Grade Profile

Recycled Paperboard: Upward Market Turn for Consumer Packaging and Industrial Grades

GRADE STRUCTURE. Recycled paperboard is made from a combination of recovered wastepaper stocks that are deinked and repulped. The primary stocks used in multi-ply boards are old corrugated containers (OCC), new double-lined kraft corrugated clippings (NDLK), and old newspapers (ONP). Some higher quality stocks may also be used to improve surface appearance. The heavyweight grades of uncoated chipboard are used for pads, partitions, and pressboard products, while higher quality uncoated grades are used for lightweight linerboard, paper cores, and tubes. Premium grades of coated recycled board are used in folding cartons and other custom packaging.

The most important end uses for recycled paperboard are folding cartons, corrugated containers, rigid set-up boxes, composite cans, paper tubes and cores, gypsum wallboard facings, solid fiber partitions, book covers and binders, and insulation board. The major end uses measured by industry production capacity are folding cartons (17.9%), corrugating medium (27.6%), linerboard (25.6%), gypsum wallboard (8.8%), and tubes, cores, and other converting grades (20.1%).

PRODUCTION/CAPACITY. Recycled paperboard production in the U.S. has increased rapidly during the past few years, rising from 8.9 million tons in 1990 to 15.5 million tons in 1997—an average annual growth rate of more than 10%. Production of recycled paperboard set new records in 1997 and continued to rise in the first half of 1998, reflecting additional output of several new paper machines. Despite higher output, demand for paperboard packaging weakened slightly in 1997. As a result, recycled board mills operated at approximately 92.7% of available capacity, compared with 93.4% in 1996. Recycled board mills are forecast to operate at 94.4% of capacity this year.

According to the American Forest & Paper Assn., new capacity additions will slow to about 2.5% in 1998 and 1.5% in 1999. The surge in new capacity for recycled linerboard and corrugating medium has accounted for most of the capacity buildup in recent years. Six new containerboard machines started up during 1994-95, and six more were added during 1996-97. In 1997, an estimated 18.2 million tons of recovered wastepaper, or 50% of total U.S. consumption, went into making recycled paperboard. Consumption is expected to grow to about 19.0 million tons in 1998.

OUTLOOK. The major concern for recycled paperboard mills is the volatility of recovered paper prices. During 1995-96, prices of recovered fiber skyrocketed to record levels and then collapsed. This pushed market prices for all recycled board grades to new highs before eventually falling back. During 1997, prices of OCC began climbing again during the second half of the year; this supported the first price increase in more than a year for recycled grades. Most mills raised prices $50/ton for coated folding carton grades.

Producers attempted another price increase for folding boxboard grades in early 1998, but fiber costs had already started receding and the effort to raise board prices a second time failed. Pulp & Paper Forecaster indicates a continued improvement in market prices for both folding boxboard and industrial packaging grades in 1998. The forecast calls for a $35 to $40/ton price increase to be implemented by the end of the year.

PRICES. As a result of reduced fiber costs and price rollbacks, prices fell to about $525/ton for coated grades and $340/ton for uncoated grades in early 1997. Since then, prices have rebounded to $590/ton for coated grades and $420/ton for uncoated grades.

Historical prices for 20-pt clay-coated boxboard (rolls, $/short ton, year-end prices): 1990-91, $535; 1992, $500; 1993, $480; 1994, $575; 1995, $610; 1996, $530; 1997, $580. Bending 20-pt chipboard (rolls, $/short ton, year-end prices): 1990-91, $350; 1992, $370; 1993, $335; 1994, $420; 1995, $440; 1996, $370; 1997, $410.

NOEL DE KING News Editor

SUPPLY/DEMAND (million tons)