While the fourth quarter typically boosts demand for packaging, the prospects for 2025 are uncertain, especially with the return of President Donald Trump to the White House.
The market dynamics for recovered fibre can change rapidly during the last three months of the calendar year. Retailers are filling shelves due to optimistic projections and that means lots of empty corrugated boxes. Generation in the US, which had been low all year, have finally been increasing rapidly.
However, paper orders at mills were at an all-time low during this period as manufacturers had already had their fill. Once again, there was a mismatch between the supply and demand of recovered fibre with supply outpacing demand. Based on this scenario, price had become secondary to movement, according to suppliers, so the pricing of bulk grades (OCC and mixed paper) dropped precipitously.
Excess tonnage
Price degradation of 30 to 40% for these bulk grades was experienced over the previous six months. Suppliers had excess tonnage they needed to move while buyers (mills and export customers) were saying their inventories were at all-time highs.
They were being selective, taking only the cleanest or cheapest supplies – or going to critical suppliers they depend on during the rest of the year. Reports suggested mill inventories were up 10% to 20% or even higher versus the first half of this year.
For De-inking grades/Pulp substitutes, generation and demand continued in balance overall although, as with OCC and mixed paper, it was a buyers’ market. Mills in Mexico were seeking more coated book, because of a lack of domestic generation. Demand for sorted office paper was steady but supply was slowly shrinking, forcing mills to look for SOP substitutes in the long-term.
With lower prices for virgin pulp, tissue mills could reduce their pulp-substitute recovered fibre, lower their costs, and improve their yield.
Trump: what next?
The re-election of Donald Trump as the 47th president of the USA could have far-reaching implications for the sector. Based on pronouncements during the election campaign, new tariffs could cause inflationary results meaning lower consumer confidence and spending.
However, greater domestic production in the US could mean higher manufacturing levels resulting the need for more packaging. Environmental laws could be unpicked, changing the mindset of companies looking to reduce plastic and packaging.
The future of the Environmental Protection Agency must be uncertain. Since the EPA is so involved in climate related and recycling policies, the new administration may not value those initiatives and funding for recycling-related investments may either disappear or be severely reduced.
At the time of writing, two labour issues were threatening the US paper trade in recovered paper. One is the East Cost and Gulf States Longshoreman strike where talks were being anticipated to prevent an all-out strike. The other is a dispute already underway at Canadian ports, although on 12 November the Government ordered a resolution.
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