<b>Low Grades Not Yet Out of the Woods</b>

The old corrugated market may be nearing a bottom. While more paper stock dealers feel prices are close to, if not already at a floor price, any sense of a sharp upward swing in the near future is still muted.

One of the biggest factors right now is the belief that prices can’t drop much further. Many handlers of the grade, while acknowledging problems with prices, feel most mills in North America are not willing to push OCC prices down much further. Some handlers of the grade feel prices are reaching a level where many companies that do both waste hauling and recycling will opt to dispose of the OCC, rather than separate the material out.

Although more vendors seem to feel that prices may start to show some stabilizing, there isn’t yet any strong sense that prices will begin rebounding. The biggest uncertainty is the murky short term market in China. As political uncertainty between the United States and China continue, many exporters say that the shipments to China could drop sharply. If this happens, it could force more domestic paperboard mills to cut their price again.

While there doesn’t seem to be much incentive right now to push prices down even further, many board mills are seeing steady erosion in finished product prices. With lower prices for much of their product some mills may have no alternative to lowering their raw material prices.

While there is some further downside possible, it is likely that any further price dips will be limited. With OCC prices already down around a level where disposal may be an alternative, some handlers of the grade speculate that at most OCC will come down between $5-$10 a ton.

Old news is showing a much different outlook for this spring. Export activity had helped boost the grade, even when OCC was declining. This trend may start to ease back as the spread between the two grades increases. A number of paper mills are opting to more actively control their tonnage amounts, which could restrain any upward growth in ONP over the short term.

North American newsprint mills continue to lower production schedules as debate ranges over whether price hikes for newsprint will hold.

Abitibi-Consolidated already announced that it is taking several weeks of downtime at its newsprint mills in Sheldon, Tex., and Kenora, Ont., newsprint mills. The Texas mill is a large consumer of ONP.

The downtime, scheduled for this month for both of them, is initially scheduled for two weeks. However, a source at Abitibi says there could be additional downtime taken at the Ontario mill if warranted. If further downtime is taken it could put even greater pressure on handlers of ONP.