Paper sector: no more of the same in 2026, please

After a challenging year, those struggling in the recovered paper sector are hoping for brighter times ahead. Many are looking to technical enhancements.

The recovered paper sector is not alone is wanting to put 2025 in the rear-view mirror. As with plastics and several other commodities, there were many more challenges and struggles than positive factors. The picture is varied but recovered paper in the US, Europe and the UK limped toward the end of 2025, closing the year with little momentum and limited optimism.

Trading conditions in the final quarter were notably subdued, with demand patchy across most grades and pricing under constant pressure. Capacity rationalisation continues across Europe, while export-led demand remains fragile and highly price-sensitive.

DEMAND UNCERTAINTY

Several EU mills are reportedly reviewing, and in some cases looking to exit, long-term supply contracts. This has further eroded confidence throughout the supply chain and reduced forward visibility for merchants.

In the US, the new Trump administration has been cutting back on environmental, social and governance (ESG) programmes. The Environmental Protection Agency enforces legislation and sets goals for recycling rates, federal spending to improve recycling infrastructure and many other areas affecting packaging.

The government agency has reduced its headcount by nearly 25%, cutting close to 4 000 jobs. Companies do not feel compelled to spend precious budget dollars on programmes that are no longer mandated by the federal government.

INVESTMENT SLOWDOWN

2026 will probably see a slowdown in investments in recycling infrastructure such as new MRFs. If federal incentives for ESG programmes dry up, it will be hard for public bodies to invest their own tax dollars when there are many other needs perceived to be a higher priority.

Domestically it is hoped that both OCC and mixed paper have hit bottom in terms of pricing. MRFs and paper recycling plants are struggling to make a profit as the cost of collecting and baling recycled materials is higher than their selling price. However, most believe that consumer demand will increase in the spring and the mills’ need for recovered paper will get stronger once again.

EPR

As recently as three years ago the USA had no states with extended producer responsibility (EPR) legislation for consumer packaging. Today, however, seven states require brands to be financially responsible for the cost of recycling and disposing of their packaging. Additional legislation is pending in up to eight other states. EPR in the US has caused a massive amount of reporting requirements, bureaucracy, and confusion. 

The introduction of new EPR regulations in the UK has had a profound impact on the packaging and waste paper markets. While the policy intent is understood, the execution has been deeply flawed. Exporters submitted applications within required timelines yet, in many cases, the regulator failed to review them promptly.

At the start of the year, a significant number of applications remain unresolved. Several exporters, faced with regulatory uncertainty, chose not to take orders at all, further restricting material flows.

TECHNICAL ADVANCES

While automation within MRF designs has been building for some time, 2025 was a year for technology developments becoming more commercialised. They include visioning and X-ray systems to detect dangerous components that can start fires; fast fire detection and extinguishing; sorting equipment that can identify and process recycled packages on MRF lines by brand; and in line robots that can effectively sort more than 100 items per minute and remove contaminants.

New MRFs can process single-stream recycling at more than 70 tonnes per hour with fewer than 15 employees per shift to run the entire facility. Less than a decade ago, a MRF with the same throughput needed more than 40 unskilled employees. The future will require AI-trained computer engineers and an entirely different skillset.
The future is both very exciting and at the same time very scary.

WHAT’S NEXT

Most immediately, though, are tentative signs of heat entering the market. However, mills, particularly in Asia, are keen to suppress any upward movement as quickly as possible, reinforcing the sense that price resistance remains entrenched.

Does the industry now need to accept that low margins and small profits are here to stay, at least for the foreseeable future? For many operators, the answer increasingly appears to be yes.

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