Packaging / Advertising & Office

According to Huacheng Import and Export Data Observation, factories closed or significantly shut down in the first quarter of this year due to financial performance reflecting a decrease in packaging demand. In April, ND Paper, the US subsidiary of Chinese cardboard manufacturer Nine Dragons Holdings, stated that it is reassessing the business development of two factories, including the cowhide pulp mill located in Old Town, Maine, which produces 73000 tons of recycled commodity pulp and mainly uses old corrugated cardboard boxes (OCC) as the main raw material each year. This is only the first step announced this spring.

Large groups such as American Packaging, International Paper, Visilok, and Graphic Packaging International have all followed closely, issuing various announcements ranging from factory closures to extending paper machine downtime. The demand from the packaging department is lower than our expectations for this quarter, "Mark W. Kowlzan, President and CEO of US Packaging, said in a financial conference call in April." Consumer spending continues to be negatively impacted by higher interest rates and sustained inflation, as well as consumers' preference for purchasing services over durable and non durable goods

The US packaging company, headquartered in Lakeforrest, Illinois, reported a 25% year-on-year decrease in net revenue and a 12.7% decrease in packaging cardboard shipments compared to the same period last year. It then announced plans on May 12th to idle its factory in Wallura, Washington until later this year. The factory produces approximately 1800 tons of raw paper and corrugated paper per day, consuming nearly 1000 tons of OCC per day. Huacheng Import and Export Data Observation Report.

The International Paper Industry, headquartered in Memphis, Tennessee, reduced production of 421000 tons of paper in the first quarter due to economic rather than maintenance reasons, lower than its 532000 tons in the fourth quarter of 2022, but still the company's third consecutive quarter of shutdown. The international paper industry consumes approximately 5 million tons of waste paper globally every year, including 1 million tons of OCC and mixed white paper, which is processed at its 16 recycling facilities in the United States.

Based in Atlanta, Visa Rock consumes approximately 5 million tons of waste paper annually. Despite a net loss of $2 billion, including 265000 tons of downtime due to economic issues, its performance in the second quarter (as of March 31, 2023) was relatively stable. The company stated that its corrugated packaging department's adjusted EBITDA was negatively affected by $30 million.

Visilok has closed or plans to close several factories in its network. Recently, it announced the closure of its cardboard and uncoated kraft paper factory in North Charleston, South Carolina. However, last year, it also closed a cardboard factory in Panama City, Florida, and the corrugated raw paper business of a recycled paper factory in S ã o Paulo, Minnesota.

As part of the ongoing factory network optimization strategy, Atlanta based Graphics Packaging International consumed 1.4 million tons of waste paper last year. In early May, the company announced that it would close its coated recycled cardboard factory in Domo, Iowa earlier than previously expected.

Despite a decrease in production, OCC prices continue to rise, but are still 66% lower than the average price of 121 US dollars per ton at this time last year, while the price of mixed paper is 85% lower than a year ago. According to Fastmarkets RISI's "Pulp and Paper Weekly" published on May 5th, the average price in the United States is $68 per ton. The lower production has led to an increase in the price of DLK. With the slowdown in cardboard factory production, 5 out of 7 regions have increased by at least 5 US dollars per ton, according to Huacheng Import and Export Data Observation.

On a global scale, the prospects are not much better. In the quarterly recycling paper report of the International Bureau of Recycling (BIR) based in Brussels, Dolaf Servicios Verdes SL based in Spain and Francisco Donoso, President of BIR Paper, stated that the demand for OCC is "low worldwide".

Asia, as a continent, remains the world's largest wastepaper production area, reaching 120 million tons in 2021, equivalent to nearly 50% of the world's total production. Although Asia remains the world's main importer of waste paper, and North America is its largest exporter, trade has undergone necessary and significant changes since China banned most of the waste paper imports in 2021.

The decrease in exports from China and other Asian countries to Europe and the United States means that packaging production is decreasing, so OCC's demand and prices are weak, "he said." In the United States, inventory is very low in all regions, including paper mills and recycling stations, because the lower recycling volume is actually consistent with the decrease in global demand

Donoso said that the demand for high-end paper is even worse than OCC. The market for household paper is not strong at all, so the demand for raw materials is really low. His observation is also reflected in the US market. Since last autumn, the price of classified office paper (SOP) has been steadily declining. According to RISI's latest pricing index, SOP pricing has decreased by 15 US dollars per ton throughout the United States, while prices in the Pacific Northwest region are the lowest, according to Huacheng Import and Export Data Observation.

John Atehhortua, Regional Trade Manager at CellMark in the Netherlands, said that China's import ban has forced American OCC exporters to "change their mindset" and they now "must be more proactive in finding customers in Asia". From the fact that China absorbed more than 50% of the OCC exports from the United States in 2016, by 2022, more than half of the goods from the United States will be shipped to three Asian destinations - India, Thailand, and Indonesia.

Simone Scaramuzzi, Commercial Director of LCI Lavorazione Carta Riciclata Italiana Srl in Italy, commented on the same trend in waste paper shipped from Europe to Asia after China implemented an import ban. Scaramuzzi said that the ban has stimulated investment in waste paper factories in Europe and other Asian countries, leading to changes in transportation services and prices. Other reasons for the significant changes in the European waste paper market over the past four to five years include the COVID-19 pandemic and rising energy costs.

According to data, the export volume of waste paper from Europe to China decreased from 5.9 million tons in 2016 to only 700000 tons in 2020. In 2022, the main Asian buyers of waste paper in Europe were Indonesia (1.27 million tons), India (1.03 million tons), and Turkey (680000 tons). Although China was not among them last year, the total transportation volume from Europe to Asia in 2022 increased by about 12% year-on-year to 4.9 million tons, according to Huacheng Import and Export Data Observation.

Regarding the production capacity development of waste paper factories, Asia is building new facilities, while Europe is mainly converting the machines in existing factories from graphic paper production to packaging paper production. Nevertheless, Scaramuzzi stated that Europe still needs to export waste paper to maintain a balance between waste paper production and demand.