Industry News

Market struggles with surplus supply as demand seen during the COVID-19 pandemic e-commerce boom has cooled substantially.

September 29, 2022

Marissa McNees

Financial Paper

Plummeting prices for old corrugated containers (OCC) continue to reflect a market struggling with surplus supply as demand seen during the COVID-19 pandemic e-commerce boom has cooled substantially.

OCC prices in many regions fell by $40 per ton, according to Fastmarkets RISI’s Pulp & Paper Week “Price Watch” dated Sept. 7, with the Southeast seeing a $45-per-ton drop. The Los Angeles and San Francisco regions saw the least amount of damage but still did not escape unscathed, both facing a $15-per-ton decrease in prices.

According to RISI pricing data, the average U.S. OCC price per ton stands at $77, down 29 percent from August and approximately 53 percent from a year ago, when the average price was $98 per ton.

Mixed paper also has faced a notable pricing decline, with the current U.S. average at $18 per ton. That’s down 59 percent from August and nearly 82 percent (81.6 percent) from a year ago, when the average price was $98 per ton.

The decreased demand was reflected in a recent announcement from FedEx when it issued an earnings warning predicated on the softening global volume of packages being shipped to customers, with New York-based investment banking company Jefferies Group noting a “massive inventory glut” in cardboard.

The bank also reports a sharp decline in orders for cardboard packaging and anticipates manufacturers such as International Paper, Memphis, Tennessee; Packaging Corp. of America, Lake Forest, Illinois; and Westrock, Atlanta, will slash prices in the fourth quarter of this year.

Because of the new containerboard capacity expected to come online within the next year, Jefferies says it expects the situation to continue to get worse in 2023. Projects like Domtar’s Kingsport, Tennessee, conversion of an uncoated freesheet printing and writing paper machine to produce 100-percent-recycled-content containerboard are reported to be on track, with the Fort Mill, South Carolina-based manufacturer telling the Kingsport Times News the project “is almost complete.”

Troy Wilson, general manager of the Kingsport mill, told the Kingsport Times News, “All our major equipment is in place, and we expect to resume operations at the plant during the fourth quarter.”

Pratt Industries, based in Atlanta, also has a $500 million paper mill and box factory under construction in Henderson, Kentucky, it says is on schedule. When the company announced the project, it said it expected construction of the paper mill to be complete in 2023.

A report in mid-September from WFIE 14 News in Evansville, Indiana, says the company still is in the process of securing the land to build its 700,000-square-foot corrugator plant to produce corrugated sheet and boxes, which it also expects to be complete by next year.

Additionally, Empire Recycled Fiber is in the process of retrofitting a facility in Dayton, Ohio, to produce 350,000 tons per year of recycled containerboard and says it expects it to be operational in 2024.

While Cascades’ Bear Island conversion in Ashland, Virginia, threatened to run into delays related to high costs and labor and material availability constraints, the project still is expected to come online by early next year, adding to the influx of containerboard capacity on the horizon.

Sorted office paper (SOP) premiums, however, for the most part have stayed put in RISI’s most recent update after increasing steadily over the past few months to the point where several recyclers Recycling Today contacted reported the highest premiums they’d seen in their careers.