Sustained period of down markets

Recovered fiber prices seem to be drifting along at near all-time low points heading into the fall. Average national prices for old corrugated containers (OCC) decreased by $1 to $25 per ton in the September buying period, and the average national price of mixed paper is still at a low of -$2 per ton, according to the latest report from Fastmarkets RISI’s PPI Pulp & Paper Week.

A national mill operator adds that declining virgin pulp prices could also push prices for sorted office paper (SOP) a little lower this fall. He adds that more mills might choose to use virgin pulp over recovered fiber in some cases.

“Pulp pricing has really dropped,” he says. “If you look at this year alone, eucalyptus is down to $80 or $90 a ton, which makes it more attractive to mills.”

A material recovery facility (MRF) operator based in the Midwest says OCC has been moving well, but pricing is especially depressed.

He says movement has been most difficult this year for old newspapers (ONP). “There’s less generated, but also there’s less of a market for it,” he says. “We are sending some of it to China, but we don’t know for how long.”

The MRF operator in the Midwest adds that he primarily sells to domestic markets now, which he says are good, “but not good enough to absorb all the extra material that used to be exported.”

He adds that while he can export some ONP and mixed paper, export demand is declining overall.

“I think we’re in for a sustained period of down markets for mixed paper and old corrugated containers.” – a MRF operator in the Midwest

“Prices have been on a downtrend and will continue until new export markets open up,” the MRF operator based in the Midwest says. “China is slowly shutting down, and in another year, they will be finished. There’s not capacity out there to take this material. I think we’re in for a sustained period of down markets for mixed paper and old corrugated containers.”

Some new containerboard production capacity should come online soon. Georgia-based Pratt Industries, which is featured beginning on page 38 of this issue, plans to open its fifth containerboard mill in Wapakoneta, Ohio, this month.

“We’ve opened up two mills in the last 10 years,” says Shawn State, president of Pratt Recycling. “Wapakoneta will be the third mill we open in 10 years. When it’s fully operational, it will consume over 400,000 tons of recovered fiber annually.”

While he says recovered fiber markets are certainly depressed, State adds that hope is on the horizon in the form of paper machine upgrades that are occurring throughout the U.S.

North Pacific Paper Co. (NORPAC), Longview, Washington, announced at the end of August that it would expand its operations to turn recovered fiber into 100- percent-recycled papers. The company says the expansion will help to solve a difficult environmental challenge resulting from changes in the state of Washington’s ability to export recovered paper for recycling, which has led to tons of valuable material being landfilled instead.

“By increasing our ability to produce 100-percent-recycled packaging papers, our company will be able to help solve this challenge, transforming waste papers into much needed packaging-grade papers for local and export markets,” CEO Craig Anneberg says of NORPAC’s expansion plans.

Industry experts estimate that recovered fiber prices have stabilized and will hover at this low point for the remainder of this year before improving. Adam Josephson, director and equity research analyst at KeyBanc Capital Markets Inc., Cleveland, says the stabilized low prices for recovered fiber likely indicate that pricing won’t significantly drop further.

“We’ve hit bottom, but we’re not bouncing off the bottom because the demand just isn’t there,” he says. “In any kind of healthy market, there would be a bounce off these low levels, but you’re not seeing that. And there isn’t an expectation of a pickup anytime soon because there isn’t the demand. Export demand isn’t there, domestic containerboard demand isn’t there. Demand simply isn’t there.”