In past articles I have mentioned that I have a son in high school and last week at dinner he brought up what he was learning in his economics class. That got me thinking about supply and demand and how it affects the commodities ARR recycles. Paper, plastic, ferrous metals, and non-ferrous metals are the materials we recycle. While each has unique end uses, their pricing and availability are governed by similar supply and demand forces shaped by economic activity, consumer behavior, and industrial trends. This article will dive into the recycled paper market.
Paper markets, particularly recovered fiber such as cardboard (old corrugated container OCC) and mixed paper, are driven by packaging and publishing demand. Growth in e-commerce and food distribution increases demand for containerboard, while declines in print media reduce demand for certain paper grades. When the pandemic hit six years ago, we saw a spike in demand as everyone made a run for toilet paper. That lasted for one month.
The larger and more lasting change happened in the following months with a significant shift to online shopping. E-commerce uses nearly SEVEN times more OCC per sales dollar than traditional in store commerce. Additionally, we had additional disposable income from government payments, savings from not commuting and greatly reduced spending on entertainment and services. So, we had more to spend on goods and online was the only viable place to spend it. The market price of OCC doubled between March and August 2021.
Then the restrictions are lifted. We shift our spending to trips, vacations, attending sporting events, concerts and experiences out of the home. The demand drops as does the price. From July 2022 to November 2022 the price of OCC falls by over 75%. Over the next two years we slowly see consumer behavior return to a more balanced state and prices also stabilize.
In 2024 we have a presidential election, and it becomes clear that trade imbalances are an issue and tariffs are threatened/used to combat the imbalance. China mandated a significant restriction on the import of recycled materials as a response and the demand for US OCC is hit again. Which brings us to today with low demand pressure on prices.
On the supply side, paper availability depends on consumer purchasing patterns and collection systems. Strong retail sales generate more recyclable paper, while disruptions in collection, contamination, or mill downtime can tighten supply and raise prices. These forces were magnified during the pandemic with a reduction of collection due to office shutdowns and minimal in store retail sales. The paper mills themselves hold less inventory of both raw materials (recycled OCC) and finished goods (paperboard). More paper mills are financed by private equity and reducing inventories is a quick way to squeeze cash out of the mill. This causes the price peaks to be higher and the valleys to be lower. There are new export markets opening in southeast Asia since China has restricted imports. But it will take months or years to get enough mills up and running in other countries to consume the supply.
And finally, there is the transportation and logistics portion of supply. We have endured dock strikes, trucking shortages and fuel spikes. Thankfully, the logistics concerns have subsided as of now, but they need to be kept in mind.
OCC pricing over the last few years has been dominated by demand swings from the pandemic, global trade and export policy changes, mill processing capacity shifts, transport and supply disruptions. Price acts as the balancing mechanism. When demand exceeds supply, prices rise, encouraging increased production, recycling, and material substitution. When supply outpaces demand, prices fall, slowing output and restoring market equilibrium. These interconnected forces ensure continual adjustment as global economic and environmental conditions evolve.
At the end of the day …Recycling Pays – Environmentally, Socially and Financially!
