Turning a corner

After steady declines over the past several quarters, some paper stock sectors appear to be strengthening modestly. The question many recovered fiber dealers are asking now is how slow the recovery will be.

One Texas-based recycler says it may be a slow crawl from where the markets are presently to a full-blown recovery, though he says he sees modest positive signs in the market. U.S. mills are running decent schedules, he says, while Mexican mills also have been a bit more active in buying recovered fiber.

Some recovered fiber dealers are expressing optimism about the West Coast ports’ quick rebound from labor issues that hampered overseas shipping. While a contract agreement was reached earlier this year, most sources said at that time that they felt it would take months to work through the backlog of orders, with congestion expected to remain through the summer. However, several sources now say the backlog has declined quite sharply and exporters are seeing business returning to “normal.” The improvement, one exporter says, is most pronounced at ports in the Northwest.

However, several sources say Southern California ports are still experiencing a backlog, though the situation is improving.

The bellwether old corrugated containers (OCC) market is showing modest strength. While prices are far lower than they were only a few quarters ago, it appears that a combination of domestic buying and opportunistic purchasing on the part of offshore consumers has helped to firm the market somewhat.

The upcoming start of International Paper’s Valliant, Oklahoma, paper machine, which had been idled for several years, is generating optimism from recyclers throughout the Southwest, as the machine should require a significant amount of OCC.

In the Northwest, SP Fiber Technologies’ conversion of a newsprint machine at its Newberg, Oregon, mill to produce lightweight packaging also will increase domestic demand for OCC.

Later this year, Pratt Industries’ Valparaiso, Indiana, recycled board mill also will start up. The company steadily has been building up its inventory of recovered fiber in advance of the mill’s start, which is slated for this September.

The Mexican market also is displaying some positive indicators. New capacity is coming online in the country, which will contribute to a modest upswing in demand for bulk grades from within the Southwest, one source says.

“Mexico is starting to creep up its OCC purchases,” he adds.

A paper recycler operating throughout the Midwest is even more bullish, forecasting that markets will continue to strengthen through the second quarter of this year. “The down cycle is ending,” he says. Although there may be some mills shutting down in the region, he says he sees a combination of new capacity and a healthier business environment boosting markets throughout most of the country.
 

With offshore orders percolating, some domestic mills are starting to increase their offering price for OCC.

While orders from China are beginning to stir, not all exporters say they believe that Chinese consumers will strengthen their purchasing from the U.S. One exporter says between 4 million and 5 million tons of capacity in China currently are sitting idle with no plans to return to production.

Demand from India has picked up noticeably. However, several sources caution that the increase likely will be short term, and once some of these Indian mills have the supply they need, they will sharply cut back on their new orders.

Office grades continue to show strength. Prices for this material have been stable, and orders from end consumers are plentiful.

In the Northeast, demand remains fairly healthy as North American tissue and towel mills continue to purchase fiber steadily.