MARKET ANALYSIS
New year, same old
uncertainties
Uncertainty over the possibility of recession
around the world clouds trade in the fibre sec-
tor but China’s relaxation of Covid restrictions
offers hope.
52
At the start of 2023, many were hoping
that the USA would turn the corner
and box demand would rise again,
thus spurring renewed recovered fibre
demand. But no, not a chance.
In January, pricing for the major brown
grades have been stagnant across
most of the country, with even some
slight drops on the west coast in the
Los Angeles and San Francisco mar-
kets. As a result, bulk grade values are
far less than half of what they were a
year ago. Those who are active in the
market say real prices may be 75-80%
lower than in January last year for
OCC, DLK, Mixed Paper and BBC.
So why is this happening? It’s more of
the same of what this column has iden-
tified in the past few months: low con-
sumer confidence resulting in reduced
purchasing at the retail end leading to
high retail inventories. All of this has
meant lower box requirements from
manufacturers as retailers are extreme-
ly nervous about buying more invento-
ry when their current stock levels are
very high owing to a lukewarm (at best)
holiday season. Hence, manufacturers
are not demanding box shipments
from containerboard and boxboard
converting plants.
SITTING STOCK
This slowdown led to paper mills tak-
ing some serious downtime in the
fourth quarter of 2022. Indeed, most if
not all major containerboard and box-
board paper manufacturers took
unprecedented levels of downtime in
December. Since the US paper mills
did not run at full capacity, high levels
of stock are sitting in recovered paper
yards and MRFs waiting to be pulped.
All of these factors have combined to
create something of a perfect storm in
which high supply of recovered fibre
does not align with low demand for
paper-based packaging. As we know
full well, when this happens prices
drop.
LANDFILL TREND
Words that many of sources have been
using to explain the current value of
these bulk grades include ‘collapse’,
‘shatter’, ‘crash’ and ‘catastrophic’. As
usual, when prices fall this low, the cost
to process and bale recovered fibre at
a MRF far exceeds the market value of
A U T H O R Robin Latchem
52-53_mapaper.indd 52 03-02-2023 14:07
