Paper

LOOKING UP

The fourth quarter of 2005 did not end on a high note for the scrap paper market, particularly for its chief grade—old corrugated containers (OCC)—which saw four months of steady decline in price. Industry insiders hope that the first quarter of 2006 will see higher prices and a stronger market overall, but for now, the market seems to be holding steady.

Sources say the market is moving at an even keel now that the surge in supply that follows in the wake of the Christmas holiday has passed. "You see it basically overnight," says one Midwestern packer of the drop in volume from December to January.

In addition, OCC prices seem to be holding steady, and one Texas recycler reports hearing that some in the industry feel the price has bottomed out and is due for a plateau followed by an upturn.

Although the new year has started out a little slow, material is moving, says one West Coast broker. Buying has been fairly stable, he says, though he reports some weakness in OCC and old newspapers (ONP), which could be attributed to usual seasonal factors. ONP generation tends to fall a bit in January, sources say, because newspapers are thinner once the big advertising season ends.

Sources also report steady buying of mixed, coated book and sorted office paper (SOP). One Midwest source reports these grades are receiving a boost in generation from end-of-the-year document purges.

In the early days of 2006, the domestic paper market is still dealing with the effects of several major mill closures. Weyerhaeuser Co. announced the idling of several mills in Ohio, North Carolina, Missouri and Texas in December for at least the next few months. A paperboard mill in Groveton, N.H., closed Dec. 30, which has had a sizable impact on the market in that region, says one New England source.

Domestic mill closures continue to encourage packers and brokers to look to the export market, but foreign buying has been quiet and stable, not ravenous. In addition, some sources report transportation problems like high freight costs and a lack of container availability causing trouble for would-be exporters.

While the U.S. holidays may be over, Chinese New Year is at the end of January, though the effects of the 15-day holiday are usually minimal, sources say. A West Coast broker says the market usually expects a flurry of buying either immediately before or immediately after the holiday to prepare for or make up for the downtime. "But it’s short-term, not a huge disruption," he says.

Industry sources remain cautiously optimistic about the 2006 market. In general, as 2006 begins, prices may not be ideal, but steady buying is an encouraging sign, sources say.

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