On the floor

The most positive news coming from the paper stock market presently is the sense that prices for bulk grades, such as old corrugated containers (OCC) and old newspapers (ONP), may be at or nearing bottom.

Following a sharp price decline for bulk grades in the last quarter of 2014 and in the first three months of this year, signs point to OCC prices consolidating at current levels. However, mixed paper still poses significant downside risk, sources say.

Despite the news about ONP and OCC, even the most bullish paper recyclers say they don’t expect to see a sharp price increase in the near term for bulk grades. In fact, several sources say they expect markets to remain at present levels through the first half of this year.

Although prices might not have much further to fall, no catalyst that could spur an uptick in pricing is visible over the next several months. U.S. mills are buying regular amounts of material, though the dearth of offshore orders has resulted in an imbalance between supply and demand, sources say. Most paper and paperboard mills are sitting on sizable inventories and are not looking to add to them in a significant way.
 

For paper stock dealers dependent on the export market, challenges continue. Companies shipping off the West Coast may be happy that a tentative agreement has been reached between longshore workers and the Pacific Maritime Administration to get West Coast ports back to full operation. However, most recyclers shipping off of the West Coast say it will be months before the backlog of shipments is reduced. In the meantime, several paper stock dealers say they are renting warehouse space to store prepared material while waiting for bookings. This is adding to their overhead.

On the East Coast, a number of paper recyclers still are feeling the effects of heavy snows experienced during the winter season. In the Northeast, several sources say the heavy snowfalls sharply reduced their supplies of recovered fiber.

Several Midwestern paper stock dealers say they feel that Pratt’s new recycled board mill, being built in Valparaiso, Indiana, could give the soft mixed paper grade a boost in that region. Several sources say the mill will purchase recovered fiber, including mixed paper, for inventory within the next several months. The recycled board mill is scheduled to open by the second half of this year and will produce 350,000 tons of recycled paperboard per year, according to Pratt.

High grades of recovered fiber appear to be in better shape when compared with low grades. Although some signals indicate an uptick in pricing for office grades, in the short term some regions of the country are seeing modest downward price pressure on this material, though a number of recovered fiber dealers say ledger grades are moving steadily.

A growing problem for paper stock dealers is the soft export market. China’s economic difficulties are mounting. The country’s gross domestic product (GDP) continues to decelerate, and many exporters say they have received reduced orders for finished products. China’s economic outlook is being watched closely, with some analysts saying they expect the country’s economy to grow at a rate of 7 percent in 2015. Even that number is being looked at skeptically, however, by some.
 

Adding to the challenges associated with shipping recyclables to China, several sources say CCIC (China Certification & Inspection Group) is intensifying shipment inspections.

On a positive note, the 2014 Community Access Survey, released by the American Forest & Paper Association (AF&PA), Washington, shows that overall consumer access to community paper and paperboard recycling in the U.S. reached 96 percent in 2014, an increase from 87 percent in 2010. The survey evaluated 12 separate grades of paper and paperboard, each of which showed access increases. Access for nine of 12 recovered paper grades is now at or greater than 90 percent, according to the AF&PA survey.