Paper recyclers: caution despite brief surge

While the secondary paper market experienced higher prices due to political uncertainties in December, the broader outlook remains cautious – especially with Donald Trump back in the White House.

As December 2024 began, the global secondary paper market faced significant challenges, particularly for mills in the Far East. Reports indicated that many of these mills were aggressively pushing prices down, creating a difficult environment for suppliers and traders alike. Orders were scarce, leading to a bleak outlook for January. The prevailing sentiment was one of caution.

However, a remarkable shift occurred in mid-December when prices for January began to rise rapidly. This change was largely attributed to the impending inauguration of President Trump. The prospect of potential tariffs raised concerns about the accessibility of materials, prompting many buyers to secure their supplies ahead of anticipated price increases.

In contrast, the European market has continued to struggle. Over the past several months, there has been a noticeable sluggishness, with many industry players expressing a collective sense of waiting for Germany, the region’s economic powerhouse, to regain its momentum.

The overarching sentiment is that until Germany’s economy shows signs of recovery and increased spending, the broader European market will remain stagnant.

‘Were is the bottom?’

In the US, several issues came to the fore. Fears of repeat of the port strike in Q4 2024 drove up prices for recovered paper for several weeks as buyers scrambled to get tonnes on ships, especially in the Gulf and the US east coast. But the fears evaporated in the first week of January when labour and management tentatively agreed a six-year contract which cover the east coast and Gulf states. Shipments returned to normal at these ports and prices even dropped a little. 

Latest data for recovered paper exports from the USA until November 2024 are – just like 2022 and 2023 – shows further decline. The exports will almost certainly have ended the year 6-10% down compared to 2023. Many ask: ‘Where’s the bottom?’

Another thing to consider is that the new administration has also unleashed the petrochemical industry. More oil produced domestically will reduce the price of petroleum products making the paper versus plastic cost comparison very uncompetitive for paper. 

As has happened in recent years, sorted office paper and coated book is in demand in the US but, with generation so low, domestic mills have to pay higher premiums. One source thought high grade generation would continue to fall so prices should remain high throughout the year.

Meanwhile, consumer spending always weakens in February and March and many mills are trying to build inventories because they envision short supplies and therefore higher prices. 

No change?

There is a palpable desire among industry participants for a fresh start. However, the prevailing sentiment suggests that the situation may not change significantly from 2024. Many anticipate that while there will be peaks and temporary bursts of activity, the market is unlikely to experience consistent growth.

The overarching theme remains: until global spending picks up, demand for end products is likely to remain subdued. Stagnant demand could have a ripple effect throughout the recovered paper supply chain, impacting pricing and availability.