Central Kentucky Fiber Resources, LLC |847 Angliana AveLexingtonKY40508 | (859) 225-8100
Central Kentucky Fiber Resources, LLC
847 Angliana Ave
LexingtonKY 40508
 (859) 225-8100
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OCC Movement Slows Alongside Chinese Economy

OCC Movement Slows Alongside Chinese Economy

China has continued to slow its purchase of old corrugated cardboard, which has caused domestic and export prices in the US to fall in terms of fiber grades that would have been gained from the recycling and processing China would have done. This slow down has been going on for several years and although the end of 2018 was marked by higher recovered fiber imports into China, The Paper Stock Report and RISI  recently described stagnant OCC movement over much of the old cardboard in the country, thus leading to an ever-growing oversupply in the U.S. market. With the inability to send cardboard overseas to China to recycle, it is piling up here due to poorer processing methods, smaller facilities, and let streamlined process. This, in turn, leads to a pile-up of cardboard as our inferior recycling centers struggle to reach the production levels we were getting overseas in China.

Slowdown in the OCC Imports Noted

“The slowdown is even more notable given the timing: Chinese companies usually place more recovered paper orders before the Lunar New Year, when businesses traditionally take downtime, so they have feedstock to start up again afterward. The holiday this year fell in early February, but as for a buying spike, ‘We hadn’t seen that in our recycling business,’ said Jeff Chalovich, president of corrugated packaging for WestRock, in the company’s recent earnings call” (Resource Recycling).

The Lunar New Year is not the only thing working against the cardboard recycling industry but the weakening economy in China is also playing a role in this decrease. The Chinese government issued at the beginning of 2019 import permits for more than 5.5 million tons of recovered fiber. This is more than what it normally issued in 2018. However, this increase was immediately followed by more than four weeks with zero import permits being released. And to top it off, the continuing import levels seem to be drastically slowing as an order on Feb. 19, approved just 11,000 tons of recovered fiber for import, and the truly shocking thing was that this permit was issued to only a single company!

Early in the year, there is always expected to be some uptick in import permits and tonnage accepted into the country, but again, the industry has not seen as large of an influx in the recycling industry imports as experts were expecting and less raw cardboard waste is being allowed into China.

Long-term Projections

Early in the year, there is always expected to be some uptick in import permits and tonnage accepted into the country, but again, the industry has not seen as large of an influx in the recycling industry imports as experts were expecting and less raw cardboard waste is being allowed into China.  This has had a trickle-down effect that has had a big impact on fiber availability and pricing and the value of recycled cardboard and other fibers. During packaging company Sonoco’s recent earnings report, recorded and highlighted by Resource Recycling, the analysts noted U.S. OCC prices have dropped by $10 to $15 per ton in February. It is anticipated that the U.S. average OCC price will decrease by about $5 per ton throughout 2019. This is shocking because the decrease is still with taking into an account a projected price increase throughout the year of $10. Even with the projected increase, the initial drop will still result in an overall decrease in tonnage value for the U.S. OCC industry.

Time will tell how close these projections and predictions are but it is time to prepare for a drop and a continued drop in both imports to China as well as a continued drop in value for recycling cardboard fiber and other similar materials.

If you have any questions about how this affects your recycling or how we can help your business become better at recycling give us, at Central Kentucky Fiber Resources, a call.