paper prices on the rise
Recovered paper prices are increasing, but
prices are often volatile.
“We have noticed increases over the
past several months,” said Steve Grossman, president of
The Grossman Group Inc. The Westerville, Ohio-based broker of
waste paper also operates a fiber separation recycling facility
in Columbus, Ohio.
Grossman said he expects scrap paper prices
to increase further. “When pricing is very low, as many
of us have seen over the years, there really isn’t enough
of a spread to make even a decent profit, cover collection cost,
mar- ket properly, etc.,” Grossman said.
“Pricing does not have to skyrocket
in order for everyone to make a profit.”
Scrap paper prices are on the rise, but not
by the same magnitude as other scrap materials, said Tom Runiewicz,
an economist for Global Insight in Philadelphia.
Scrap steel is about twice the value of scrap
paper, Runiewicz said. “Metals, because of high value
per ton, have always been a lot more attractive to recycle.”
The price for old newsprint was approximately
$80 a ton in 2002, Runiewicz said. Last year the price increased
to about $110 a ton. This year the price is slightly below $100
a ton. The price for old corrugated containers was $88 a ton
in 2002 and increased to a peak of $115 a ton a year ago. This
year the price is back below $95 a ton.
“While both domestic and export demand
for scrap have grown tremendously, the supply chain and collection
facilities have also improved quite a bit,” Runiewicz
“Previous supply constraints with scrap
paper have not been due to the lack of availability of scrap
paper and boxes. The United States is a tremendous producer
Most new paper production facilities in the
United States are using waste paper as a material source, which
helps increase demand, Runiewicz said. Export tonnage to Asia
has grown four fold since 2002, which also helps to increase
demand for scrap paper.
Total United States paper and paperboard recovery
reached a record 51.3 million tons in 2005, resulting in a recovery
rate 51.5 percent, according to the American Forest & Paper
Association. The recovery rate is up from 49.5 percent in 2004
and 46 percent in 2000.
Stan Lancey, an economist with the Washington
D.C.-based trade group, said he expects demand to continue.
He said recyclers must compete for supplies in a globalized
market. “Demand is rising rapidly, especially export demand
from China,” Lancey said.
In addition to China, demand is also increasing
in India and Eastern Europe, said Leone Young, an analyst in
New York for Citigroup, in a recent research report. Young said
this presents good growth opportunities for the United States
paper recycling industry
“This, of course, is only if the United
States can boost its recovery rates,” Young said. While
the recovery rate has increased from 27 percent in 1990 to over
50 percent, the number of residential recycling programs has
not increased since 1992, Young said.
“In addition, 51 percent of the office
paper is not recovered, which could be a big area of improvement,”
Young said. “Bottom line, if the United States wants to
remain a leader in paper recycling, it will need to boost recovery
rates to meet offshore demand.”
China has also started to source some of its
paper supplies from Europe over the last couple of years, said
Bill Moore, president of Moore & Associates, a paper recycling
consulting firm in Atlanta. Moore said that while China has
increased its buying from the United States, it is also buying
more from Europe. “It kind of held a lid on pricing,”
“The United States domestic demand has
been real sluggish and the Chinese buying over the last six-month
period has eased off a bit. There is a major over-capacity situation
in recovered paper and paper production in China right now,”
“Supply is pretty tight. Supply generation
has been flat for five years.”
Recovered paper prices continue to increase
on a long-term basis, however, Moore said. But in the short-term,
there has been some downward pressure. Moore said as China’s
capacity gets more utilized, the internal demand will increase
and the appetite for recovered paper will also increase, pushing
up prices for scrap paper.
“Paper recyclers are in a good, modest
growth business and look forward to increased demand and probably
increasing prices,” Moore said.
The recovered paper market has not seen as
much price volatility this year as in years past, said David
Clapp, an economist at the Boston-based research firm RISI.
The current environment for recovered paper
prices is due to capacity withdraws and a downward slope of
consumption, Clapp said. Europe is also adding capacity.
“But recovered prices have been relatively
stable,” Clapp said.
Clapp said he expects improvements in recovered
paper pricing over the next six months. The pricing in the future,
however, will depend largely on China’s inventory position.
Clapp said China is starting to use its paper inventory to its
“They’re sourcing fiber worldwide.
They’ve expanded their supply source to Western Europe
and Japan, in addition to the United States,” Clapp said.
“This has allowed buyers from China to bridge between
major suppliers,” helping to keep prices down.
Producers in China are focused on market share
instead of on the bottom line, Clapp said. “They are expanding
their supply sources, by utilizing their inventory to their
advantage, really undercutting suppliers in the United States
and Western Europe.” Clapp said producers are not as concerned
about return for shareholders, quarter after quarter.
“They are much more willing to sacrifice
margins for the sake of preserving market share. Clapp said.
“They’re very reluctant about
paying more for recovered paper. They are much more willing
to sacrifice their margins. This really inhibits their ability
to raise prices.“