A mixed bag

As of early August, Southeast- and Northeast-based recovered fiber dealers say pricing is trending downward for old corrugated containers (OCC), old newspaper (ONP) and mixed paper. At the same time, however, several recyclers in the Midwest say they are seeing better movement and firmer pricing for OCC.

A number of OCC suppliers in the Southeast say prices for this material dropped by $5 per ton in August, with additional price declines likely over the next month or so. In fact, one recycler expresses surprise that OCC prices didn’t drop by at least $10 per ton in August. “We just had three of the biggest mills we supply cut our OCC orders in half,” he adds.

He says a number of paperboard mills are either taking downtime or extending their downtime in light of a general slowing in demand.

The recycler also notes that inventory levels at many recycled board mills in the Southeast have climbed, which may indicate slower purchases in September and October.

High inventories of OCC are not limited to board mills, with several recyclers saying they have building OCC inventories. The high inventories are a surprise as the summer months are typically a time of low OCC generation and mills typically run better schedules as they seek to fill their end-of-year orders.

Indicative of the problems with bulk grades, in its third quarter earnings report, Norcross, Georgia-based containerboard and paperboard producer RockTenn reports that its recycling segment saw net sales of $85 million, a $38 million decrease relative to the prior year’s third quarter, which it attributed to lower recovered fiber volumes and pricing as a result of soft global markets and the closure of seven of its recycling plants in the past year.

Also hurting many recyclers in the eastern half of the country has been the decline in offshore orders. One source notes that shipments to China are down for the first six months of 2014, which likely will continue for the foreseeable future. “There is downtime there as well,” a large exporter adds.
 

Although recovered fiber shipments to China have declined, new production capacity continues to come online in China and other parts of Asia. For instance, Lee & Mann just commissioned a recycled board line in China that is expected to produce more than 320,000 metric tons of recycled board per year. The China-based company also is expected to complete a recycled board line in Vietnam with 400,000 metric tons of capacity annually.

While suppliers in the Northeast and Southeast are experiencing challenges, these issues aren’t necessarily seen in other regions of the U.S.

A Midwest-based recycler says business in his region is healthy. He adds that he is not seeing high inventories at the mills he supplies.

While bulk grades are showing mixed signals, high grades are in good shape throughout the U.S., with pulp substitutes, ledger grades and office pack holding up fairly well.