Paper

Growing Strong

With the price of old corrugated containers (OCC) at its healthiest level in months, the overall market for fiber is steady and showing signs of strength in some grades.

The price of OCC jumped $5 per ton in the Midwest in early May, to the pleasant surprise of recyclers and processors who had expected the price to remain unchanged. The grade has been "inching up" on the West Coast as well, according to one California broker who says the demand for OCC has been strong on both the domestic scene and the export market.

A West Coast source reports that part of OCC’s boost may be coming from increased demand from a Lee & Man Paper Manufacturing Ltd. mill in China, which has recently put one of its new machines into commercial production, consuming an additional 30,000 tons of OCC per month.

A Texas recycler reports that OCC is "getting hot" in the Southwest as well, with some aggressive buying from Mexico. He reports some Mexican consumers looking as far afield as the Great Lakes region for OCC—a sign they must be pretty hungry for the material to consider buying from that distance, considering the high cost of transportation.

The old newspapers (ONP) grade, on the other hand, has not fared as well, dropping $5 per ton in early May. A Midwestern broker blames the softer market on an overabundance of supply. A West Coast recycler says the weakness could have something to do with a slight drop-off in buying from China, which is a major player in news grades as well as OCC. He says the May Day holidays the first week of May in China could have played into decreased buying.

However, a Texas recycler reports that ONP is strong in that region because of healthy demand from producers consuming ONP for the production of insulation. That market has been running strong because of the large amount of insulation needed for construction efforts in rebuilding the region damaged by 2005’s hurricanes.

While the price of office pack went up $5 per ton, some sources report mills getting a bit full on this material, signaling that the market may soften in the coming weeks. A Midwestern broker says this is to be expected at this time of year, just after tax season, when individuals and companies are likely to be purging old files, glutting the market with various grades of shredded office paper.

Record purges have also led to an increase in generation of mixed paper, the broker reports.

Troublesomely high transportation costs continue to be the status quo in the industry. While sources report the situation has not grown any worse, there has also been little in terms of relief for the cost of moving material either by rail or by truck. Sources report fuel charges keep getting passed on down, which is hurting bottom lines on both the supply and demand side. Some rail freight costs have nearly doubled in the West, one broker reports.

In spite of transportation woes within the industry, the recovered fiber market is entering the summer months on a relatively upbeat note, sources say. Generation of all grades is strong, and material is moving consistently. One source reports that typically this time of year can be slow for generation, as summer vacations take their toll, but he says this has not been the case so far this year. Sources are optimistic as the market turns the corner from spring into summer that it will continue on a strong and stable path.

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