1993 Corrugated Cardboard (OCC) Market Profile

Solid Waste Department
600 NE Grand Ave.
Portland, OR 97232-2736
(503) 797-1650
Fax (503) 797-1795

August 1994

Key Facts

Major Generators

Estimated Generation

210,110(1)

[FOOTNOTE 1: Generation equals quantity recovered from the Metro area for secondary uses plus quantity disposed.]

Estimated Recovery

143,366 = 68% of OCC generated(2)

[FOOTNOTE 2: This is "post consumer waste" which is defined in Oregon statute as "a material that would normally be disposed of as a solid waste, having completed its life cycle as a consumer or manufacturing item." The term "old corrugated cardboard" (OCC) includes kraft linerboard and container-board cartons of corrugated paper. Also included in this category are brown paper grocery bags. Corrugated boxes containing any wax in the lining or medium cannot be recycled as OCC.]

Handlers/Processors

These are the major handlers/processors in the Metro area. Virtually all buy-back centers, depots and curbside programs accept OCC.

Origin of Recovered Material

All states as far east as Illinois, and Canada.

Secondary Uses

Location of End Markets

Market Value

$75 per ton(3)

[FOOTNOTE 3: This is the average price West Coast mills reported paying for OCC in July 1994.]

Market Factors

Recovery Trend

High and approaching practical "maximum" recovery rate.

Outlook

Price and recycling level stabilizing.

Overview

Recovery of OCC increased a modest 3.5 percent between 1992 and 1993, achieving a recycling rate of 68 percent. Market prices hit historic lows in the third quarter of 1993, and then rebounded sharply through the first half of 1994 to record highs. This reflects an increase in domestic demand due to increasing domestic mill capacity and the rebounding general economy.

While recovery of OCC is high, this material still accounts for approximately seven percent of waste disposed by all types of generators in the Metro area, and more than 10 percent of commercial and industrial waste disposed.

Estimated Tons of OCC Recovered from Metro Area [(See source document for picture)]

Recycling Infrastructure

The market for OCC is relatively mature and quite diversified geographically. This market operates with minimal government incentives or regulation.

Fifty percent of OCC is collected from retail/commercial sources. About 70 percent comes from large-quantity generators such as major shopping centers and distribution centers. Other sources are manufacturers at 28 percent, pre-consumers at eight percent and households at 13 percent.(4)

[FOOTNOTE 4: "Report and Recommendations of the Paper Division, Oregon Recycling Markets Development Council," September 1992.]

Most OCC from large-quantity commercial generators is baled by the generator and marketed directly to mills. Commercial garbage haulers collect most OCC from small-quantity commercial generators and households. Larger commercial garbage haulers bale and market this material themselves, while smaller haulers take it to local buy back centers that bale and market it. Several material recovery facilities (MRFs) in the Metro area also recover this relatively valuable and readily identifiable commodity from mixed waste loads collected from construction/demolition, commercial and residential sources.

Secondary Uses

Most recovered OCC is used as feedstock to manufacture kraft bags, corrugating medium, and boxboard. OCC is being used increasingly in linerboard. Other markets for this material include tissue and toweling, core stock, and bleached board.

Primary Recycling Process

The process for manufacturing different types of paper is essentially the same. Fiber input, equipment and handling do vary depending on the end product, but the fundamental recycling processes are similar. Recycled fiber and virgin wood fiber are mixed with water and beaten in separate large vats. This process, known as "hydropulping", frays the surface of the fibers for better bonding. After the recycled and virgin fibers have been hydropulped, they are mixed together and sprayed onto a moving screen.

This mixture typically contains approximately five percent fiber pulp and 95 percent water. This is a crucial step for the use of recycled fibers which are generally shorter than virgin fibers and may pass through the screen if they are not suitable for the grade of paper being produced. The moist pulp at this stage in the papermaking process is then pressed between felt rollers to remove excess moisture. It then passes over a series of hot rollers that reduce its moisture content. After this stage, the paper can be coated, rolled, cut and formed.

Factors Affecting OCC Markets

Supply and Demand

Historically, OCC prices have experienced seasonal and cyclical demand-side swings.(5)

[FOOTNOTE 5: "Looking into a crystal ball: What explains the value of recovered paper?" Resource Recycling Recovered Paper Supplement, November 1993.]

Seasonal fluctuations have been tied to Christmas shipping and sales activity. Cyclical fluctuations have been related to paperboard output which is a function of the general economy.

Average Price/Ton For OCC (1991 - 1994)*[(See source document for picture)]

* These are average prices paid by Metro area buy back centers and Pacific Northwest mills, reported to Metro for its quarterly Market Price Report. They are intended strictly to illustrate relative changes and trends overtime.

Northwest mill demand for OCC historically has outstripped supply. This has continued to be the case as additional mill capacity has been built in anticipation and response to increased recovery. In recent years, OCC recovered in the Pacific Northwest has competed increasingly with European fiber in Asian markets. The recent upturn in the US and global economies is contributing to a demand-side surge that is pushing OCC prices up to record levels.

Raw Material Prices

Pacific Northwest mills rely on three principal sources of fiber other than recovered paper. These are chips and residue from lumber mills, utility or cull logs available as a byproduct of timber production, and a small percentage of harvested timber. Timber harvesting restrictions on federal forestland in the Pacific Northwest have caused the price of all of these sources of fiber to increase in recent years, improving the competitiveness of recovered fiber prices.

Collection and Processing Costs

Recycled fiber facilities are usually more expensive to operate than virgin facilities. One of the reasons for this is that the use of recovered paper increases quality control expenses. Chemical additives often are required to compensate for reduced fiber strength. Additionally, contaminants require process adjustments and can lead to increased machine run interruptions. In general, paper manufacturing and printing systems often have to operate at reduced speeds, raising costs per unit of output. Paper breaks occur more often lowering productivity. Moreover, the approximate 20-30 percent weight loss associated with recycling recovered paper means that 100 tons coming into a plant may yield only 70-80 tons of pulp, with the remaining 20-30 tons being waste material or sludge.(6)

[FOOTNOTE 6: 1992 RMDC Paper Report.]

Stock preparation is an important part of the recycling process. This process involves repulping, removing contaminants and preparing recovered fibers for paper making. Contaminants can affect finished product quality or the ability of paper machines to operate. Heavy contaminants include metals such as nuts, bolts, wires, staples and soda cans as well as sand, rocks and glass. Light contaminants include plastic, Styrofoam, waxes, glues, adhesives, pressure-sensitive adhesives, and wood.

Nearly all Northwest mills contacted for a 1992 Northwest Pulp and Paper Association survey indicated that they prefer to receive materials from total source-separated systems because they get better quality material and it requires lower capital costs for secondary fiber processing. Nearly all of them also said they prefer that the recovered paper they receive be baled.

Secondary Product Value

There are 43 regular and 37 specialty grades of recyclable paper, each of which has different fiber qualities and end uses. Generally speaking, the more carefully paper is sorted and separated, the more valuable and useful it becomes in the recycling system, since mills need feedstocks with known and consistent characteristics.

Outlook

With increasing mill capacity, an improving global economy, expanding multi-family collection programs and increased post-collection material recovery, prices and recovery of OCC are expected to remain strong. However, with recent OCC prices approaching and in some cases even exceeding prices for wood chips, mills will either revert to using wood chips, or use a blend of wood and OCC.

The industry demand for all major categories of sorted paper is large and growing. More than $1.1 billion dollars will be spent between 1989 and 1995 to increase recovered paper processing capacity in Oregon and Washington mills.(7)

[FOOTNOTE 7: 1992 RMDC Paper Report.]

Oregon and Washington mills had the capacity to consume 648,300 short tons of recovered OCC in 1992. This is projected to nearly double to 1,132,530 short tons by 1995.(8)

[FOOTNOTE 8: Mill capacity figures are from the 1992 Northwest Paper Mill Recycling Capacity Survey conducted by Arthur Andersen & Co. for the Northwest Pulp and Paper Association.]

In addition to increasing domestic demand for OCC, global demand for US recovered paper should keep pace with the increasing worldwide supply for several reasons. US recovered paper is relatively high in quality. Worldwide recycled fiber manufacturing capacity continues to grow. The North American Free Trade Agreement and recent revisions to the General Agreement on Tariffs and Trade should reduce trade barriers with major importers of US recovered fibers, including Korea, Singapore, Hong Kong, China, Mexico and Canada. Favorable currency rates also are boosting overall US exports to Asia. US recovered fibers will compete with European and Asian recovered fibers for these markets.

While all indicators suggest OCC prices will remain healthy in 1994-95, several factors could drive prices down. Changes in currency rates, the global supply of recovered fibers, and political instability in foreign countries can negatively impact foreign demand for US recovered fiber. Mandatory participation in California residential curbside recycling programs also may increase the supply of recovered fiber available to Northwest mills and drive prices for in-region recovered fibers down.


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Last Updated: November 9, 1995