A Red Hot Market

Earlier this year, a number of paper stock dealers said they expected to see a price correction this spring. However, many of these same dealers now say they expect to see higher prices for most paper stock grades during the next several months.

Moving into late spring, grades such as old corrugated containers (OCC), old newspapers (ONP), office grades, deinking grades, mixed paper and even pulp substitutes are holding on to the higher prices they reached earlier this year.

Some dealers say they are concerned that markets are behaving somewhat irrationally, which could result in a significant correction in the future. However, these same sources are reluctant to forecast when such a correction will take place.

Paper and paperboard mills’ inability to push through additional price increases for their finished products may cool down recovered fiber pricing. “Something has to give,” a Southwestern paper stock dealer says, “and it will likely be the recycling side.”

Also holding the potential to soften prices for some grades, notably OCC, is the move by buyers for Chinese mills to lower prices. Several exporters say these buyers have been trying to push OCC prices down by $10 per ton in May, though U.S. paper recyclers appear to be resisting. With domestic mills still purchasing OCC, it is uncertain whether buyers for Chinese mills will be able to lower the price.

One West Coast paper stock dealer says it is likely that OCC prices will stay tight during the next several months. The paperboard industry in this region may be helped by the seasonal pickup in California’s agricultural industry, which could mean increased demand for boxes.

Another paper stock dealer says several paperboard companies have sharply increased raw material purchases. International Paper tripled its orders recently, which is helping soak up OCC and double-lined kraft cuttings.

Georgia-Pacific also is running strong schedules in the Northwest, which is keeping recovered fiber flowing in the Western United States.

High grades also have been surging. Demand for pulp substitutes, driven by stronger pulp prices, has increased, as has pricing. The North American tissue industry has been buying higher grades of recovered fiber. In the Southwest, one paper stock dealer says that two large tissue producers have been competing with each other to lock in loads of ledger and office pack, which has helped to keep prices strong.

Orders for these grades, as well as for coated book stock, also have been strong into Mexico and Latin America, another recycler says.

ONP prices have been surging, and supplies are limited. In fact, several recyclers say ONP, along with coated book stock and office pack, are surging, with one West Coast dealer saying the three grades are “on fire.”

A number of non-market issues are responsible for the improvement in paper stock markets. One paper stock dealer says the weather-related disasters in the South and parts of the Midwest are causing supply shortages.

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