The American recycled cardboard market is witnessing a significant uptick in prices due to heightened demand from both domestic and international paper mills. The escalation, primarily fueled by the pandemic-induced e-commerce surge, has seen old corrugated container prices more than triple in certain U.S. regions over the past year, reported WSJ. This resurgence follows a notable dip in 2022, attributed to increased interest rates and consequent scaling back by businesses.
Newly established mills, focusing on the production of containerboard for shipping and paperboard for consumer packaging, are driving the demand. These mills are competing for a reduced supply of recycled cardboard, exacerbated by decreased production during periods of business destocking. The scarcity is further compounded by inadequate residential recycling practices, leading to a substantial volume of potential raw material ending up in landfills.
Adding to the competitive landscape is the disruption caused by the Red Sea conflict, which has obstructed Europe's cardboard recycling route to Asian mills, redirecting attention to the U.S. market. This shift has intensified competition, particularly along the West Coast, leading to a significant price surge at these ports.
Industry analysts have observed a national average price increase to $87 per short ton in January, a substantial rise from the previous year's $29. This increase is attributed not only to transportation costs but also to a growing preference for cleaner and more sorted recycled cardboard bales, pushing mill expenses to nearly double the benchmark rates.
The Southeast U.S. has experienced a sharp price increase, with some areas reporting costs around $150 a ton, reflecting more than a threefold rise from the previous year. This region, home to several of the largest new containerboard mills, is at the forefront of over $7 billion in sector investments since 2019. These developments are expected to significantly boost recycled fiber consumption.
As mills expand their search for feedstock, competition intensifies, leading to increased costs and strategic shifts in sourcing. Despite current challenges, analysts anticipate a potential price normalization as cardboard production volumes recover. Moreover, efforts to enhance recycling rates, particularly from residential and small business sectors, could further stabilize supply and prices in the long term.
