Home Magazine An Uncertain Stability

An Uncertain Stability

Departments - Paper, Paper

Domestic mills, which have contributed to the improvement in markets in early 2013, seem to have built up their paper stock inventories and have cut back on new purchases.

Recycling Today Staff April 1, 2013

Paper stock markets are holding their own moving into the spring. Despite this stability, some dealers say they question why many paper stock grades have retained their pricing strength when the overall U.S. paper industry is only moderately improved.

Domestic mills, which have contributed to the improvement in markets in early 2013, seem to have built up their paper stock inventories and have cut back on new purchases. Although orders have cooled a bit, new generation has been somewhat sluggish, which is resulting in a balance between supply and demand.

The market for old corrugated containers (OCC) is holding up surprisingly well. Several paper stock dealers say they have been able to retain most of their pricing power through the end of the first quarter. The strength is partly in light of the lack of generation of new material. The U.S. economy continues to improve at a modest pace that has been enough to encourage paper stock dealers and paperboard mills to move into more steady buying and selling patterns. The optimisim follows a fairly challenging 2012 for most paper recyclers.

Despite the cautious optimism, one source expresses uncertainty as to why markets have held up. “I would have expected a bit of a correction,” she says.

While a correction still may happen, many OCC dealers say they feel the material will retain its pricing through the spring. Additionally, a number of paper stock dealers say they expect to see prices firm up even more during the next several months.

A more sluggish outlook is being expressed for ONP (old newspapers). While OCC has held up fairly well, the dearth of clean ONP on the market is a source of concern for many recyclers and mills. Deinked news (No. 8) appears to be rapidly disappearing as a tradable grade, according to sources. For consumers of the grade, including recycled newsprint mills and some insulation producers, this situation is creating significant concern.

The problems with ONP grades emanate from the accelerating decline in new newsprint production. In a number of presentations given at several recycling conferences in March, speakers said the decline in newsprint production has not yet stabilized. In fact, one presenter said the slide in newsprint production will accelerate throughout the next several years, exerting even greater pressure on companies that need this raw material.

Higher grades of recovered fiber have seen modest improvements, however. Orders from mills throughout North America, including Mexico, have kept sorted white ledger and office pack flowing.

While short-term markets are fairly healthy, the long-term outlook for many office grades is being muddied by the general decline in the printing and writing (P&W) paper market. Prospects for P&W papers could pose problems over the next several years. Forecasts generally see production in this sector declining.
 

 

As a key driver of paper recycling markets over the past several years, China has become a more challenging environment for shippers.

Following the recent raid on a Dutch paper stock exporter and a growing concern over suspect loads being shipped to the country, Chinese government officials are becoming more stringent in inspecting loads of recovered paper and plastic scrap. As a result, several exporters say moving containers from the country’s ports to consumers takes much more time. One exporter says containers are backing up at many Chinese ports as customs officials work to inspect them. In addition to delaying the shipments, demurrage charges for containers are a growing issue.

At the same time, with more stringent inspections, including some reports that inspection agencies in China are requiring all incoming shipments to be thoroughly inspected, the risk of shipments being rejected is growing. One large exporter says that if his company ships 10 containers to China and one bale in one container is found to contain a small amount of out-throws, the whole shipment is rejected.

The question several sources pose is how Chinese mill buyers will respond to these inspections if they see supplies decline sharply as a result. While most Chinese board mills reportedly have significant inventories of raw material on hand, these more aggressive inspections could affect future supply.

 

Sponsors

Current Issue

Follow us on Twitter
Follow us on LinkedIn
x