Paper

The scrap paper market witnessed another stable month in March, helping create a positive outlook for the beginning of the second quarter of 2005.

While most grades have had a relatively strong month, office paper may be showing some signs of weakness. Sources from all regions say the market has slowed considerably and prices have dropped. Some speculate that the growing interest in secure document destruction has created an influx of supply in high grades, especially office grades, and demand is slow in catching up. But despite the drop in price, many remain optimistic that the market is likely to level out rather than to continue downward.

As expected, prices for old corrugated containers (OCC) have come back down in the Northeast after an unexpected hike in the asking price last month. While the market is reportedly a little soft in the Northeast, OCC has remained stable in generation and in price in most other regions.

The old newspapers (ONP) grade has inched up in price slightly, with No. 8 and No. 9 news standing out. The only exception is No. 6 news, which has reportedly dropped a bit in price in the New England area. Generation has been stable and even a little stronger than usual for this time of year in some areas, especially out west. Sources say this could be attributed to the typically larger newspapers that are printed following the thinner winter issues and general improvement in the U.S. economy as a whole.

Pulp substitutes have been in short supply and high demand, driving the prices up. Mixed paper has also seen an upturn in price.

The eyes of the industry are again on China, and many sources say that what China decides to do will set the prices for the upcoming quarter. Brokers and pulp producers in the western United States report just now feeling the effects of China cutting back orders slightly in January and February. Domestic demand for ONP and OCC has been strong enough to keep them from feeling the effects on those grades, but sources say prices could drop for other high grades in addition to office paper, which is already down. Slight inventories are building out west, but domestic mills have been picking up some of the slack from China’s demand. In spite of any cutbacks, China still remains the strongest buyer of OCC globally.

Weather was a concern, especially in California, which was pounded by unusually heavy rain for much of February. However, the inclement weather has had a minimal effect on scrap paper generation and transportation—material has reportedly been moving steadily out west and into export markets in spite of the bad weather. Sources in other regions typically hampered by winter weather say the scrap paper markets will benefit from the confidence that comes traditionally with spring.

Despite a few frayed nerves about what’s going to happen with orders from China, sources say they are mostly optimistic about scrap paper heading into the second quarter and projecting a strong market based on the strength of manufacturing and transportation. (Additional news about paper recycling markets, including breaking news and pricing, is available online at www.RecyclingToday.com.)