Paper recyclers caught in ‘cycle of chaos’

The challenge of tariffs and the danger of trade wars have been highlighted at bvse’s international recovered paper conference.

According to bvse chairman Mike Hayes, the European recovered paper market remains ‘extremely volatile’. He also told the 500+ delegates gathered in Bonn that German recyclers had realised a strong utilisation rate of 83% in 2024.

‘Germany’s paper recycling surely deserves a round of applause. The European average is stuck at 70%, with some member states managing only 50%. Well done to everyone in the sector for making this happen. Recovered paper is clearly the blueprint for the circular economy.’

On edge

Scrap and trade often go hand in hand with turmoil, observed Kelly McNamara, senior analyst at Canadian firm Numerica when she addressed the Bonn gathering and considered what might happen if President Donald Trump’s tariffs remain – or other countries weigh in with their own.

‘This sector has often seen trade disruptions and setbacks. We’re not facing the first battle, nor the last. The question is: how do we position ourselves for long-term success?’

Canada – and Mexico – were the first to suffer tariffs from White House, although they were later mostly withdrawn. By April, goods from Mexico and Canada that comply with the two countries’ Usmca trade agreement with the US remained largely exempt, except for automotive exports and steel and aluminium which are covered by separate policies.

Recalling China’s National Sword protectionist strategy around 2017, McNamara said the policy created a new dynamic for paper recyclers. Then, in 2020, the coronavirus pandemic and, most recently, the wars in Gaza and Ukraine war have disrupted global supply chains.

‘All of these have hurt prices of various grades tremendously and created logistical nightmares, although Covid didn’t alter long-term market trends,’ she pointed out. ‘Now the US trade policies are keeping us all on edge. Certainty sure is a rare commodity these days.’

‘OCC crucial’

The analystsaid Canadian OCC demand makes up just 3% of total OCC consumption and the fibre plays a crucial role in trade with border states such Washington and New York. ‘Around 35% or 300 000 tonnes of all OCC collected for recycling gets exported to the US. Without this market, we’d have a huge surplus.’

Most of Canada’s OCC is exported to Asia, with about 10% going to Latin America, notably Mexico which receives approximately 800 000 tonnes a year. ‘We are a net exporter, while the US is a net importer. Mexico is the biggest net importer for the US.’

McNamara said this underlined how deeply integrated the Canadian and American markets are. ‘For the containerboard industry, it would be nothing short of devastating if trade was interrupted by new policies, as have been recently announced by President Trump.’

She cites a mill in the Toronto area with main clients in the Niagara Falls and Syracuse region. ‘OCC is exported there, shipped back to a box producer and sent over to a company in Rochester, New York. If the tariffs apply to OCC as well, that means our industry will have to pay every time material crosses the border.’

‘There is a lot of back and forth so tariffs will stack up. And, no doubt, there will be reciprocal tariffs. This compounding effect will fundamentally change how we do business, and our ability to do so.’

Border effect

Companies close to borders would feel the effects first, McNamara believed. ‘US mills tend to choose Canadian tonnes due to freight benefits. A 25% tariff will eliminate that advantage. I’ve heard some mills are already seeking alternative markets domestically, fearing on again-off again measures – creating a cycle of chaos and tariff whiplash.’ Recyclers are said to have hired personnel specifically to manage the costs of tariffs and to update their invoicing methods.

She believes the extent to which Mexico relies on recycled paper from the US, means it is unlikely to retaliate with its own tariffs. ‘But we don’t know anything for certain. What’s clear is that prices are suffering, even if initial tariffs are delayed or scrapped. Volatility will do that.’

In the months ahead, McNamara expects OCC prices to remain flat as the downward pressure will be maintained due to tariffs and shaky economics. As a result, planning and doing research to stay agile is considered critical for staying competitive and remaining in business.