Paper

Sources report a relatively sure and steady recovered fiber market heading into the late days of summer. The market for old corrugated containers (OCC) has cooled off a bit since a spike in activity and pricing in July.

"OCC got pretty hot, but the luster is off now," one Midwestern recycler says of current market conditions. Prices remain relatively strong for OCC following a period of hot buying driven by high demand from mills in the Southeast. What one Southwest recycler describes as a bit of "panic buying" has now curtailed, bringing the market back into more of a balance. A Midwestern broker attributes the demand from the Southeast at least partly to the Fourth of July holiday, saying such long weekends usually lead to some kind of disruption in the market. "People are always worried about running out of paper" over holiday weekends, she says, and they "want to make sure they have their reserves."

Makers of cellulose insulation continue to drive strong demand for old newspapers (ONP). Midwest and Northeast sources report a slight increase in ONP prices this month.

Generation has been strong for all grades, and sources report that trend is likely to continue into the autumn months. Sources expect generation of ONP to increase in the coming weeks with the back-to-school season bringing more advertising and plumping up newspapers across the country.

In addition, sorted office paper (SOP) and coated book have also shown some renewed strength lately. One source attributes this to the particularly seasonal nature of that market. Companies and private individuals tend to do file purges at certain times of the year, like the beginning of the calendar year or just after tax season, which floods the market with office grades, dampening demand and prices. Now that tax season file purges are done, supply has tightened and demand has surged.

Mixed paper remains relatively unchanged since last month.

Sources report no great change in the patterns of recent export buying. China continues its pattern of quiet, steady purchasing, while mills in Mexico are also continuing to buy American recycled fiber. A Southwestern recycler reports that transporting material by rail to Mexico has been inconsistent, which has led to many Mexican mills looking to obtain material by trailer instead.

A Midwestern broker notes that transportation costs are continuing to chip away at margins and that the effect is particularly noticeable since this time last year.

Looking ahead to the beginning of the fourth quarter of the 2006 fiscal year, sources anticipate strength in the market, particularly for OCC, as the market prepares for the holiday season, which always brings a surge to the packaging industry and demand for OCC and other paper packaging materials.

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

DOW JONES OFFERS RECOVERED PAPER INDEX