An Uneasy Balance

Prices for a number of paper stock grades have dipped, though only modestly, compared with what dealers had expected.

Pricing for bulk grades, including old corrugated containers (OCC), old newspapers (ONP) and mixed paper, has held through the middle of June, though price has eroded somewhat in light of slowing demand.

A West Coast-based exporter says OCC has shown the most significant decline at $5 per ton in some regions. The exporter says mixed paper and ONP have held up slightly better than expected, though they also are showing some weakness because of a slowdown in orders from domestic mills.

Domestic board mills, which had been more aggressive in buying raw material earlier in the year, are now telling suppliers they have ample inventory and are scaling back orders. This trend began in May and will continue through the next several months, according to sources.

Some paper stock dealers say they are concerned about the lack of substantive orders from domestic mills, as the seasonal cycle usually indicates an increase in demand because of expected orders for end-of-year business. Without a strong sign of a pickup in demand, most bulk grades could languish at moderately lower levels for the next several months.

The export market, while not aggressively filling the void left by domestic mills, has been buying steadily, which has kept prices from falling further.

One paper stock dealer says China continues to buy material, though not aggressively. He says buyers are “looking for deals.” He points out that two larger Chinese paper companies have been seeking tonnage out of the Midwest, though they are both offering different prices for the material.

“China is not robust right now,” a West Coast recycler says. “All the grades they are buying they have overbought.” He adds that buyers for Chinese mills are nonetheless “basically buying at the right price,” despite their growing inventories of raw material.

The recycler based on the West Coast says prices for many paper stock grades may have already seen the high-water mark for this year. “Markets should be robust, but they are not,” the recycler adds.

A broker in the Southeast says mills in that region are not calling for larger blocks of recovered paper, though shipments are possible.

A recycler in the Southwest takes a less optimistic tone. He says he is nervous about the near-term direction of paper stock markets and wouldn’t be surprised if a sharper correction takes place in the next several months.
 

Regarding the offshore market, some paper stock dealers say they are concerned about the number of rejections at some Chinese ports. One source says customs agents at one Chinese port have been cracking down on what they consider to be inferior quality material. Although most of the suspect shipments are coming out of Europe, there have been some cases where U.S.-based companies have had containers flagged as not meeting quality levels, he says.

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