Okay, We’ve Got to Talk about Cardboard

by | Dec 13, 2019

In 1884, when Swedish chemist Carl F. Dahl developed a process for pulping wood chips into a strong paper that resists tearing, splitting, and bursting, he brought corrugated cardboard into the world. His work produced a stiff, strong, and light-weight material made up of three layers of brown kraft paper. (source: madehow.com) Dahl probably never imagined this new product would become such a big part of our shopping and shipping – and, more importantly, the recycling market.

And it’s doubtful he could have foreseen plain clothes investigators in California sitting outside recycling centers in 2005 to stop cardboard theft, a long-running practice when prices were high; or imagined New York City officers breaking up a cardboard-recycling ring which stole cardboard from big-box stores in 2013.

But those incidents were back in the days when OCC (old corrugated containers) was on the high end of the scrap market.

After years of a good return on recycled OCC, two things happened:

  • Online sales surged in the past five years, and cardboard use jumped 8% in the same period, according to the American Forest & Paper Association. Yet cardboard recycling has dropped, reported in an article in USA Today.
  • In January 2018, China stopped accepting most used cardboard imports. The material was mixed with so much trash and food contamination that it was causing serious environmental issues. China’s clampdown created a glut of cardboard scrap so that American mills are able to obtain their most vital raw material at 70 percent less than it cost a year ago, according to a March 2019 New York Times article.

The current situation with OCC is a major topic at recycling industry meetings. At the 2019 Paper & Plastics Recycling Conference Europe earlier in November, Bill Moore of Moore & Associates in Atlanta gave a presentation on paper recycling. Here are two of his key points related to the fiber market:

  • “In 2017, most U.S. recovered fiber exports—60 percent—were shipped to China, while 18 percent went to India, Moore said. However, U.S. exports to China fell to 33 percent in the first seven months of 2019.”
  • “The trend in average annual old corrugated container (OCC) pricing in North America has been upward; however, supply no longer dries up the way it used to in response to low pricing, which keeps pricing at the bottom,” he explained.

While these conditions have been great for pulp and paper mills, the glut of raw material plus a greatly-reduced overseas demand have driven down prices for OCC and paper.

How did we get here?
“China is really the only reason we’re in this situation,” said M-PASS’s Chris Witherspoon. “We’ve also lost most of our other possible overseas markets.”

For years, China has been the top spot for U.S. recyclers to sell recovered materials. But the situation started to change in early 2017 when China put up the “Green Fence,” initiating intensive inspections of incoming loads of scrap material, and restrictions have gotten stricter since then. (You can see a detailed timeline of the changes in China’s policies here).

In a September Commodity Roundtable in Chicago, the Institute of Scrap Recycling Industries (ISRI) reported that in 2018, China’s market was #1 for U.S. scrap at $3.5 billion, even though it was down 38% from 2017. According to figures through July of this year, China is no longer even in the top five. And despite new opportunities, no single country is capable of picking up the slack from China’s policy changes.

Writer Colin Staub details the current situation in a July 2019 article “A Fiber Free Fall” in Resource Recycling. Staub writes, “Prices for old corrugated containers have dropped steadily in recent months, leaving recycling operators with few choices but to store material or unload it for the lowest returns in memory.”

One MRF operator in San Francisco told Staub that this current recycled fiber market is

“… unlike anything he’s seen in his four decades in recycling.” He also predicted the price would drop lower before the situation changes and said we’re getting near the threshold for it to be cheaper to landfill it than collect it, process it, and try to market it. The price for OCC is at the lowest it’s been since 1993, decreasing from $66/ton in June of 2018 to $25/ton this past May.

“One of the larger paper manufacturers, Greif, closed their MRF outside their mill earlier this month,” Witherspoon said. “Our contact there said they can’t any longer take loose OCC and will only take baled cardboard due to the state of the market.”

When is the market likely to improve?
Witherspoon says, “The market is probably near the worst it’s ever been and, unfortunately, we’re going to be here for a while.”

An October 2019 Waste Dive article “Where to grow: Asian and Latin American countries may increase recyclable import capacity,” states that  recyclable material exporters have spent the past two years seeking new markets following China’s material bans and stricter import standards. While numerous countries are emerging as hot destinations, Southeast Asia and Latin America are among the regions receiving the most buzz, along with India.

But most experts agree that no single country can fill the footprint China left, and by most estimates, the other areas collectively fall short of compensating for decreased Chinese demand.

What about pulp and paper mills?
Today, according to IBIS World, a worldwide market research company, there are only148 pulp and paper mill businesses in the US.

“Paper mills are either completely full or extremely picky. In the Southeast, they have realized that instead of taking materials from facilities that have to sort out the cardboard, they can get material from post-industrial sources as opposed to post-consumer,” Witherspoon said. “Right now, most loose (not baled) OCC is probably going to a landfill.”  (NOTE: Loose, or unbaled, OCC generally has to be sorted so that OCC from industrial sources is easier to handle than that from consumer sources).

“However,” he quickly emphasized, “M-PASS is not taking OCC to landfills. But due to the situation, our clients who are accustomed to getting a rebate may now have to pay a fee for the service.”

There is a little good news about paper and pulp mills according to Resource Recycling:

  • Packaging Corporation of America will add 350,000 tons per year of OCC pulping capacity at its mill in Wallula, Washington, sourced from the Pacific Coast and Pacific Northwest area.
  • Some Chinese paper companies are shifting investments overseas to get around their country’s restrictions. For example, Nine Dragons has invested in multiple facilities in the United States, Vietnam and Malaysia. Another China-based company, Lee & Man Paper, is building a plant in Malaysia with an expected 700,000 ton-per-year paperboard capacity and a 550,000 ton-per-year recycled pulp capacity.

“In addition,” says Witherspoon, “two 2 new mills are coming to the Southeast but we probably won’t see any market expansion until sometime in 2021-2022.”

“We are watching the changes in the industry and working on ways to adapt to the changing markets,” Lorraine White, President of M-PASS added. “There are many reasons we don’t want anyone to stop recycling OCC and paper.”

Next: Thinking Outside the Box
Cardboard and Fiber Markets, part 2


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