Fastmarkets webinar recap: Recovered paper outlook for the North American market - Fastmarkets

The Fastmarkets recovered paper (RCP) outlook for the North American market webinar features Fastmarkets’ Matt Graves, editorial director, Megan Workman, price reporter and Hannah Zhao, director, fibre, discussing structural changes and the outlook for the North American RCP market. Watch the full webinar recording for a thorough understanding of the points made.

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At Fastmarkets, we have more than 4,300 recovered paper price points and have established 224 RCP prices. We have adopted the International Organization of Securities Commissions (IOSCO) price reporting principles for all our price assessments, including our recovered paper assessments.

You can read more about our pricing methodology and view the latest IOSCO assurance reports for our prices here.

Recent large scale mergers and acquisitions have had a significant impact on producers. International Paper, North America’s largest containerboard producer by capacity, is in the process of acquiring DS Smith, the second largest containerboard and corrugated box producer in Europe, and the operator of two US containerboard mills and box plants.​

The deal comes on the heels of another major acquisition earlier this year. Smurfit Kappa, the largest containerboard producer in Europe, acquired WestRock for $11 billion. Before the deal was completed, WestRock began shutting down four containerboard mills from 2021 to last year, including one in Panama City, one in St Paul, Minnesota, one in North Charleston, South Carolina and one in Tacoma, Washington.

These mill closures have opened a gap now filled by five new paper machines that have started up or been converted since January 2023, totaling 2.4 million tons/year of additional 100% recycled containerboard capacity. As companies ramp up their recycling efforts, the demand for recovered fiber is only set to increase

Between January and June 2024, US mills consumed 1 million more tons of total recovered paper than the same period in 2023, which correlates to a 16.44% demand increase for recovered fiber, particularly OCC and mixed paper.

Among suppliers, material recovery facilities (MRFs) are producing fewer mixed paper tons as their advanced plants better sort out RCP, making more OCC bales, with the help of AI sorting.​ There has been a sharp increase in the number of AI-driven optical sorters in MRFs in recent years, with less sorting being done manually.

As MRFs continue to look for new ways to establish a consistent workforce through AI, the role of workers will become more technologically advanced. Instead of hand-sorting, workers will increasingly be overseeing the machines to ensure the AI are running as effectively as possible.

The North American RCP market, particularly the OCC market, is closely tied with other regions around the world, including Asia.

US OCC prices were on a downward trend in the US at the beginning of last year, but more recently the price has started to stabilize. By comparison, the Chinese domestic price has continued to decline. This is partly due to the weak Asian market as China struggled with a sluggish economy, which slowed paper packaging sectors in the region and therefore reduced demand for recycled fiber.

The fluctuation in Asian RCP imports has had a ripple effect on global supply chains, prompting US producers to recalibrate their export strategies. With Asian demand not as strong as anticipated, there is a growing emphasis on exploring alternative markets and diversifying trade partnerships. This strategic pivot is essential to mitigate the impacts of reduced Asian imports and to maintain a stable export flow.

Low OCC supply has limited US exports. In 2023, US OCC exports dropped by 13%, and in the first half of 2024 total exports dropped another 11%. This is partly due to a healthy domestic demand for OCC in the US.

Exports to Mexico and Canada more than doubled in the first half of 2024, up 112% to Mexico and 129% to Canada.

Looking ahead, the outlook for the recovered paper industry the relationship between OCC and mixed paper will remain dynamic. Globally, the share of recycled containerboard in the total containerboard sector has increased from around 50% in 2004 to between 80 and 81% last year, and that share is set to keep growing.

This indicates that the worldwide OCC recovery rate is around 90%, and unlikely to climb higher, which could lead to another OCC crunch.

While mixed paper may help to relax the OCC demand-supply balance, new regulations to restrict mixed paper trade and the price gap between OCC and mixed paper will mean many suppliers will remain focused on OCC.

Interested in learning more about the outlook for the recovered paper industry, or want access to the full webinar, including presentation slides? Watch the recording.