as in the past 6-9 months, including low supply/recycling volumes. Factories that need OCC remain concerned that their demand will not be met as product demand remains weak, and this nervousness is driving up OCC prices. Typically, if prices in the U.S. generally rise or fall, one or two regions may see the opposite trend, but this time it is not the case: Prices appear to be rising in all markets for OCC and mixed paper nationwide.
In addition to weak lineup products, there will be 100% recycling plant launches in 2023, which supports growth in demand and thus higher pricing. Earlier this year, Domtar launched its Kingsport, Tennessee, facility, which transitioned to produce 100% recycled containerboard, which can consume up to 660,000 tons of waste paper per year. In the same geographic area of the U.S., Pratt Industries opened a new 100% recycling plant in Henderson, Kentucky, last month, and these two plants alone consume well over 1 million tons per year.
On the other hand, however, the U.S. domestic containerboard market is weaker than normal, with some reports suggesting corrugated box demand is down more than 10% from 2022. As reported in previous months, there are a number of reasons for this weakness, including: low consumer confidence and therefore lower spending; the lightweighting of cartons, and the right size for packaging in general. While none of these factors had much of an impact, the combination of these three factors had a very negative impact.
U.S. bulk paper export prices are also naturally trending higher, apparently from the east and west coasts. Compared to 2022, most U.S. exporters have seen an unprecedented decline in tonnage in the first eight months of 2023, with total exports down 15% -20%. Almost every major country has purchased less waste paper from the U.S. so far in 2023, with the only exception being Thailand, which has increased purchases in the year to July and is currently the second largest U.S. export market for waste paper.https://www.risedongsheng.com/
However, the overall trend appears to be shifting, and the export picture in the fourth quarter of 2023 may not be as weak as it was in the previous three quarters. Other developments that will affect the resurgent waste paper market in the long run include, first, recently announced or under construction or newly opened MRFs. On top of that, Lumpke's MRF in Columbus, Ohio, which is expected to be one of the largest in the United States; WM's new MRF in Cleveland, Ohio; and a new MRF to be built in Lucas County, Ohio. Ultimately, these additions should increase the collection of recycled fibers.
Second, the merger of Smurphy Kappa and Viselok created the world's largest containerboard manufacturer. Of course, only time will tell what impact this will have, but pay close attention to how it affects global production.
Again, last month's PackExpo attracted 30,000 attendees, and the big news was a race by companies to try to switch from plastic packaging to paper packaging. This has already happened to some extent, but if it continues, the demand for waste paper used to make new paper will increase in the long term.
France
The level of activity this summer has been less than satisfactory and collection has not been good at all for recyclers or paper makers. The lower grade waste paper market remained quiet until mid-August before rising again in September and October due to lower recycling volumes of waste paper and a slight increase in sales to Asia. Given that activity levels are not dire for European paper makers, it doesn't take much to create a slight imbalance given the limited supply available. The trigger is Asian buyers looking for volumes in Europe.
Indeed, on the other side of the Atlantic, things have changed not long ago. Low collections, no inventories and new capacity launched locally have meant higher export prices for cardboard, while the logistics costs of container shipping are very low. This has prompted a slight recovery in Asian demand in Europe, logistics costs have returned to historically low levels, and the euro/dollar comparison has been more favorable.
The situation remains contradictory and tense. The waste paper and cardboard market in Europe is rising, but European customers have few orders, stocks are high, prices are often falling, and it has been announced that several machines will be closed at the end of the year. Therefore, exports will continue given that local customers will not have much demand for the rest of 2023. As for the medium paper market, the situation is less optimistic due to insufficient customer orders and pressure on finished product prices.https://www.risedongsheng.com/
The graphics market is not booming, with deliveries declining year by year. The German market, which was very important and demanding until the summer of 2022, is now completely gone. Prices for these grades are lower, and the lack of a proper level of overseas trade doesn't help. The same is happening in the office paper market, where demand is sluggish and prices are steadily falling. Exports picked up slightly in October as prices rose, and if that trend continues, it could help put some pressure on the European market.
There has been no change in the market for high-grade paper. Pulp prices remain low and there is little customer demand from recyclers. The market is not strong and some products sometimes experience sales difficulties. In a complex and volatile situation, the number of recyclers is insufficient and there is no market appeal for customers. It is known that the activity level of papermakers will decrease at the end of the year due to very high stocks of finished products enough to meet weak market demand. Although the presence of Asian buyers will have an impact if sustained, the activity level of recyclers is not expected to be very good either.
Germany
Orders for paper, cardboard and waste paper remain equally weak due to continued weakness in the German economy and related consumption patterns. Most paper and cardboard producers have warehouses full of new paper and raw materials. Waste paper collections continue to decline as schools are closed. Due to the lack of full orders, this means less raw material to re-inject into the loop.
Improved export conditions due to lower sea freight rates in Asia have led to higher orders in the Far East and brought price pressures, especially near ports in Western and Northern Europe. Waste paper treatment companies benefited from higher prices, forcing waste paper demanders to slightly increase payments at the end of the third quarter. Imports of waste paper have continued to decline and have adapted to lower consumption levels. Economic stagnation and changes in consumption behavior have created more and more problems for the industry, and only exports have contributed to a slight improvement in the overall situation.https://www.risedongsheng.com/
Turkey
The contraction in demand triggered by the earthquake in February continued into the third quarter, in line with the trend of the previous three months. Several paper mills badly affected by the earthquake have emerged from operational disruptions, with those operated by Kipas and KMK resuming operations in July and September, respectively.
Modern Karton is starting up a new PM6 in Zonguldak, coupled with the machine in Chorlu, the company plans to reach an annual production capacity of 2 million tons by the first half of 2024. Meanwhile, SUN-KA is in Songuldak. The Erlu trade zone launched an investment plan in August with the goal of increasing the annual production of its new grey board machine to 150,000 tons. Meanwhile, Mondi, a major player in the Turkish market, chose to cease operations at its corrugated box factory in Kemal Pasha, Izmir, in August.
Lila Kagit, which owns a tissue paper mill in Tekirda Chorlu, is preparing to set up a new plant in Erzurum with the goal of launching a paper machine that will increase its capacity from 270,000 to 340,000 tonnes by 2026. Eczacıbaşı has launched its fifth paper machine in Manisa, thus bringing the company's annual capacity to 250,000 tonnes. Meanwhile, Gürsa in Kutahia has announced a new investment focusing on corrugated paper production, while Barem Ambalaj has indicated that paper machines are being installed in Konya Eregli. These developments mark a period of significant investment and strategic shifts within the industry.https://www.risedongsheng.com/
In the third quarter, paper mills, especially those specializing in kraft paper, struggled under operational constraints, with capacity utilization at just 70%. Another complicating factor is inflation in Turkey, which has also led to a surge in lira-based recycled paper prices. Imports of waste paper continued unabated as domestic recycling volumes were insufficient to meet demand. Market forecasts for the fourth quarter largely reflect the pattern observed in the previous two quarters, suggesting that the trends and challenges faced by the industry will continue.
Scandinavia
In the third quarter, the OCC market was stable and mixed paper demand continued to be sluggish. OCC prices rose slightly, but the current economic situation still poses a challenge to predict the future direction of the market. Factors such as rising interest rates, inflation and cooling in many industries have all exacerbated this uncertainty. Paper mill inventory levels are high and orders are lower.
Demand for newsprint and other graphic quality continues to decline due to lower orders and uncertainty in the final quarter of the year. Recycling volumes for newspapers remain at a low level. Logistics-wise, the third quarter did not bring any major changes. Availability of domestic and international trucks remains good, while shipping prices remain high