OCC price goes up by about 345 percent in the first quarter of this year as OCC supply shortfalls due to pandemic.
Coronavirus is consistently changing the supply, demand, and price trends of the paper recycling industry. Due to pandemic, OCC supply shortfalls from commercial as well as residential channels. As a result, OCC price goes up in May by $34 per ton compared to April and by $83 per ton compared to January.
Analysis of OCC market trends by Fastmarkets RISI
RISI is a globally leading business-to-business information group that provides insight into the forest products industry worldwide. The firm has analyzed the market turmoil of OCC amid lockdown and its implications on large recovered fiber consumers in the US. The senior economist of RISI, Hannah Zhao, has summarized this analysis as:
- A drop of 30% – 50% has been noticed in the overall collection of US recovered paper during the 2nd half of March & April.
- The generation of OCC declined sharply after lockdown due to the closure of offices, stores, schools, and other large paper consumers.
- Although, panic buying increased its generation in the e-commerce sector and at grocery stores, but not enough to compensate for the decline from other sources.
- Unlike supply, its demand has majorly remained stable and even increased in North America, as a result of the producer’s supply chain rebuilding attempts.
- The escalation in OCC demand has led to the OCC price-hike.
- Some millers are in thought of replacing OCC with mixed paper.
- If the supply of OCC from offices remains low, tissue mills might shift to using more virgin pulp.
- The recovered fiber demand and its shortage are expected to slip down as soon as the businesses reopen.
Analysis of OCC market trends by different paper companies
In their recent earnings reports, several mills have discussed the rapidly changing OCC trends due to COVID-19.
- International Paper
As per Mark Sutton, the CEO, the decline in the OCC supply is because of the reduction in imported shipping boxes, which generates about 30% of OCC. He expects the recovery of the recycling system to take some time.
Tim Nicholls, the senior VP and Chief Financial Officer, claims about four times more hike in the prices of recovered fiber as compared to that of early 2020. He expects a short-term rise in the demand of virgin pulp as most of the companies shift to using it more while the supply of recovered paper falls short.
Nicholls states the company’s prediction of $55 million in higher input costs for the coming quarter due to the recovered paper price hike.
Howard Coker, the CEO, reveals the company’s move towards reducing OCC exports to ensure the fulfillment of the nation’s domestic demands. As per him, the company is not expecting any sooner recovery from this situation; in fact, it is foreseeing a further price-hike in the coming time. He anticipates OCC to hit $100 per ton by June.
According to Julie Albrecht, VP and Chief Financial Officer, the company is envisioning an OCC price hike in the 2nd quarter.
- Packaging Corporation of America
Thomas Hassfurther, the Executive VP for corrugated products, calls OCC collection from consumers tougher than that from the retail or foodservice sector. He expects this difficulty to stretch for quite some time in the coming future.
According to Jeff Chalovich, the Chief Commercial Officer, recycled fiber demand shows consistency. However, OCC supply shortfalls due to lockdown, as a result of which OCC price goes up to $50 per ton since December.
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