<b>Low Grades Continue to Strengthen</B>

The rekindling of markets for old corrugated containers, old news and mixed paper continues. Offshore mills, especially those to the Pacific Rim, are the big driving force for the demand. China, Indonesia and Thailand, and, to a lesser degree Taiwan and Korea, continue to be active for the grade.

Offshore prices for OCC have been moving up sharply over the past month, with some West Coast sources reporting prices moving up above the $140 a ton level. Some West Coast vendors add that OCC prices are going for as much as $180 a ton at the dock.

One area of differences is in the ability of exporters to obtain containers and bookings to ship material offshore. While last month there was some difficulty in landing bookings on many vessels, a number of exporters are now reporting having a much easier time getting containers of recovered fiber onboard container lines.

However, there are several exporters who report that while bookings are improving, it still is more difficult to book space, especially with more valuable material bumping recovered fiber from some vessels.

One positive factor is the relative inexpensive cost to ship freight. Prices have moved up due to higher fuel costs, although relatively speaking shipping costs are still much lower than they were several years ago.

Helping augment the improvement has been the strong buying by the Nine Dragons Mill in China. The mill complex is reportedly buying more than 40,000 tons of OCC a month to feed the mill.

While OCC continues to be the "hot" grade, there are a host of other low grades that have been moving up. Old news and deinked news are both in much stronger position, with higher prices being posted.

One of the biggest reasons for the strength in low grades continues to be the inability of many Asian mills to get fiber from Western Europe. Over the past several months, as paper markets have heated up much of the recovered fiber collected in Western Europe has stayed on the continent. This is forcing more Asian mill buyers to buy heavier from the United States.

European paper mills are running very strong schedules. Demand for raw material has been climbing, keeping the material within the continent. At the same time the cost to ship material from Europe to the Pacific Rim has increased significantly, making it more economically viable to keep the material in Europe.

Hard white mixed also is in much strong position, with some West Coast sources seeing prices topping the $100 a ton level.

Inventory levels at many mills, especially on the domestic side, are not high. This is forcing some procurement agents to become more aggressive with their purchases to build up inventories. And, with a decline in generation during the summer typical, some mills continue to buy before some fiber becomes scarcer in the next several months.