Weak demand, resulting in a lack of global waste paper demand, where will the market go next?

A few days ago, the Brussels-based Bureau for International Recycling (BIR) released its quarterly assessment report on the state of the global waste paper industry. The report shows that at present, not only the waste paper market in the United States is facing challenges, but the situation in other parts of the world does not appear to be improving. 

Francisco Dono, president of the paper division of the International Recycling Bureau at Dolaf Servicios Verdes S.L., Spain, said that the main feature of the waste paper market is insufficient demand around the world, especially due to low consumption of finished products, resulting in weaker demand for packaging materials.

Mr. Donoso said the financial crisis, high inflation and the war in Ukraine could all have reduced demand for finished goods, but he also noted that freight rates to Asia had fallen enough that the market "still retains some dynamism" despite the weakness. "Despite weak supply and low inventory levels at waste paper recyclers and paper mills, prices have fallen in recent months," he wrote in the Paper Quarterly Report.

In Europe, prices for used corrugated boxes (OCC) and white grade paper have fallen by around 20 euros per tonne since May, while the Bureau of International Recycling says deinking grades, although lower, have remained relatively stable. Similarly, in the US, OCC prices have started to rise slowly, but are still well below the highs of past years and still around 60% below the same period last year. However, most pricing for other paper grades in the US continued to fall.

The Bureau of International Recycling report showed a different trend in Asia, with India up $15 a tonne and other countries up $5-10 a tonne. "The reasons for this may be lower production levels in recent months and weak local recycling, while paper mills are trying to reduce inventory levels in a downward trend in the market," Donoso said. With lower recycling volumes, paper mills are now trying to replenish inventories, so prices are slowly rising. "

However, China has not provided much relief over the past few months and, as the Bureau of Recycling report points out, the amount of recycled pulp it seeks from other Asian countries is very small because of sluggish global demand for consumer goods. "China's lower demand for recycled pulp means that other Asian countries also have lower demand for waste paper, as China often uses waste paper to produce recycled pulp," the report said.

Outlook for Europe

According to Jean-Luc Pettitugnen, founder and CEO of the French Paprec Group, although the amount of waste paper recycled in France remains around average and the demand for various paper types is relatively stable, the factory is facing a shortage of customer orders and the pressure of falling coil prices, which has caused some troubles for the factory. He pointed out that the factory has experienced machine downtime every month due to declining market conditions. In addition, European recycled paper and packaging producer VPK Group opened a factory in France, but Norwegian paper company Norske Skog has delayed production at the factory. The paper machine at the Gorbe plant in France is expected to start next year.

Mr. Pettitugnen said: "The paper market has been weak, especially for certain grades, which are difficult to price and prices have been falling. Customer orders have dried up, leading to a slowdown in production. No improvement is expected this summer, with analysts forecasting demand to remain around average. At the same time, inventories will increase again in August due to the announcement of factory closures. It is difficult to predict what will happen at the end of the year, but there are currently no signs of a market recovery. What is certain is that 2023 will be completely different from 2022."

Reinhold Schmidt of Karla Schmidt, the German recycling industry association, said sales of paper and cardboard in the German market remained sluggish throughout the early summer season, with no improvement in new product orders and sales. Although some companies with long-term cooperation in overseas countries still prefer to sell overseas, the demand for waste paper in these countries is still low. The warehouses of waste paper suppliers have almost no bulk inventory, only some reprinting and printing waste. At the same time, many factories continue to reduce the use of waste paper. Schmidt noted that "the dual pressures of rising costs and falling transaction volumes are increasingly problematic for recyclers and paper producers."

In Turkey, the Ukrainian war and natural disasters have had a widespread impact on the recycling industry, leading to continued shrinking market demand. By the second quarter of 2023, the average capacity utilization rate in the Turkish market is about 70%.

Ekrem Demirsioglu, a Turkish analyst, said: "Since the second quarter of last year, demand in the Turkish market has continued to decline, affected by the war and natural disasters in Ukraine. The devastating earthquake in February this year caused the complete shutdown of two well-known paper mills in Kahramanmaras, which continued into the second quarter. In response to the challenges of lower capacity utilisation and low selling prices, paper mills began to slightly increase selling prices in the third quarter, a strategic move that hopes to bring some financial relief to the industry."

The report by the Bureau of International Recycling shows that imports of waste paper in the Turkish market have decreased significantly. Imports are expected to be around 1 million tonnes in six months, with an average of around 35 days for large plants and 15-20 days for small plants. Demirsioglu said that with several investments currently underway in Turkey, he expects Turkey's total capacity to expand by around 2 million tonnes by 2024.

North American Outlook

As in the European market, U.S. waste paper production of almost all grades is still growing slowly. While lower volumes are fairly typical at this time of year, this year's production is lower than usual, according to the Bureau of International Recycling report. This has left paper mills worried about supply, despite continued sluggish demand. Paper mills feel they are competing with less tonnage, leading to higher prices.

Tissue paper makers are struggling to win sales, so they have created a lot of high-grade inventories, especially in the U.S. Midwest, analyst Miles Cohen said in a report on behalf of Vipa Group's Mark Erich. In addition, an oversupply of virgin pulp has an impact on high-grade pulp used as a pulp substitute, as prices rise or fall in tandem.

However, some major paper and packaging companies, including International Paper and Viselok, expect waste paper growth to approach 5% this year. This is because factories need more OCC (used cardboard) and mixed paper to meet the growing consumer demand for paper packaging.

While the strong recovery in paper packaging demand has yet to fully reverse, prices are starting to rise, giving some optimism. Maybe we can finally see the light of day, and a good era is coming.