Has the Cardboard Recycling Industry Fallen Flat?

Along with plastics and paper products, the demand for imports of old, corrugated cardboard (OCC/Containerboard) from the U.S. has continued to decrease this past year following import policy changes in China and other major buyers.

Although the Chinese government has issued imports for more than 5.5 million tons of OCC this year, import permits do not equate to demand, and permits continue to fall as well.

Low and flat demand for OCC has put the price at a 25-year low, causing existing inventories to build up and influencing a decision in many communities and businesses to stop recycling it altogether. The price for OCC is at the lowest it’s been since December of 1993, decreasing from $66/ton in June of 2018 to $25/ton this past May.

This matches (and even sometimes surpasses) the cost to collect, sort, and sell OCC. Recycling companies are now requiring a fee to pick it up. Consequently, OCC is being landfilled alongside mixed paper and plastics. U.S. OCC mills are also taking downtime and closing in order to balance the high supply and low demand of the market.

Low export demands are due in part to China’s Chinese Sword policy that forecasts a complete ban of scrap imports by the end of 2020. Additionally, spill-over to Indian and Indonesian mills has also slowed, as these countries strive to utilize their scrap materials domestically as well.

In addition to China’s 0.5% contamination limit and import restrictions, their economy has also experienced a slowdown that’s having a significant effect on their manufacturing industry. The status of China’s economy has always been closely tied with the OCC market. Another factor as always is the Lunar New Year, which always causes a downward spike in scrap imports from China.

However, it can be expected that sooner or later, the price of OCC will return to some state of normalcy as China will still need scrap materials for manufacturing before they are able to open their own mills and process scrap domestically. In our opinion, it’s unlikely China will be able to ban all scrap imports by the end of 2020, especially with the current state of the economy.

While Nine Dragons and Shaying International are acquiring old U.S. OCC mills and creating new ones, it may still be a challenge to fill the demand for raw materials for manufacturing once the Chinese economy resurfaces.

As you know, Berg Mill has a long history as one of the pioneers in the industry, and we are never going anywhere even when faced with recyclable import changes. Since you continue to handle large amounts of recycled waste and are looking for solutions to offload idle scrap, don’t forget to contact our industry veterans at Berg Mill supply via our website or phone at 866-333-BERG. Talk to us about purchasing any and all of your scrap paper, plastic, metal, textiles, glass grades, and any other materials. We can get through this, together…