After previous corrugated container costs skyrocketed in 2024, analysts anticipate a return to extra regular situations in 2025 — no matter regular means anymore in as we speak’s surroundings.
This performs into packaging producers’ backside traces as they work to stability efforts to spice up recycled content material with larger enter prices. In December, OCC costs fell 16% 12 months over 12 months to $66 per ton, and dropped 11% month-over-month from November, in accordance with a Jefferies observe to traders on Dec. 17. The agency cited port strikes and lower-than-expected demand as causes for the worth dips, which adopted a leap early final 12 months. Jefferies put the common OCC value at $74 per ton in December and anticipated it to succeed in $76 per ton this month.
Exports have pushed up OCC demand over the previous 4 weeks, and consequently costs on each the East and West coasts have elevated $10 to $15 per brief ton, in accordance with Garrett Mason, director of recovered paper, and John Litvay, accomplice, at pulp market intelligence and value index agency TTOBMA. It is not but clear if the will increase are solely on account of true product demand, or to a mix of that and mills trying to get forward of a possible port strike.
Home consumers had excessive inventories going into the vacations, however shopping for has since elevated in a number of areas, Mason and Litvay defined.
OCC costs have decreased after which flatlined the final 4 months, stated Chaz Miller, founding father of Miller Recycling Providers. However that is commonplace given conventional seasonal cycles of field era and consumption: Bins must be manufactured previous to the busy vacation delivery interval, after which manufacturing tends to drop off.
“It is actually fairly regular to go down the final couple of months of the 12 months,” Miller stated. “We simply do not want as many bins [produced] in December as we did in September. … So your manufacturing begins to go down in October and November and December — financial downtime is quite common.”
Many observers have saved tabs on the OCC market to find out whether or not or how a lot it could renormalize following notable will increase in 2024. Michael Roxland, senior paper and packaging analyst at Truist Securities, cited in a number of notes to traders in summer season and early fall 2024 that OCC pricing was up 245% in contrast with January 2023.
Fiber packaging producers that use OCC as feedstock repeatedly cited larger costs for OCC and different inputs as a number one cause they repeatedly raised costs in 2024, and once more as of this month.
However in an Oct. 27, 2024, replace, Roxland identified that OCC costs have been coming down and recycled board producers subsequently “could have issue implementing [a] value improve with out continued and extra notable demand enchancment, significantly as OCC pricing has declined ~22% since June.”
The brand new field issue
The brand new field market instantly influences the OCC market. And the OCC market performs a big position within the total packaging panorama.
Take into account that “OCC is usually the biggest packaging materials generated within the market,” Myles Cohen, founding father of consulting agency Round Ventures, stated throughout a Wednesday webinar hosted by the Recycled Supplies Affiliation.
“You possibly can’t have OCC, previous corrugated bins, with out new bins,” stated Ryan Fox, corrugated packaging market analyst at Bloomberg Intelligence, in the course of the ReMa webinar. He anticipates a slight improve, as much as 1%, in field shipments for 2025, however not an enormous bump.
Whereas indicators level to a restoration in field demand following a droop, partly on account of buyer destocking after a pandemic-era growth, expectations aren’t for a brand new surge.
“We’re hoping that we are able to see the development get again to the place it was from 2010 by 2019, the place there’s only a gradual, gradual improve that’s manageable,” Fox stated of the projected field demand restoration.
Nevertheless, a number of analysts have flagged extra containerboard and boxboard capability out there that they imagine will probably be eliminated quickly. Observers count on producers to shut ageing mills as the brand new ones come on-line.
“It is type of inevitable. If you get this new capability on-line, it simply has higher economics behind it,” Miller stated. “We’re beginning to get again to extra of a real provide and demand stability.”
George Staphos, BofA Securities analysis analyst, stated in a Jan. 6 outlook for 2025 that he expects about 1 million tons of capability to be eliminated this 12 months and subsequent. And Gabe Hajde, senior analyst, packaging and paper fairness analysis, at Wells Fargo Company & Funding Banking, stated at a convention in October that his group recognized 2.5 million tons of containerboard capability that might be faraway from U.S. producers’ footprints over the subsequent 5 years. These predictions are along with the capability that has already been eliminated within the final two years, following a interval of will increase.
OCC outlook
Trying forward by 2025, TTOBMA’s full-year common value outlook for OCC “is similar to 2024 throughout all areas and export,” Litvay stated.
Regardless of the latest volatility — value spikes after which the monthslong decline — some observers recommend that OCC’s value declines in latest months point out the market might be returning to extra regular tendencies in 2025.
“‘Regular’ has been so uncommon,” Miller stated with fun. “I believe costs will return up within the spring. And, barring the sudden, I believe we’ll be again at a extra regular curve.”
That being stated, a big wild card is about to be performed: A brand new president and the potential for tariffs, amongst different adjustments.
“Every time you have got a brand new administration, there’s all the time a component of uncertainty within the financial system,” Miller stated.
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