Commodity Report

As late summertime temperatures continued to rise throughout much of the country, the recovered fiber market remained just about as hot in August as it was in July.

Prices have remained strong throughout the summer, and sources say the market is likely to continue in a similar pattern for the near future.

"It’s pretty strong right now, and that’s kind of unusual," says one recycler in the Southwest. He says the price strength isn’t necessarily tied to seasonal variation on the calendar either, but is being driven by worldwide economic trends. "You have a global supply and global demand that has dictated how strong markets are," he says. "So all over the world, you’ve got people wanting material."

This high demand has kept inventories low, prices strong and recyclers and packers happy. "The demand is there and demand is just driving the market," agrees one Midwestern packer. Overseas demand is still a major factor, the packer continues, with much of it coming from China, which is now less than a year away from the 2008 Olympic Games in Beijing. However, the packer adds that India cannot be ignored on the world fiber scene. "I don’t think China is the one driving the market as much as India is right now," the packer says. "Their economy is very strong worldwide, and that’s where a lot of paper has been heading off to, holding that pricing."

Active export markets really make all the difference, according to the packer. "We keep waiting for the doors to close and the prices to drop," she says.

The market for old newspapers (ONP) has remained fairly steady, though there continues to be some long-term concerns. Total construction spending in the U.S. dropped 0.3 percent in June, according to the most recent statistics released by the U.S. Census Bureau. The weak housing market means less demand for ONP from insulators, a major consumer of the grade.

ONP is also facing the same concerns as the newspaper industry that generates it, according to a Midwestern packer. "The news is going in the other direction," she says. "It’s harder to find than OCC (old corrugated containers)." She continues, "We are trying to encourage everyone to get news into the recycling streams. News is facing difficult times."

The packer reports hearing from sources in the regional newspaper industry that subscriptions and circulation numbers are down. "That’s a long-term trend that’s going to transition," she says, adding that packers and recyclers are looking to diversify with other grades to protect themselves from a dip in the ONP market. "It’s tough times on demand and supply. The smart guys are transitioning to different grades to accommodate that," she says.