THE PAPER Trail

Bill Moore

Old corrugated containers (OCC) make up the largest portion of recovered paper in the United States. Of the more than 45 million tons of paper recovered in the country in 1998, more than 22 million tons was OCC. In comparison, approximately 9 million tons of old newspapers (ONP), the second largest grade of paper, was recovered in 1998.

OCC's prevalence and the fact that the solid waste industry is focused on the removal of post-consumer grades of recovered paper from the waste stream, makes OCC an important grade to the solid waste management industry.

It makes up approximately 60 percent of the tonnage collected by the industry.

Recovered Paper Facts and Figures: Post-Consumer OCC Definitions: The Washington, D.C.-based Institute of Scrap Recycling Industries Paper Stock Industry's definitions of recovered paper are used widely in recycling operations. Double line kraft cuttings (DLK), or corrugated box cuttings, are the largest pre-consumer grade of OCC. The majority of post-consumer OCC falls in the following grade definitions:

* PSI #11, Corrugated Containers: Consists of baled corrugated containers having liners of either test liner, jute or kraft. Prohibitive materials may not exceed 1%. Total outthrows may not exceed 5%.

* PSI #12, Double-Sorted Corrugated: Consists of baled, double-sorted corrugated containers generated from supermarkets and/or industrial or commercial facilities. They have liners or test liners made from jute or kraft. Materials must be sorted to eliminate boxboard, off-shore corrugated, plastic and wax. Prohibitive materials may not exceed 1%. Total outthrows may not exceed 2%.

Double-sorted corrugated has more rigid specifications, especially the restriction on offshore corrugated and wax. Offshore corrugated generally applies to materials derived from areas, such as some Asian countries, that are fiber poor and produce low strength, off-color corrugated materials.

Waxed corrugated, primarily used in food-related industries, is another contaminant that must be minimized in all OCC grades. When wax enters paper mill systems, it either can cause spotting on the new paperboard or, in extreme cases, cause the paper to become slippery and slip off the wound paper reels in a telescoping manner.

OCC Use: Recently, a U.S. pulp and paper industry analyst noted that OCC is becoming a pulp substitute for unbleached virgin fiber in the U.S. containerboard industry. The trend is clear: OCC use in containerboard has increased dramatically during this decade.

Linerboard and medium mills in the United States consume more than two-thirds of the OCC generated in the country. Ten years ago, the containerboard sector used less than one-third of all OCC.

U.S. OCC Consumption: As of June 1999, the United States is experiencing a tightening market for OCC, and prices are rising sharply. Industry experts expect OCC prices to continue to rise throughout the summer.

Typically, generation and collection of all grades of recovered paper (especially OCC) slows during the summer. This puts upward price pressure on OCC because mill demand frequently increases during this time frame. The containerboard (liner board and the interior fluting called medium, which make up corrugated boxes) that eventually is used for goods shipped for the Christmas season actually is produced during the summer months.

This year, corrugated box demand is expected to be especially strong due to the "millennium effect." Many of the items that will be consumed during new millennium celebrations will travel in corrugated boxes.

The Containerboard Industry: Containerboard industry operating rates are an important factor in the demand for OCC. The operating rate is the percentage of installed mill capacity being used in a paper/paperboard grade at a given time. OCC price has a strong correlation with U.S. containerboard mill operating rates.

In 1996 through 1998, containerboard operating rates were at their lowest point in a number of years [see chart]. This contributed to low OCC prices. Going forward, the U.S. containerboard operating rate trend is expected to continue upward. During the 1990s, the paper industry has suffered over-capacity in many product grades - one of the most problematic areas being containerboard. Through consolidation, efficiency improvements and slowing in new capacity additions, the industry has begun to shut down and idle inefficient capacity, which will lead to higher mill operating rates and subsequently an upward trend in OCC prices.