<b>OCC Hoping for Stability</B>

The old corrugated container market could be flattening out. Prices, although under pressure over the past several months, may be starting to ease back. Prices may not be ready to decline much further, if at all.

On the other hand, prices probably won’t be showing much in the way of sharp upward movement over the next several months. Generation, although down, is running up against slowing orders, both on the domestic and offshore market.

Earlier this month there were indications that Chinese interests may be heading back into the OCC (as well as Old News) market. There was some optimism that this move would help prop prices on the West Coast, with possibility some gradual shifting to the East Coast.

While there does appear to be some strengthening in the offshore market, it is not as strong as many had hoped. There also have been some reports of one machine at China’s Nine Dragon’s mill being taken off line for a month for repairs.

This move will mute the need for OCC to China.

While there has been some rocky news for the OCC market, there does appear to be some modest improvement in prices for the grade. The offshore market, along with some interest by West Coast mills, is allowing for a steadier flow of OCC. The question is whether this improvement will last, or is just a short-term pop.

Despite the modest improvement, there is downtime being taken at a number of board mills on the West Coast. For board mills that are running, their operating rates are down significantly, with some sources noting that operating rates are down as much as 10-20 percent from the same time last year.

Other mills, while seeing slow demand, seem to be determined to hold their OCC prices at the present level. There could be some perceived opinion that prices can’t go much further before much of the marginal tonnage is sent to landfills.

What is becoming more difficult is that some purchasing managers are trying to hold their OCC buy prices at a level to keep the flow in while finished product prices continue to see downward pressure.

Exacerbating the problem for the domestic paperboard industry has been the ability for some offshore mills to import greater amounts of finished products such as linerboard and medium. This is flooding an even more sluggish market.

While there is a modest uptick in OCC, there appears to be a fairly strong opinion that the improvement in export orders is only short lived. After this blip markets may start slowing down.

A purchasing agent for one paperboard mill on the West Coast feels that the market for OCC in March may get uglier on the West Coast if the export market tails off.

Meanwhile, the amount of downtime cropping up on the West Coast is creating continued problems for many vendors. Several board mills have moved from taking maintenance and equipment repair downtime to inventory adjustment downtime.