As 2012 winds down, positive indicators in the recovered paper markets appear to be few and far between. Despite a recent uptick in old corrugated container (OCC) prices, most dealers of the grade say that rather than strong market fundamentals, technical issues are behind the increase.
During the Paper Recycling Conference & Trade Show, which took place in Chicago in mid-October, several paper stock dealers said the upswing in OCC prices was driven by second-tier mills in China that had to fill their OCC order quotas before year end. By doing so, these mills would be able to lock into similar tonnage for 2013 under licenses issued by the Chinese government.
With a handful of Chinese mills ordering larger blocks of OCC, buyers for other Chinese mills are raising their purchase prices to compete for the available tonnage.
While offshore activity has spurred higher prices for OCC, domestic board mills appear to be willing to sit on the sidelines, with ample inventory. As a result, the price spread between domestic and offshore OCC orders is as great as $50 per ton, though paper stock dealers say the price will likely drop when this recent surge in offshore buying comes to an end.
Within the U.S., demand for OCC in the Midwest appears to have picked up modestly, though cheaper wood chip prices are capping increases in OCC pricing.
The old newspapers (ONP) market is in better balance as the year comes to an end. While not surging, ONP, along with mixed paper, is seeing growing overseas interest. Like OCC, however, without true need for the material on the part of Chinese consumers, the improvement may be temporary.
The market for mixed paper is more challenging. In the United States, large buyers of mixed paper are few and far between. One key buyer in the South helped firm up markets over the summer, though it isn’t likely this consumer will buy enough material to further boost prices by any degree.
Markets for high grades also appear to be softening. Several vendors say sorted white ledger, manifold white ledger, coated book stock and office grades are all sluggish currently. Tissue mills, large consumers of deinking grades, have been easing back on new purchases, leaving domestic processors with material in inventory.
Pulp substitutes also are facing headwinds because of lower pulp prices and mills’ increased use of wood pulp at the expense of recovered fiber.
Mexico has been a key outlet for recyclers in the Southwest, and buyers for mills in that country have been buying at a decent clip, though less aggressively than expected, a Texas recycler says. Low grades have been flowing in modest amounts to Mexican mills, though several recyclers say they are having difficulty getting orders for ONP.
Finally, the impact of Hurricane Sandy on markets remains to be seen. As the storm wreaked havoc in the Northeast, it is likely that the supply of recovered fiber will be greatly reduced in November. If there is a significant pickup in demand for recovered fiber in the next few months, mills could find a shortage of supply, and prices could rise.
(More information on secondary paper markets is available at www.RecyclingToday.com.)