As far as the current global economy is concerned, the factors affecting the OCC market include the new coronavirus pandemic, the growth of e-commerce and the change of global waste flow. Especially this year, these three factors seem to have a significant impact on the supply and demand trend of waste corrugated boxes (OCC).
The popularity is undoubtedly a factor contributing to the growth in demand for cardboard, in part because the rise of e-commerce this year has changed the composition of the residential recycling stream and stimulated new packaging designs. Another factor determining this demand is the shift in the global market, as China will exit the No. 12 OCC market in 2021, and accordingly there will be some other export destinations. On October 21, the International Conference on recycling of paper and plastics was held. In the prospect session of OCC, the speakers and group members talked about the factors that affect the production and price of OCC.
01, covid-19
In recent years, the pricing of OCC is like a roller coaster. In 2017, with the surge of exports to China, the price of OCC in the United States rose sharply. But as China implemented the national sword policy and began to restrict the import of waste paper, prices fell to a low point at the end of 2017.
The price of OCC experienced a long period of decline, from $105 per ton in November 2017 to a low of $25 per ton in summer of 2019. It was not until the onset of the covid-19 pandemic that the price soared due to shortage of supply. Paper and paperboard manufacturers around the world need OCC. Almost all other recycled fiber grades also had very strong demand in April and may.
Debbie Jones, a senior analyst at New York based Deutsche Bank Securities, said the market for cardboard and OCC this fall appeared to be “much better” than in the spring. “At the beginning of the pandemic, demand was relatively uncertain after a surge related to increased consumer inventories. The inventory is very high and the investment community is very worried, “Jones said.
In March, the demand for packaging cartons increased by 9% year on year. However, by April and may, after normalization according to the delivery date, the carton shipment volume dropped to single digit, and the inventory of lean market was higher than expected. In addition, at the beginning of summer, many carton paper manufacturers use downtime for maintenance.
But by the end of the summer, everything was back to its original state. “We see demand trends actually starting to improve,” Jones said. What we have seen in recent months is that the demand for carton packaging is actually a low single digit growth, which is much better than the forecast at the beginning of the year. “
She pointed out that cardboard producers even began to raise prices during the November purchase period. “Usually you don’t see price rises in the early spring, or in the fall. What’s happening now is that with the growth of e-commerce in the fourth quarter, it’s a bigger quarter for the industry as a whole. “
Jones said she and her team attributed the growing cardboard and OCC markets to the shift in e-commerce related orders. Due to the popularity, many people work at home and shop online, so the demand for cartons is relatively healthy.
It also has an impact on the residential recycling channels of waste paper. Sean Logan, director of commodity sales at Columbus, Ohio based waste management and recycling company, said waste management companies saw an increase in OCC for residential recycling due to the popularity of more and more people working and shopping at home. “In fact, it is the fastest growing project in the waste paper recycling channel.”
Matthew Prosser, head of European Strategic Development and business transformation at DS Smith in London, said the trend was also taking place in Europe, with the pandemic “accelerating the demand for online shopping.”. “At home, there will be more and more problems in working with municipal authorities and local governments to recover high-quality OCC. This means that recycling education will be very important. “
02. The impact of e-commerce
Due to the growth of e-commerce, the material recovery facility (MRF) has received more OCC. On the other hand, with the popularity of covid-19, the amount of OCC recovered from commercial sources has decreased.
“I heard recently that someone said that covid is a mode transformation, and there are no fixed rules to follow. Consumer trends are changing rapidly, and our customers need support to quickly adapt to these changes. ” Kevin Hudson, senior vice president of forest resources and recycled fiber at westrock in Atlanta, said, “as everyone is committed to reaching a certain social distance, many consumers usually don’t want to be in densely populated areas. It’s not surprising that covid-19 has accelerated the trend of consumers to online shopping. With the rapid change of consumer behavior, the demand for e-commerce packaging, such as corrugated boxes and soft paper envelopes, has indeed increased. “
Changes in carton design affect the type and size of cartons that MRF and recyclers are receiving. Hudson said westrock has been “sizing” cartons or designing packaging that is more suitable for the product to ensure less waste and more cost-effective transportation. He pointed out that a good example of the right size of packaging was the toothpaste box, which the company had developed with CP before the pandemic. The size of the box is just right for three tubes of toothpaste, and the outside of the box also adopts the marketing method of CP.
“This is an example of how we can help our customers reduce their packaging and the fiber content in their packaging, which is a victory for sustainability,” he said. We can also reduce shipping and repackaging of products in e-commerce warehouses. Once again, he reduced the cost of customers. What’s more, we can help customers identify their brands by printing on the box. “
Referring to the growth of e-commerce, Hudson said: “market data show that online shopping has increased by 3% – 4% compared with the original covid-19 outbreak in the United States. Logically, some of the growth in online shopping will remain after covid and may grow over time. How can this hypothesis be established, then more OCC will be recovered through residential buildings than through more traditional commercial channels. “
Michelle Williams, Dutch European Business Coordinator for Smurfit Kappa Recycling, said that as more and more OCC are expected to enter the residential recycling field through e-commerce, improving its quality is crucial. “For me, it’s not about the amount of recycled material, it’s about the quality of the recycled material. I’d rather have less material that can be actually recycled than a little more material that eventually needs to be incinerated. I think people should separate from the source and keep the material clean from the source. “
03. Changing global market
In recent months, China has made it clear that it plans to stop importing all grades of waste paper by 2021. In the OCC outlook session, all speakers seem to agree with this.
“I think everyone should be prepared for that. One of the things I’ve seen recently is that China’s commitment to carbon neutrality by 2060 is not about the OCC, it’s a bigger commitment than that. It tells me that China is very concerned about sustainability and improving the environment. ” Jones said.
Logenze of waste management company points out that China’s zero import policy of waste paper is “an urgent situation everyone is thinking about.” He pointed out that the export of OCC has been transferred to other countries and regions, including Southeast Asia, the Middle East, Europe and South America.
Some Chinese paper companies are investing in recycled pulp mills around the world. Williams of Smurfit Kappa Recycling Division said he had heard some rumors about this capacity in Europe, but whether the situation would “become more specific in the next few years.”.
“We’ve made a conscious shift back into this market, where in some cases there’s new growth; in others, we have to develop ourselves. Interstate transportation is much easier than trans Pacific transportation. ” This is not to say that the company has completely abandoned the export market. “So when we look at the export market as a whole, we see that all leave China and go to other Southeast Asian countries, even Europe and other regions.”
There are similar stories in Europe. Prosser said that DS Smith’s recycling division had previously exported OCC to China, but this has changed in recent years. He pointed out that as China withdraws from the market, demand within Europe will increase. But, he said, China will continue to make cartons in the future and will need semi-finished products, or some form of recycled pulp.
On the whole, even if China starts to import zero waste paper in 2021, the global demand for OCC is still growing. Although U.S. factories may not demand the same strict waste paper quality as China, they require higher quality materials than China accepted before the introduction of the “national sword” policy.
According to Deutsche Bank’s Jones, OCC consumption in the US increased by 4% year-on-year. “I don’t think you will see a rise in the price of recycled materials in existing paper mills. I think a lot of what you see will be these new recycled paper mills. Interestingly, you may see a lot of new supply coming online in the next few years. I hope this will drive the growth of OCC demand, as well as the demand for ordinary packaging boxes, in the next few years. “
Post time: Dec-18-2020