Paper

THE AUTUMN BLUES

The first few weeks of autumn have not been kind to the old corrugated containers (OCC) market.

"It’s been very sad for OCC," says one Midwestern packer. "Nobody’s coming out of the weeds—everybody’s kind of hiding back, waiting to see what everybody else is going to do," he adds.

Prices are down across the country for the dominant grade in the paper industry. A source on the West Coast reports domestic mills have reduced OCC prices up to $10 per ton.

A New England recycler reports inventories piling up across the region. He says that OCC is moving at lower prices just to get rid of excess supply.

Back-to-school season, which comes with fall, has brought a flood of material to the market. Sources say demand usually matches the seasonal boom in supply, but this year, the buyers just aren’t there.

Complicating the matter is the fact that export markets aren’t eating up as much OCC as many industry insiders had anticipated. According to one West Coast recycler, the word is that Chinese mills keep sufficient inventories during the summer months and that many mills shut down during the season to save energy costs, meaning the demand is just not there.

A Midwestern packer reports reaching further and further just to find business. "We’re all looking for alternatives—calling people we haven’t done business with in a long time just trying to move material."

In the aftermath of Hurricane Katrina, sources say it’s still too early to determine what the full impact of the storm’s devastation of the Gulf Coast will be on the scrap paper industry.

Sources say that so far, the direct impact seems to be minimal and that for the most part, paper mills seem to have been spared severe structural damage.

However, one effect from Katrina has already been felt by the industry: the sharp increase in fuel and energy costs. "It’s putting a crimp on the industry," says one source, who added that most of the disruption he’s heard about has to do with power outages and fuel.

Other sources predict that rising fuel costs will have the greatest impact on the industry in the short term as packers, recyclers and mills grapple with the effects on their transportation and energy costs.

In spite of OCC’s downturn and Hurricane Katrina, it’s not all bad news in the scrap fiber market. Sources report prices for old newspapers (ONP) have remained unchanged and that the grade should anticipate a slight boost as autumn typically brings thicker newspapers.

Mixed paper, which usually follows OCC’s lead, is only down slightly, about $5 to $6 per ton out west. Other regions report mixed paper’s price has been stable.

Out west at the California ports of Long Beach and Los Angeles, the industry has been dealing with the Pier Pass Program—which charges an additional fee for shipments made 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., according to local media reports.

"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 it seems the system has just switched the problem—the congestion that used to exist during the day is still a problem, but at night instead of during former "peak hours."

As for the near future in export markets, sources report that the Muslim holiday of Ramadan, which begins in early October, will most likely interrupt shipments to Indonesia. In addition, China’s celebration of National Day in early October is expected to cause some slowdowns.

In spite of the less-than-favorable climate for OCC near the end of the third quarter, most sources say they are optimistic that demand throughout the winter holiday season will start pumping new life into the packaging market soon.

(Additional news about paper recycling markets, including breaking news and pricing, is available online at www.RecyclingToday.com.)

Cascades, Kingsey Falls, Quebec, Canada, has announced plans to streamline activities at its Fine Papers Group operations in Thunder Bay, Ontario.

The plan involves the closing of the No. 5 paper machine and converting operations. Along with the machine closings, the mill will lay off around 150 employees by the end of this year. In order to minimize the affect on customers some of converting activities and manufacturing of certain paper grades will be transferred to other facilities within the Fine Papers Group.

"We know how much this decision will affect our employees and we will make the efforts required to reduce the impact. However, these measures will enable Cascades Fine Papers Group to restructure its Thunder Bay operations, to improve mill economics by more than $10 million annually and to enhance the future of the remaining 375 employees," says Gino Lévesque, vice president of operations, Cascades Fine Papers Group.