<B>Deinked Grades Ready to Turn</B>

It may still be far off the highs that were seen earlier this year, but it looks like some deinking grades are starting to gather strength. Prices may still be off, in some case significantly, but there appears to be the beginning of a turnaround. Several exporters report of better than expected orders are filtering in from some of the secondary areas of consumption. The South American market, while still much smaller than the traditional stronghold of the Pacific Rim, has been seeing a rise in the shipment of sorted white ledger and sorted office pack.

Europe also is becoming more aggressive with some grades from the United States. The move by both these continents follows the steady price hikes being seen with market pulp.

In the beginning higher market pulp prices helped propel many direct entry pulp substitutes such as hard white shavings and cuttings. At the same time many deinking grades were cascading downward. Part of the reason for the sharp decline was the surge earlier seen with these very same grades. SWL, sorted office paper and coated book stock all climbed significantly in a short period of time. The opinion at that time was there was no legitimate reason for such a sharp increase.

After seeing rapidly climbing prices, a number of North American mills attempted to knock down these prices. This past spring there were a number of sources noting that several larger consumers of coated book stock made a concerted effort to push down coated book prices. This move was followed by domestic mills who took advantage of the move by cutting their price. At the same time Asian buying started to wane, adding to the downward momentum. While prices declined sharply, movement was still steady.

Further into the trough, several packers began reporting more difficulties in moving material. This added to the overall problems with the grade over the past several months. SWL, which had been moving at around the $300 a ton level, fell back to around the $200 a ton level. The decline, while sharp, was not totally surprising. More than a few packers noted that the spike earlier in the year was unwarranted, and a speculative bubble that needed to be burst.

Lately, the trend is back up. While Korea still hasn't come into the market in a strong way, a combination of domestic buying, a decline in generation and some buying from some smaller offshore countries is helping firm up prices for some of these grades in certain regions.

Packers on the East Coast report some strong movement, with little excess inventory available. At the same time a number of domestic mills are making more inquiries about available tonnage. For one packer, this is greater indication that some concern is being expressed about available supply.

While this news is a positive on the East Coast, West Coast and Southwest markets are still further away from any significant turnaround. The Mexican market, which has greatly benefited the Southwest, has been fairly quiet over the past month. This region has been one of the biggest buyers for a host of grades, including office deinking grades. Lately many of the mills that helped propel this grade have been curbing their new orders.

One concern being expressed by a number of paper stock dealers is the goal by some mills to extract "pay back" for prices which were too high earlier this year. For coated book stock prices have been crashing. In the Southwest prices continue to be very sluggish. Mexican buyers are looking, although it appears that more than likely that the bigger buyers are shopping for better prices. This will likely keep prices for the grade in a depressed mode until it is perceived that prices have hit bottom.