Five new 100 percent-recycled containerboard mills are boosting efforts in the United States to reuse old corrugated containers (OCC). OCC prices have eclipsed the 10-year average and could remain elevated as new mills ramp up production and increase demand for the raw material.
Export prices for OCC also have climbed, with less domestic supply left over to ship abroad, and several factors will affect exports over the next year.
OCC prices heating up
OCC prices could remain robust given imbalances in supply and demand.
Pricing has risen steadily over the past 10 months, eclipsing the 10-year average. It started to rise almost a year ago as shifts in consumer spending left retailers short of normal supplies. Nearly 90 percent of domestic OCC is estimated to be generated by commercial and industrial companies such as Walmart, Kroger and Costco.
While supply was muted, new containerboard mills were ramping up, adding pressure to demand. Prices jumped as each mill came online, seeking more tons from the eastern U.S.
The new U.S. mills also are competing for OCC volume that would normally be exported, pressuring prices abroad. In 2023, U.S. containerboard mills could have consumed more than 18 million tons of OCC. That figure could reach 20 million tons in 2024.
Domestic OCC supply could expand
U.S. corrugated box volume could be up 1 percent to down 3 percent in 2024, according to Green Markets, a Bloomberg company that covers the corrugated box industry as well as other sectors. After a two-year slide in demand totaling 8.7 percent, North American box producers now are looking for a rebound.
Although consumer sentiment remains mixed, a small increase in box shipments could be possible this year. Yet, headwinds abound, including the pessimistic views of brands and retailers, multiple wars, the upcoming U.S. presidential election in November and higher interest rates.
Initial sentiments from box producers put first-quarter shipments up 2 percent, which is in line with this outlook. But over the past two years, respondents have been about 260 basis points too optimistic, indicating shipments could be flat to up 2 percent.
OCC from imported goods is set to rise this year
OCC from imported goods could go up by 265,000 tons if ocean freight increases the anticipated 1.8 percent. Should consumer demand rebound as anticipated and Panama Canal delays don’t hamper shipments, the additional tonnage would help ease supply shortages.
Green Markets calculates 14 million to 17 million tons of corrugated boxes and products come into the U.S. each year, depending on the mix of products. In 2022, about 90 percent of total 20-foot equivalent unit volume was considered “retail goods” and potentially packaged in boxes. Bloomberg estimates the average retail container has about 1,750 pounds of boxes on board.
Mills adjust as new capacity outpaces demand
Five new containerboard mills opened in North America last year:
In January, Domtar, headquartered in Fort Mill, South Carlina, completed a $350 million conversion of its mill in Kingsport, Tennessee, from uncoated freesheet paper to a 100 percent-recycled packaging plant. The facility is expected to produce 600,000 tons of recycled linerboard and medium annually.
In April, ND Paper, the U.S. subsidiary of Hong Kong-based Nine Dragons, completed the conversion of its B26 paper machine at its mill in Biron, Wisconsin, from producing coated mechanical papers to lightweight packaging paper. The mill’s B26 machine can produce more than 500,000 short tons of packaging paper, while the mill now can manufacture more than 800,000 short tons.
In May, Cascades, based in Kingsey Falls, Quebec, started operations at its Bear Island containerboard mill, a new 100 percent-recycled mill in Ashland, Virginia, with an annual production capacity of 465,000 tons.
Pratt Industries opened a $700 million 100 percent-recycled paper mill and corrugated box factory in Henderson, Kentucky, in September—the company’s sixth recycled paper mill in the U.S. Conyers, Georgia-based Pratt says the facility has a production capacity of about 540,000 tons per year.
Headquartered in Scarborough, Ontario, Atlantic Packaging Products started a new recycled paper machine at its mill in Whitby, Ontario, that produces up to 400,000 tons per year of corrugated medium and liner-board. The company reopened the Whitby mill in 2013 after converting production from newsprint.
Domtar, Atlantic Packaging, Cascades and ND Paper are running near half of their annual capacities, while Pratt’s new mill is still in the early phases of its startup. Of the 2.4 million tons of annual capacity, only about 1 million tons could be realized early in the year, with the rest set to ramp up throughout this year.
The addition of this recycled mill capacity amid soft containerboard demand has forced adjustments by companies like Atlanta-based WestRock, Lake Forest, Illinois-based Packaging Corp. of America (PCA) and Memphis, Tennessee-based International Paper (IP). IP deployed rolling downtime across its system and closed its mill in Orange, Texas. WestRock shuttered mills in North Charleston, South Carolina, and Tacoma, Washington, while PCA reopened its mill in Wallula, Washington, after idling it for much of last year.
From a volume standpoint, 2024 likely will be similar to 2023 for containerboard demand. If domestic box demand turns around and imported goods increase the estimated 1.8 percent predicted by analysts, some growth could be seen.
The big driver for OCC is going to be domestic recycled paper manufacturing. When the capacities of every mill in the U.S. are added, the total is approximately 19 million tons of containerboard—nearly 2.5 million tons more capacity than last year simply from new North American capacity. With box demand declining the last two years, we still have these new mills that need to fill up with OCC before markets can stabilize.
Therefore, Bloomberg expects pricing pressure on OCC this year as these new recycled mills compete for available tons and on finished goods. Part of the reason we anticipate that pricing will be flat to slightly up this year is that if demand is pressured and supply limited, OCC prices will be supported.
Until mills are full, they will have to do more to increase their supply footprints to feed their machines. Once they’re full, then you can start lowering the bar.
TAPPI
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