Tepid Stability

The market for most grades of recovered fiber remains in moderately good health, though signs indicate that some grades may experience a correction in the near future.

The bellwether old corrugated container (OCC) grade has rebounded nicely from the sharp correction seen during the third quarter of 2011. However, a number of paper stock dealers say markets may start to soften in the near term.

One key reason for their concern is the growth in raw material inventory at many domestic paperboard mills.

Part of the reason for the mills’ higher inventories is that the winter season has been exceptionally mild, therefore recyclers have not seen the typical decline in OCC, ONP (old newspaper) and mixed paper generated by residential sources.

Several sources say mills in China also have vast inventories of OCC and other recovered fiber grades and will reduce their future recovered fiber orders. One paper stock exporter says he recently came back from China and saw firsthand that many of the board mills were loaded with inventory.

High grades are in a slightly better situation than low grades, with movement of material remaining fairly stable. Deinking grades, pulp substitutes and office grades saw prices tumble during the third quarter of 2011 and have rebounded nicely since then. Markets for high grades have been strong as tissue mill post better run schedules.
 

However, Kruger has announced plans to lay off approximately 200 people at its New Westminster, British Columbia, tissue and towel mill because of slowing demand for its finished product. The company says it will take some of its older tissue mills offline to reduce its production costs.

ONP continues to face the twin problems of the declining newsprint industry and steady degradation in the grade’s quality. A source says all of North America’s newsprint producers are experiencing economic difficulties of some kind, with several of the larger producers having filed for bankruptcy protection.

Catalyst Paper is the most recent newsprint producer to file for bankruptcy protection. The company, which has been cutting production during the past year as it seeks to bring supply and demand into balance, is in the process of working out a restructuring plan with its creditors.

Several recyclers say the quality problem with ONP is most difficult on the West Coast, with single-stream processing reducing the available supply of deinking news.

Companies exporting recovered fiber overseas are finding that shipping lines have implemented higher freight rates for container shipments to China, with several sources saying the price has practically doubled.

Several sources also say container availability is tightening in some regions of the country. One exporter says West Coast ports continue to see plenty of containers, while exporters in other regions of the country, especially the Midwest, are finding containers difficult to locate.

Along with the reduction in available containers, a source says some shipping lines are taking vessels offline, reducing overall capacity available.

(Additional information on secondary paper markets, including breaking news and consuming industry reports, is available at www.RecyclingToday.com.)