Tough Times

Paper stock markets are challenging. Paper stock dealers, exporters and brokers all are expressing concern about market conditions through the next several months.

Paper recyclers say prices for most grades are tumbling, and few say they feel markets will turn around soon. The late summer is typically a time of low generation and strong demand. However, generation and demand are both low currently. One source says markets may be rough later in the fall when production at mills really slows down.

Prices for the bellwether grade, old corrugated containers (OCC), have been dropping significantly during the past several months. As of early August, several sources report that prices for OCC have declined by about $20 per ton. Several OCC dealers say they feel further declines are likely.

A paper stock dealer in the Southwest says that for the third straight month Mexico is not buying OCC from the United States. It isn’t so much a quality issue, the source says, but that the country is collecting enough material domestically to fulfill its needs.

“Movement is getting pretty tough right now,” one Midwestern paper stock dealer says. “Generation also is declining. Exports to China also are pretty quiet right now.”

On the West Coast, a paper stock dealer says “it is a grind to get orders. We are operating on a week-to-week basis.”

OCC is not the only problem grade these days. Prices for old newspapers (ONP), notably deinked news, have eroded significantly. Quality concerns also continue to plague the industry. Chinese mill buyers are reducing their purchases and insisting on higher quality fiber, according to sources, and Chinese officials have been cracking down on shipments of questionable material into the country.

Another source concurs that it is getting tougher to ship into China, adding that many shippers are being hit with rejections.
 

When it comes to other low grades, several sources say that as of early August mixed paper is selling for more than deinked news in many regions of the country.

One source in the Southwest says Pratt Industries has been one of the more active buyers of mixed paper in that region. The mill has been tapping a wider range of markets to get the raw material required to feed its recycled board mill in Louisiana. However, another source says that Pratt has started to push prices for mixed paper, especially from residential sources, down.

Reflecting the challenging market for ONP, Catalyst Paper, which has been struggling through bankruptcy protection, recently announced plans to close its recycled newsprint mill in Snowflake, Ariz. The company says the mill will close by the end of September 2012.

Kevin Clarke, CEO of Catalyst Paper, cites the diminishing quality of ONP as one reason for closure.

Despite ongoing issues, many deinking grades, including sorted office pack and coated book stock, are in decent shape, though sorted white ledger is a bit softer.

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