<B>West Coast Activity Stirring for OCC</B>

Although vendors throughout the country seem to feel brown grades will be in the doldrums through the rest of the year there is some modest improvements being seen on the West Coast.

Chinese buying could be setting up some of the strength off the West Coast. Purchases by Chinese interests had been very strong through the second half of last year and through the first quarter of this year. After building up significant tonnages a combination of mill problems, oversupply of inventory and expensive fiber created a vacuum, with orders into China dropping off.
The crucial Pacific Rim market helped drive OCC through the first half of the year. The backing out of the market toward the summer months helped put the grade in a tailspin. Now, it appears there has been some improvements in the grade, which could help keep OCC from declining even further.

Other regions, while also following a steadily increasing buying pattern, opted to cut back their purchases, creating a flood of material for the domestic market.

An improvement in the grade can be attributed to a host of reasons. Several vendors feel that with the large sell of in the grade over the past several months there may be a perception that prices have hit their bottom price. This bottom buying could pull some extra tonnage off the West Coast.

If the price difference between the West Coat and the Midwest and East Coast is great enough some shipments could shift to off the East Coast. At the same time, any price disparity could create more inquiries from sources in the Midwest to the West Coast.

In the Midwest some of the prices being offered for OCC are less than $50 a ton at the mill, a level that is making it more difficult for some vendors to cost justify collecting material.

Although there are some possibilities for a modest comeback, the specter of further downtime is keeping OCC in a state of concern. Several paper stock dealers have said they are hearing of significant amount of additional downtime is expected to be announced in the very near future. The possibility of further downtime that has yet to be announced is creating significant apprehension in the market. With OCC prices hovering at such low levels there are concerns that any further erosion could result in a significant drop in the generation.