Mixed Indications for Recovered Paper Fiber Market

According to a recent article in Recycling Today Magazine, Valley View, Ohio, USA, recovered paper pricing has been in a slump in late 2014 and early 2015, according to U.S.-based paper and recycling industry consultant Bill Moore of Moore & Associates. Speaking to attendees of the 2015 Paper Recycling Conference India event, held in New Delhi in late January, Moore described variables that affect scrap paper pricing, several of which may soon conspire to boost prices back upward.

Among the most important variables, said Moore, is the global economy, which in many places is doing better than current recovered fiber prices might indicate.

For some grades, the cost to recover additional tons can impact price, which Moore says is why old newspapers (ONP) and old magazines (OMG) grades have been faring better in late 2014 and 2015. Those two grades, said Moore, are in "chronically short supply" as print media circulation numbers in North America and Europe decline.

A variable that is suppressing prices on the OCC (old corrugated containers) side of the market is the low mill operating rate in the world’s largest containerboard production market—China. Moore said he foresees that China’s excess board mill capacity "will be soaked up [but] it will take a while."

China’s excess capacity and a prolonged economic slump in Europe have been the biggest contributors to the current price slump, says Moore. He predicted, however, that "we are at the bottom end of the cycle. Prices will go back up." Rising prices, though, may not hit peaks as high as those in China’s fastest growth years of the previous decade, Moore noted.

Among the other variables that will affect scrap paper pricing in 2015 and beyond, said Moore, are virgin pulp prices, ocean freight shipping costs, currency exchange rates, disposal (landfill) costs, and inventory levels at large paper mills.

A panel at another session at the same event in India portrayed recovered fiber markets in Europe and the Middle East, two regions that supply India with some of the 2.3 million metric tons of recovered fiber that nation imports each year.

Europe generates some 68 million metric tpy of recovered fiber and exports up to 11 million metric tpy, potentially meaning Europe has more than enough fiber to meet India’s needs. However, China in recent years has imported from 28 million to 31 million metric tpy from around the world, absorbing most of Europe’s excess tonnage.

China has advantages not only in bulk buying, but also in transportation costs. A panelist from the Middle East, meanwhile, expressed short-term concerns about that region’s continued ability to collect and ship recovered fiber in the current low-price environment.