The global recovered paper market has experienced significant disruptions and challenges in recent times, driven by a combination of geopolitical events, economic factors, and evolving market dynamics. Industry experts share their insights on how these factors are shaping the market and the implications for the future. 

Recent geopolitical events, particularly the Red Sea crisis, have had a notable impact on the global recovered paper market. Bret Biggers, Senior Economist at ReMA (Recycled Materials Association - formerly ISRI), United States, explains, "The Red Sea crisis added extended delivery times and put upward pressure on prices. As Asian countries consume a substantial portion of recovered paper, depending upon the country, many U.S. exports took longer to get to their destination." He adds that Asian countries were less affected overall, as most of their exports remained within the region, reducing reliance on the Red Sea trade route.

Edith Leeuta, CEO of South Africa-based Fibre Circle also highlights the broader impact of these events, stating, "These geopolitical events have disrupted supply chains, increased transportation costs, and created uncertainty in international trade. The South African market, like others, has felt the ripple effects, particularly in terms of fluctuating availability and pricing of recovered fibre."

Trends in prices and demand for recovered paper 

The U.S. market has seen significant shifts in the pricing and demand for various grades of recovered paper. "The trend for the past couple of years has shown increased prices for recyclable paper," Biggers notes, citing data from the U.S. Bureau of Labor Statistics. The producer price for recyclable paper rose by 83.9% in July 2024 compared to July 2023, marking the tenth consecutive double-digit year-over-year increase. He also points out fluctuations within specific grades, such as corrugated recyclable paper, which fell to a 15-year low in November 2022 but has since risen by 237%.

In South Africa, the trends vary across different grades of recovered paper.  Leeuta observes, “Higher-quality grades are experiencing increased demand due to their suitability for packaging materials, driven by the uptake in e-commerce. However, lower-quality grades are facing pricing pressure due to oversupply and reduced demand from certain sectors." She emphasises that market dynamics remain fluid, with supply chain challenges and cost variations playing a significant role.

Current state of the recovered paper market 

The recovered paper market is currently navigating a complex landscape, characterised by both challenges and opportunities. "Demand for recovered paper is high, partially from increased capacity and from increased demand from the market’s goal of increasing recycled content," Biggers explains. However, he cautions that the ongoing contraction in the manufacturing sector has tempered this demand.

Leeuta states, "The recovered paper market in South Africa is at a pivotal point, with both challenges and opportunities shaping its trajectory. Key challenges include the need for improved collections infrastructure, particularly in informal settlements, and the need for incentives to boost recovery rates. On the opportunity side, there is growing interest in sustainable packaging, which is driving demand for recycled paper products."

Operational challenges 

Recycling companies in both the U.S. and South Africa face a range of operational challenges in maintaining steady supplies of recovered paper. Biggers emphasises the critical role of the manufacturing sector: "Operational challenges rely heavily on the manufacturing sector’s growth. As the manufacturing sector comes out of its contractionary phase, adjusting production to meet demand could create a bottleneck in hiring more qualified and skilled workers."

Leeuta identifies additional challenges, stating, "Maintaining steady supplies of recovered paper is a significant challenge for recycling companies in South Africa. Fluctuations in collection rates, driven by economic conditions and consumer behaviour, can lead to supply inconsistencies. Additionally, the high costs associated with collections and processing, especially in remote or underserved areas, pose operational challenges. Regulatory compliance and the need for continuous investment in technology and infrastructure also add layers of complexity to the operations."

Commenting on the BIR’s World Mirror report, Simone Scaramuzzi, Commercial Director at LCI S.R.L, Italy, said the final two months of 2023 seemed to confirm a positive trend for finished product and recovered paper demand in Asia and Europe. Prices were increasing slightly despite a shipping cost increase of around US$ 200 which had been announced for January 2024 - a week before the Red Sea vessel attacks and the “war surcharge” applied by shipping lines.

Offering a general market overview, he said that the domestic market prices in Europe had been almost the same as those for export and a downtrend had not been expected for the coming months. 

The surcharge of between US$ 1000 and US$ 3000 per container suddenly applied by the shipping lines blocked the loadings between the final week of 2023 and the opening week of 2024. Amid this temporary interruption, mills in Italy and elsewhere in Europe confirmed prices and volumes to ensure regular supply in the case of a rapid resolution of the Red Sea issue and a resumption of shipping, which would lead to increased competition in the form of Asian demand. This uptrend vanished a few weeks after the start of the Red Sea attacks as finished product demand and prices fell 5 to 10% when compared to their levels of the previous two months.

The significantly higher increase in shipping costs to Indian ports compared to other Asian destinations put India out of the market as sales prices had to be 30 to 40% higher than for other countries in Asia in order to be competitive.

A temporary lack of containers caused by longer shipment transit times initially created a worry for the mills in India and elsewhere in Asia but this lasted only a couple of weeks as the local recovered paper market dropped at the end of January. At the same time, more material was available in Europe despite decreasing local recovered paper demand.

China, the main engine of the Asian economy, seems unlikely to see a recovery in the near future, with low consumption, higher costs and a lack of orders for finished products creating a fight for survival across the entire industry.

Francisco Donoso, Dolaf Servicios Verdes S.L., Spain, in the BIR report, highlighted the challenges owing to the situation in the Red Sea. Suppliers and buyers in Asia - particularly in South East 

Asia - have been struggling to settle recovered fibre import deals, especially from Europe and the USA, in recent weeks. Mills in the region have reduced purchases of European brown grades over recent months and have turned to local collections owing to slow domestic packaging demand and weak exports to China.
Delivery uncertainties have become a major concern for buyers of European paper: transit times have been extended by at least two weeks, making it difficult to plan procurement. Sellers have reported risks of cancelled orders and revoked vessel space bookings for recovered paper cargoes owing to container shortages and intense competition for lower shipping rates.
European recovered paper offers have increased in recent days in South East Asia, leading to an unusual price decline despite supply constraints. This drop is attributed to available volumes being diverted from India to South East Asia.
The Red Sea shipping crisis has caused a significant supply crunch in the Indian recovered paper market, leading to surging prices for domestic collections. Some suppliers have either cancelled recovered paper imports ordered in December or have asked clients to bear additional shipping costs, while a few vendors have stopped accepting new orders from India.
Ocean freight rates for recovered fibre shipments from the US East Coast to India have surged by US$ 400 per 20-foot container, equivalent to an additional US$ 20 per tonne for the material. Delivery times for US shipments to India have extended to 65 days, causing further challenges for buyers in the market.
OCC prices in the UK have decreased significantly for several reasons, including inflated ocean freight rates and rerouted ships keeping more supply within domestic markets.
Reduced export buying and decreased domestic consumption in Europe are also influencing these price drops. European containerboard and cartonboard production has reached historically low levels, with containerboard mills operating at 80-85% capacity.
Weak domestic demand and declining exports have also affected cartonboard demand in Europe, with an envisaged 16.4% decline in 2023 expected to be followed by 3.8% growth in 2024, according to Fastmarkets.
Reports on the Red Sea/Suez Canal shipping crisis suggest that elevated rates are expected to continue, with shipment delays and equipment shortages also projected, especially in Asia. Transportation company C H Robinson has recommended at least four weeks’ advanced booking time for upcoming trades.
Europe has been particularly impacted by increased freight rates resulting from the crisis, and rate hikes in India (effective from January 20) range from US$ 1000 to 1500 per container. Limited volumes of European OCC are thought to be moving through the Red Sea route.
European suppliers have negotiated cheaper surcharges for shipping recovered paper to South East Asia in response to the Red Sea disruption. Sellers were previously facing surcharges of US$ 500-1000 per container, equivalent to US$ 20-40 per tonne for recovered fibre on this route.
RISI’s Paper Packaging Monitor Europe report for December highlights a list of delayed recycled containerboard capacity projects, coinciding with weak demand and oversupply challenges in the European packaging sector. The five largest containerboard producers in Europe in 2023 were Smurfit Kappa Group, with a 12% market share and 6.04 million tonnes of annual capacity, followed by DS Smith at 7.2%, SAICA at 6.7%, Mondi at 5.2% and Hamburger at 4.7%.
The oversupply in the European packaging sector has been exacerbated by several hundred thousand tonnes of new capacity coming on stream. Additionally, the global oversupply of packaging papers has attracted overseas suppliers looking to gain market share by offering competitive prices in Europe. Consequently, downward price pressure is expected to persist in the European containerboard and cartonboard markets until conditions tighten enough to support price increases.