US recycled containerboard production increases

A new price assessment to meet rising demands

  • Recycled containerboard has surpassed 37% of US domestic containerboard production market share, accounting for 73% of new capacity growth or 4.2 million tons in from 2013 to 2018.
  • 1.8 million tons of recycled capacity expansions are expected between 2019 and 2021.
  • Such large capacity growth has created tremendous volatility in recovered paper prices with no official benchmark prices until now.
  • New US linerboard price assessments will add reliability to future market analysis.

Over the last 20 years, recycled containerboard has provided a substantial amount of the growth in US containerboard production. Recycled's share of the domestic market averaged 27% between 2001 and 2005 but surpassed 35% by 2015. Aggregate recycled containerboard production increased from 8.3 million tons in 2006 to 11.3 million tons in 2015. Nearly all of the recycled containerboard produced in the US is consumed by domestic box plants. Only 634,000 tons of recycled containerboard was exported in 2015.

Recycled's share of the domestic market continued to expand during the last three years, hitting 37% in 2018. Producers added 5.8 million tons of capacity to the market between 2013 and 2018 via a combination of new machines, converted machines, incremental expansions of existing machines and true capacity creep on existing machines. A total of 4.2 million tons of new recycled capacity hit the market during these five years, accounting for 73% of the capacity growth.

Planned and confirmed capacity expansions will add another 1.8 million tons of recycled capacity between 2019 and 2021. There have been announcements that another 640,000 tons of recycled based capacity will be added by the end of this period, although it appears that the financing for these potential projects is still up in the air. These figures do not include Cascade's proposed conversion of the Bear Island mill, since that conversion is likely to be delayed into 2022. Even without this expansion, it appears that new recycled projects will account for 84% of the new capacity being added to the market during the next three years, even without factoring in any additional conversions.

Much of the new recycled based capacity that has been added to the market has come from new entrants to the market, creating some disturbances on the pricing front, especially when factoring in the tremendous volatility in recovered paper prices during the last four years. In the absence of any official benchmark prices from the editorial arm of Fastmarkets RISI, the Fastmarkets RISI analytics group has shown some subjective estimates of recycled containerboard prices in the Paper Packaging Monitor for several years. These are based in large part on anecdotal evidence, such as comments in news articles regarding the range of recycled prices or the growing spread between kraftliner and recycled linerboard prices.

That's all about to change. On August 23, the indices group of Fastmarkets RISI published a coverage note regarding its plan to introduce new assessments of recycled containerboard prices. While adding new containerboard price series will add a new level of complexity for producers and converters, this is also something that other participants in the market have been requesting vigorously for a number of years.

Speaking from an analytical viewpoint, it is far preferable to have a regularly updated series tracking actual recycled containerboard prices than the older subjective estimates, especially when these figures meet the rigorous standards used by the indices group of the company. The combination of the large amount of recycled capacity growth scheduled for the next three years, the prospective ongoing softness in recovered paper prices and the potential for containerboard demand to weaken if the track of the US economy proves to be more negative than we currently forecast all suggest that it would be highly desirable to have some reliable recycled containerboard price figures to use as the backbone for our future analysis of the North American containerboard markets.

Ken Waghorne, Fastmarkets RISI Vice President of Global Packaging and author of the Paper Packaging Monitorthe North American Paper Packaging Forecast and the World Containerboard Forecast.

COVERAGE NOTE: Fastmarkets RISI to launch recycled linerboard assessments from September

OAKLAND, CA, Aug 23, 2019 (Fastmarkets RISI) -  Fastmarkets RISI will launch new price assessments for 30-/31-lb recycled linerboard in the US domestic market on Sept. 20, 2019. Read full announcement >

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