Paper Department

Moving into the summer, it seems that paper markets are in a bit of a holding pattern. Offshore demand is fairly strong for some bulk grades, and domestic mills are steady buyers at current prices. However, generation is still down, so this is not a full-blown recovery.

Early summer is typically when some mills start to see a pickup in orders as customers start to place orders for Christmas shipments. With the economy only starting to show signs of a modest uptick (or maybe just bottoming out), it is likely going to be a meek pickup in orders, rather than a strong push. However, sources indicate that they believe paper markets will continue to show modest growth this year, culminating in a 2009 Christmas season that will be stronger than 2008’s.

On the export side, many of the problems that cropped up late last year, notably the sudden cancellation of orders, have abated, though concerns over credit markets linger.

Recent comments from a number of recyclers indicate that orders are increasing, though prices are far from where they were one year ago. Bulk grades such as OCC are moving domestically and offshore.

More recently there are indications that China, after buying aggressively during the first half of this year, is starting to ease back on its purchases. However, it appears that many North American board mills are jumping into the fray with more aggressive buys.

One paper recycler notes that many of the larger board mills are running as hard as possible and buying significant amounts of OCC and some other bulk grades as raw material. According to some sources, the increase in production is because some mills are attempting to maximize their profits through the use of the black liquor tax credit. In this scenario, some of the board mills are opting to run their machines to produce as many rolls as possible and then inventorying the finished product if they do not have orders for the material.

How significant is the black liquor issue? One report states that with the government offering a tax credit of 50 cents for every gallon of black liquor burned in a mill’s recovery boiler, and a typical mill using around 256 gallons for every ton of product manufactured, the benefits are significant. It is further estimated that in 2009 the credit could reach $75 per ton for unbleached pulp mills and $175 per ton for bleached mills.

While OCC has been the most talked about export grade, ONP is becoming an export grade. With the prolonged slide in North American newsprint demand, much of the collected ONP is being shipped overseas. This notion was touched on during the recent Paper Recycling Conference, when Robert Cook of AbitibiBowater, based in Montreal, noted that newsprint usage was showing significant decline. "We’re now seeing double-digit declines in newsprint usage."

Deinking grades also are displaying modest strengthening. Tissue mills have been a little more active in purchasing this grade, and, like many other paper grades, the economic problems have resulted in a decline in generation of material, reducing the overall supply.