ISRI Spotlight – Effect on Paper Industry during COVID-19

ISRI Spotlight, effect on paper industry

Image source: Recycling today

During the event – ISRI Spotlighteffect on paper industry due to COVID-19 was observed and anticipated for the year 2020.

Institute of Scrap Recycling Industries (ISRI), which is often referred to as the voice of the recycling industry, conducted a virtual event last week, naming ISRI Spotlight. Effect on paper industry during COVID-19 in terms of price and demand was discussed and analyzed in this event.

While ISRI’s Director of Commodities and Chief Economist, Joe Pickard, moderated the event, AFRY Management Consulting’s Senior Principal, Jose Gonzalez, and Principal Consultant, Sanna Sosa, were the speakers. They talked about the dramatically changing dynamics of demand, supply, and price of paper amid pandemic and their impacts on the overall paper and paper recycling industry

Impact of COVID-19 on Recycled Pulp Market

  • The pandemic has brought volatility to recovered paper prices, which otherwise deflated throughout 2019, due to recovered paper imports restrictions of China, and weakening demand of containerboard.
  • According to Gonzalez, the volatility can continue to the second and third quarters of the year.
  • Recovered paper prices have risen by about 40% from the previous year, and about 50% from March 2020 to April 2020.
  • An addition of 4 million metric tons in recycled pulp capacity has been noted since 2019.
  • With five projects coming online in the US from Phoenix Paper, Nine Dragons, Kamine Development Corporation, and Empire Recycled Fiber, the recycled pulp capacity is expected to increase by 5 million metric tons.

In his oration, Gonzalez emphasized the need to remain updated with China’s plans for recovered paper imports in 2021, as the country gradually proceeds towards banning it altogether.

Impact of COVID-19 on Tissue Market

Based on application, tissue paper products are usually categorized as at-home tissue products (used in houses) and away-from-home tissue products (used in schools, offices, restaurants, and hotels). 

At-home tissue products primarily consume virgin fiber as bleach kraft pulp, while the away-from-home tissue products mostly consume recycled fiber. The changing dynamics of natural and recycled fiber availability during pandemic has impacted the tissue market in the following ways:

  • The increased concern towards hygiene as a preventive measure against COVID-19 has raised the demand for the already well-performing at-home tissue products.
  • The closure of hotels, restaurants, schools, and offices amid lockdown has dropped away-from-home tissue products demand.

As Sosa stated, although the demand for tissue products has risen during COVID-19, the away-from-home tissue products have been still struggling to survive. She expected the situation to remain the same for now as more people are expected to continue working from home even after the pandemic.

Impact of COVID-19 on Packaging Market

  • The containerboard market is going sharp in the retail grocery and e-commerce sector; however, manufacturing is negatively impacting its demand.
  • According to Gonzalez and Sosa, increased sales of products like cereal and frozen food have increased the demand for carton board, particularly that of Coated Recycled Board (CRB).
  • Sosa stated about the expected additional capacity investments in the carton board sector of North America. She pointed COVID-19-led-growth in the food sector and shift of trend from plastic to fiber-based packaging in North America as the prime driving forces behind this furthering of capacity investments.

During the event, Gonzalez showed his concern towards the possibilities of delay and cancellation of upcoming containerboard projects. About 14 companies have pipelined containerboard projects of about 5.6 million tons capacity, most of which would be using some mixed paper and old corrugated cardboard (OCC).

Impact of COVID-19 on Scrap Prices

According to Pickard, the impact of COVID-19 on recovered paper prices differs significantly from other scrap commodities. While recovered paper prices have gone high as compared to the previous year, the rate of the other scrap commodities has been falling year over year. 

A decline of around 21% has been observed in copper-based alloy scrap price, 20% in the price of aluminum scrap, and 28% in ferrous scrap price.

Impact of COVID-19 on Economy

According to Gonzalez, the economic forecasts from some renowned investment banks have revealed growth of about -5.7% in the gross domestic product (GDP) for 2020. He called the current economic shrink worse than that of the Great Recession in 2008-09 when the GDP growth was about -2.8 percent.

As per Sosa, AFRY expects COVID-19 to effect on paper industry in 2020 dramatically. In the belief of the company, the paper and paper recycling industry can triumph the ongoing economic challenges by defining the new normal.

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