Paper

Although prices overall have held relatively steady, the recycled paper business continues to struggle, along with many other industries.

Prices for old corrugated containers (OCC) and mixed paper even inched up somewhat in mid-March. At current pricing levels, even a small increase can make a big difference, according to a Midwestern recycler. "Any boost helps people stay in business."

But that small uptick in price isn’t necessarily indicative of renewed strength in the market. Sources say the increase in price is likely because of dwindling supply.

"Especially with OCC, it isn’t so much that demand or business has picked up, it’s because there is less OCC being generated," says one recycler based in the Southwest. "Retailers are selling less, manufacturers are making less. On one hand, [the increase] is positive; on the other hand, the reasons behind it are not as much."

Generation, while down overall, varies regionally. A packer in the Midwest reports strong tonnage coming from grocery stores. "Where it’s dropped off on the retail side, it’s picked up on the grocers’ side. They’re the ones with all the board."

Tissue mills have held up relatively well, which has kept deinking grades and sorted office pack (SOP) moving well, sources say.

Domestic production of containerboard and paperboard have not fared as well. The American Forest & Paper Association (AF&PA), Washington, D.C., reports that total containerboard production decreased 19.4 percent in January 2009 compared to January 2008. The association reports a 10.4 percent decline for that period.

Declining domestic capacity pushes more material to the export market. China has continued a pattern of slow buying. The drop in freight rates has encouraged an increase in tonnage purchased by Chinese mills. However, like the price increase in the U.S., this uptick in Chinese demand shouldn’t necessarily be heralded as a sign of a major market turnaround. "Are they making more boxes? Not necessarily," says the Southwestern recycler. "Mills are taking advantage of cheap freight rates to build inventory."

While far away from the historically high prices enjoyed for the first part of 2008, material is moving, which is encouraging to those in the paper recycling industry. "With some grades, you can ship almost everything you have, as long as the quality is there," says the Southwestern recycler. "Mills just want quality."

Price changes in the last few weeks of the first quarter of 2009 were slight, if they occurred at all, leading some sources to speculate that the market has leveled off since its fast, steep drop at the end of 2008. However, the improvement that many were hoping to see in the market by now seems further away than they originally had hoped.

"I don’t think it’s going to be as easy as people first thought to come out of it," the Southwestern recycler says of the current recession. "People need to work smarter and might be in it for a little longer haul."