<b>OCC Looks for a Bottom</b>

Prices may not be strengthening, although there appears to be signs that a bottom is being hit for old corrugated. After a precipitous fall through the first quarter of the year a number of paper stock dealers report of better movement of material lately.

There is still the specter of downtime and other inventory problems curtailing movement to some mills. However, there are pockets of improvement by a number of mills that is giving some vendors hope that markets for the low grades will start to improve. Any turnaround, many of these vendors note, will be slow, and prices may not move up too sharply over the next several months.

What is being heard more and more is that more board mills are looking to keep the prices where they are at as concerns grow about more OCC moving to the landfill instead of being collected.

In the South, several paper stock dealers note that a number of large OCC consuming board mills are buying larger blocks of material. Prices are still poor, although movement has improved. One paper stock dealer notes that the large Smurfit-Stone mill in Jacksonville, Fla., is running at a better clip, which is helping keep the flow of material better than in the past.

On the West Coast there are some mixed signals. The strike at four Weyerhaeuser plants in the Northwest could have an impact on OCC demand throughout the West. Over the past several quarters a number of mills have opted to take machines off line for either an extended period of time or even permanently.

With the decision by union workers to strike some vendors speculate that Weyerhaeuser could opt to use this as an opportunity to reduce the supply of finished product.

The offshore market is less certain. There have been some reports that Chinese interests may be looking to place some increased orders. While this is a positive, a number of vendors report having multiple orders spread out, creating the impression that larger volumes of orders are being made than in reality. This could give the false impression that the orders are greater than expected.

OCC markets in the Midwest are moderately better than they were last month, although there continues to be significant problems with moving material. Many of the OCC consumers are scaling back their orders, resulting in more material being stranded.

The situation is not expected to ease up much this month as there are indications that more downtime could continue to hamper paper stock markets in the region.

Concern on the West Coast also involves several other large-scale OCC consuming mills in the Northwest. The problems with run times by some board mills could be exacerbated by total closures. The continued pressure on paper stock dealers is growing as domestic mills send out mixed signals about their market health.

Regions in the Southwest also are posing problems. There have been indications that some orders for OCC have picked up. However, the supply of OCC continues to outpace total demand. Despite this, more paper mill buyers are reluctant to drop prices any further. With the recognition that in some regions OCC prices are so low that more material is starting to go toward the landfill, there may be a move to hold prices at their present level.

One mill buyer cautions that he has all the OCC he needs and could drop prices and still get all the OCC he needs.

In the Midwest, a pervasive sense of doom continues to spread. A host of mills have been taking machine downtime, cutting into demand. At the same time some mill buyers are looking to reduce their supply region, cutting out some suppliers outside a certain geographic region.

There hasn’t been much of a catalyst to slow the decline, although even vendors in this region feel that prices are close to a bottom.