Commodity Report

The end of July and very beginning of August have seen a slow recovered paper market in terms of both pricing and generation.

While the market typically bottoms out in early-to-mid July, it can usually be expected to rebound in August—a trend that has yet to be seen so far this year, sources say.

Generation is slow across the board; especially the key grades of old corrugated containers (OCC), old newspapers (ONP) and even mixed paper.

The languishing generation of ONP is to be expected for this time of year, says one Midwestern recycler, who describes the phenomenon as the "summer blahs," where not a lot of people are buying advertising in newspapers—or the newspapers themselves for that matter. Some say the market is still feeling the sluggish effects of the July 4 holiday.

While many in the industry expect generation to lag come the dog days of summer, what’s peculiar about the current scenario is that prices are also unusually soft, says one California broker. Sources from all over the country report dipping prices in ONP and mixed paper, although OCC for the most part has continued to float around the same price all summer.

"Normally in the summer the prices go up because the collection goes down due to all the holidays," says one California source. But the current state of the market is "well off the projections," says a Midwestern recycler.

Another Midwestern recycler predicts a possible rocky near future for OCC in that region in light of the closure of a Michigan mill, but says the effects are yet to be seen.

The market for office grades remains sloppy, and one source says not to expect any signs of improvement any time soon. He says the growing number of secure document destruction companies "is going to cripple that market for awhile."

While there’s still some movement, the export market has remained relatively quiet—"oddly quiet," according to one source. Chinese purchasing has slowed down considerably, which in part could be because some of the smaller mills are taking summer down time.

However, a West Coast source reports that China is currently a bit over capacity and having a hard time maintaining the prices of finished product, which isn’t encouraging mills to pay higher prices for raw materials.

Some sources report having trouble booking other Asian destinations for recovered fiber—particularly India and Pakistan.

While the movement may be slow, material is moving—There is little evidence of large inventories building up for any grade, sources say.

Transportation issues have also been causing some unrest in the market. A recycler in the Midwest reports that many recyclers in the region are starting to feel the effects of mounting transportation costs chipping away at their margins.

One source reports being turned down for a deal for being "too far away" from a potential buyer. "That’s unprecedented," the source says.

Out West at the California ports of Long Beach and Los Angeles, the industry has been dealing with the introduction of the Pier Pass Program—which charges an additional fee for shipping during peak hours.

The program has been in effect since July. Port operators have been charging shipping fees starting at $20 per 20-foot container during peak hours—3 a.m. to 6 p.m.

"So far, we don’t know if it’s going to be successful, but it’s causing inconveniences for some," says one California recycler. He says some packers are struggling with the new system by having to pay extra to move the material by truck from the facility to the pier at night to avoid peak hour shipping charges.

According to the recycler, a few exporters have decided the extra costs of nighttime trucking are more of a hassle than the Pier Pass fee and are opting for daytime shipping anyway.

The market may be uncharacteristically slow, but sources are optimistic that seasonal conditions will buoy price and generation back up.