Domestic Strength

Throughout the past several years, U.S. paper stock dealers have found growth opportunities in the Chinese market. However, more recently, the domestic market appears to hold more promise for a number of paper stock grades.

Prices for bulk grades, such as old corrugated containers (OCC), old newspapers (ONP) and mixed paper, have been rallying in the domestic market during the past several months, with a number of U.S. board mills becoming more aggressive in their raw material purchasing.

Several sources say International Paper (IP), based in Memphis, Tenn., is among the domestic paper companies that have been ramping up their orders for recovered fiber this spring. One broker says IP’s Mansfield, La., recycled board mill has been especially aggressive in its buying of OCC.

A second source says IP mills have been buying larger blocks of material, especially OCC, while also storing more material at off-site locations.

Several other paper stock dealers say they expect domestic demand to hold up fairly well during the next several months, though prices likely will not rebound sharply. Despite the upswing in demand for low grades of recovered paper, pricing has seen only modest improvement and is still lower than what was seen in 2011.
 

A source from the Midwest says prices for mixed paper and ONP have held up better than pricing for OCC, though all have been stable.

Despite the slowing Chinese economy, several exporters say Chinese mills are still interested in buying steadily but are trying to push down prices.

“China has been adamant about pushing prices down,” one exporter based on the West Coast reports. “They can’t get the price increase they want for the finished product, so they are trying to keep their margins.”

Also affecting export orders is a freight rate increase that is scheduled to go into effect May 15. The increase, which the Westbound Transpacific Stabilization Agreement announced in April, will add roughly $5 per ton to the cost of offshore orders. This increase follows one that went into effect April 1.

Unlike low grades, high grades of paper stock do not seem to be enjoying strengthening demand and higher prices. Deinking grades, coated book stock and ledger grades are struggling because of reduced demand from a number of larger tissue mills in Mexico. That country has been a key end market for many deinking grades during the past several quarters. However, more recently, Mexican mills do not seem interested in increasing their orders for deinking grades in light of softer orders for their finished products.

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