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US paper sector adjusts to post-Covid realities

Changing markets at home and abroad, as well as investment in different grades, marked the last year in the US recovered fibre sector according to a leading observer of the industry.

Megan Workman, Fastmarkets’ editor and price reporter for recovered fibre, was addressing a session at the 2021 ISRI convention and exposition, held online because of the Covid-19 pandemic. She noted that because the US recovers more paper than it recycles, the industry relies on exports. China had previously been the biggest customer but its crackdown on scrap quality meant that exports of old corrugated container (OCC) had shrunk. However, US exporters had looked elsewhere.

‘They have successfully shifted their targets to other markets,’ Workman noted. ‘India has become the dominant buyer and the pricing leader. It is paying more money and has the demand. They have proved to be big buyers instead of China and will continue to do so.’

In January 2021, India’s imports of US recovered fibre were 355 000 tonnes, a similar total to that imported by China a year earlier. Other major Asian markets for the US are Indonesia, South Korea, Taiwan, Thailand and Vietnam.

Workman also pointed out that Europe was a significant buyer, partly because lockdowns during the pandemic had hit paper collections. These shifts also meant that recent export prices from east coast ports had been higher than those on the west coast, inverting the situation when China had been the leading importer. Container shortages and shipping delays also favoured east coast ports.

The editor expected worldwide demand for paper to grow until 2025. She said nearly every grade was down in 2020 but they had grown this year. In April 2021, OCC average was US$ 88 per ton, up 24% from US$ 71 in March and 77% up on the same month the previous year. Workman noted that OCC prices were rising because it is the main component in brown recycled pulp and that was not affected by the Chinese paper ban.

Export prices of US$ 280 – 350 per tonne for brown pulp in March 2020 were now nearer US$ 520. Fastmarkets estimated that Chinese demand for the product, which was almost nil in 2017, would reach 4.5 million tonnes by 2025.

Turning to the domestic situation, Workman said recovered paper consumption in 2020 was more than 20 million tonnes, its highest point in a decade. Mills had been adding to capacity, investing in equipment and buying more mixed paper. As a result, they could handle grades of paper they had previously ignored. Demand – and prices for – mixed paper grades had been transformed.

During 2018 and 2019, prices were often at US$ 0 and sometimes negative. But 2020 recorded the second highest consumption year in a decade and pricing had increased significantly for mixed with this increased demand. Price increases from virgin pulp had also shifted demand back to the secondary side.

The paper sector was suffering similar logistical problems to other industries during the pandemic. These include equipment, vessel and container shortage for exporters. Part of the problem was containers returning empty to China because it was more cost effective for the shipping lines to rush them back. Another challenge was absent workers at the ports, staying home due to lockdowns or illness.

Concluding, Workman said, ‘We now have more diversified markets. There is a higher emphasis on quality.’ Had Chinese restrictions been a good thing, she wondered?

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