Hints of improvements

Paper markets may not have returned to the roaring conditions seen several years ago, but they do appear to have made modest gains. Prices for a number of recovered fiber grades, most notably old corrugated containers (OCC), have improved with West Coast business slowly recovering from the damage caused by the extended labor problems at West Coast ports.

While the labor strike ended several months ago, some sources say a backlog of shipments still awaits placement on container vessels.

One large exporter says that while some ports on the West Coast are getting back to normal, he estimates that it will be the end of July before all the back orders have been addressed and the steamship lines are caught up.

An exporter whose facility is located fairly close to one of the larger ports says most of the port issues seem to be resolved, with the exception of the Bay area, which continues to have difficulties. He says his facility is only recently seeing its backlog of containers reduced to an acceptable level.
 

Another residual impact of the extended labor problems at the West Coast ports is that some paper recycling companies further inland that traditionally shipped out of West Coast ports have shifted their deliveries to the East Coast, reducing the overall volume of recovered fiber leaving West Coast ports.

An exporter operating off the East Coast says higher shipping costs are a growing problem.

“(Shipping) is becoming a bigger headache,” he says. “At the same time, margins continue to shrink, making it hard to make a profit.”

In the meantime, China reportedly has increased its buying, which is helping push up prices. A number of paper stock dealers say OCC prices are starting to heat up quite nicely as a result, especially on the West Coast.

While China seems to be the main driver for the upswing in OCC demand and price, some inconsistencies remain in that market in the short term. One exporter says OCC orders from the southern part of China, which is home to some of the country’s large OCC consumers, primarily have increased, while orders remain soft in the northern half of the country.

Within the U.S., the OCC market is benefitting from renewed interest by domestic consumers. International Paper is restarting a paper line at its Valliant, Oklahoma, paperboard mill. This has helped pull more tons from recyclers in the Southwest, sources say.

Also helping to firm up OCC markets in that region is the purchasing activity of Mexican mills. Another source says these buyers are becoming more aggressive. However, Mexican mills continue to look for higher-quality material.

The return of buyers for Chinese mills, to a degree, also is having an impact on mixed paper markets. One source says the movement of mixed paper has improved, with China starting to buy more of this grade.

Mixed paper is holding its own in terms of offshore demand, though prices are flat to mildly up, another source says. Buyers for Chinese mills have shown renewed interest in ONP. Prices aren’t necessarily significantly higher, but movement has improved.

The paper stock market may be improving, though not everyone is convinced that a full recovery is at hand.

Once source reports that markets “are incredibly dull right now.” He adds, “I have never seen such a sustained nothing.”

He says he expects this listlessness to carry over through the next three months.

Presently, office grades appear to be one of the laggards in the market. Because of downtime that a number of office grade consuming mills are currently taking, and because of reduced buying from mills outside the U.S., prices for office grades have been slightly softer, though movement of this material continues to be stable, sources say.