Paper Stock Markets Remain "Hot"

Paper stock markets continue to run hot, with demand strong across the country. Two regions which are benefiting significantly lately are the West Coast and the Southwest. Several grades have been surging as of late in these two regions, with signals that old corrugated container, coated book, mixed paper and office pack all enjoying sharply higher prices. In fact, some vendors feel these grades could continue improving for the next several months.

The reasons for the improvement are many. A host of Asian buyers continue to be very active in the market for a number of grades. Matched with the strong offshore buying has been improved domestic buying patterns. According to one broker, prices for OCC have moved sharply above the $120 a ton mark at domestic mills and at the dock, with some prices hitting the $130-$135 a ton level. With supply flat, partly due to inclement weather on the West Coast, there could be further strengthening in prices. The broker terms the West Coast OCC market "hotter than a pistol."

According to some sources, large blocks of recovered fiber are moving to China. This pattern began early this year, and is to build up inventory by one mill, which is expected to have a new paper machine on line later this year.

Asian buying is not the only driver for the grade. There also are reports that mills on the West Coast are boosting their purchase price to guarantee they will receive an ample amount of material through their doors. Premiums and price increases are starting to take place in many areas, as competition heats up for the available tonnage.

In the Southwest, a number of domestic mills are purchasing sizable loads, while the Mexican market continues to be an active buyer in the market.

OCC is one of a number of grades which are seeing some sharply higher prices. Coated book stock continues to strengthen, with signals that tissue mills continue to purchase more of the grade. Along with coated book stock, office pack demand is strong, and prices have moved up above the $200 a ton level at some mills. This improvement is fueling some pull back, with a number off vendors expecting further price increases down the road.

While supply constraints are one big issue, the theories behind much of the shortages are mixed. Some vendors see a pullback by some waste management operations, which have been refocusing their attention on the solid waste side of the business.

However, another reason for the lack of many bulk grades is the inclement weather which has reduced collection levels. On the East Coast, heavy snow and winter storms have reduced some supply levels, while significant rainfall on the West Coast is working to lessen the amount of recovered fiber being collected.