Paper Department

Activity in the paper markets is beginning to mirror the widely publicized upswing in markets for scrap metal, albeit at a more restrained pace. The continued strengthening in the offshore demand for many post-consumer grades of recovered fiber, notably old corrugated containers (OCC) and mixed paper, have pushed prices for these grades, as well as a host of others, to steadily higher numbers.

While China has been the biggest buyer of many grades, other Asian countries also have been placing larger orders.

Reflecting the growing prices for many recovered paper grades, a host of paper companies, in their quarterly and yearly financial figures, report that higher-than-expected paper stock prices had a significant impact on their bottom line results.

The strengthening market has further tightened an already tight supply. Many of the domestic paper companies expect to see stronger and more volatile markets through the rest of this year. In fact, some traders have even mentioned that prices could possibly crest to levels not seen since the mid-1990s, when many of the bulk grades soared far past historic levels.

While demand is already strong, yet more capacity is scheduled to come on line overseas. Several new projects are being built in Asia, with some close to opening. These will likely dictate sustained scrap paper purchases to build up inventories. At the same time, many domestic mills—still trying to strengthen their bottom lines by taking inventory adjustments—have to increase their raw material purchase prices to bring supply and demand into balance.

However, as many long-time paper stock dealers note, markets could change very quickly if several large buyers opt out of the market if prices are deemed too high.