Since COVID-19 was declared a pandemic in March, there’s been a noticeable increase in the price of Old Corrugated Cardboard (OCC). In this week’s blog, we try to understand what’s driving current trends, whether or not the trends are likely to last, and how it’s impacting operations. Knowing how end markets are evolving can help municipalities be prepared to continuously tweak their expectations, responses and budgets.
Current trends in the OCC markets
Revenues for this material had been stagnating for past six months ranging from a low of $65 to a high of $72 CAD per metric tonne (MT). Recent data collected for the CIF Price Sheet shows that the monthly average for OCC had grown to $99 CAD per MT in March. Continuation of this uptick is expected for April.
What’s driving the trends
“The corrugated packaging industry has been running flat out to supply paper products and shipping boxes to the many levels of essential needs in North America. Food industry and personal care market demands have been significant along with medical suppliers and e-commerce”, says Allen Kirkpatrick, Executive Director at the Canadian Corrugated & Containerboard Association.
COVID-19 has significantly increased the demand for transporting medical supplies, food, PPE, etc. Additionally, retailers are directing shoppers to their online platforms, which has compounded the demand for OCC materials. However, with non-essential business closed or significantly scaled back in response to COVID-19, there are fewer Industrial, Commercial, and Institutional (IC&I) sources of OCC feedstock. Shawn State, Pratt Industries says 75% of US mills utilize recovered paper in their operations. It’s a case of supply and demand; OCC value is up for residential programs because of the constriction in the IC&I supply of brown fiber needed to make packaging, as well as the increased demand to ship to consumers.
Will the new trends last?
The new normal may be very different than pre COVID-19. Out of an ongoing concern for public health, new behaviours and practices may carry on past the point at which businesses are permitted to reopen. Consumers may continue to use online shopping over retail stores. However, given the economic downturn due to closures and high unemployment rates, the level of online activity may drop, which means that the uptick in OCC pricing that we’re currently seeing could change again.
Many people may continue to work from home to help employers adhere to social distancing guidelines, by restricting the number staff that can be on site at any given time. Large group gatherings for sporting events, concerts or conferences may also continue to be put on hold for the same reasons. This may result in continued disruptions to the fibre supply chain as OCC material will not be generated from these types of activities.
What does this trend mean for municipalities?
Right now, there’s more OCC in the Blue Box. As residents receive their online packages and discard the boxes they came in, our collectors and MRF operators are left to manage them. Now is a great time to use your P&E dollars to remind folks to breakdown boxes and tie them into manageable bundles. This will help ensure efficient collection at the curb (i.e., no stopping to break down the box) and in multi-residential buildings and depots where storage space for large bulky items is limited.
As consumption habits continue to evolve, it will be important to monitor the changes and their impacts on recycling operations. When it’s safe to do so, inbound material audits can provide municipalities insights into where the material mix is changing to help inform P&E messaging. Mass balance studies will help calculate the impact a change in material mix is having and determine where there is a good business case for an upgrade or an adjustment.
If you have ideas on how to best to respond to changing market conditions, contact Jessica Landry. Funding opportunities for Market Research and Support are provided for in CIF’s 2020 REOI.