<B>OCC Continues Slide</B>

It is a recurring theme: OCC is being hit with a combination of declining domestic demand and minimal offshore orders. The corrugated market continues to reflect the overarching concerns in the U.S. economy. The strong run times seen with many board mills during the first half of this year is now running head on into a slowing economy. The result is too much supply on hand matched with a board industry attempting to bring supply and demand into balance.

However, it now looks like OCC prices will be dropping to prices that haven't been seen in several years. Some reports are pegging OCC at $40 a ton this month. Other vendors feel prices may hold at slightly higher prices in other regions, although no one seems to be expressing any optimism that OCC will see any strength at all this month.

The question now is how far OCC prices will decline this month. Some vendors see prices declining by $35 a ton, while others see prices falling by as much as $40 a ton. East Coast prices are down to as low as $45-$50 a ton, and there is very little export activity on the horizon. While this month could be very difficult for many large handlers of the grade, there continues to be hope that the end of the month will result in better shape. At the mill domestic mill prices being offered right now there may be a return of slightly stronger offshore orders at what is perceived as a bottom price.

Downtime is still a big issue. An oversupply of finished product is forcing more board mills to either take downtime or extend originally planned downtime. In Eastern Canada and the Northeastern U.S. more board mills are taking their machines off line. With less demand and no export prices are expected to remain in distress for the first half of this year.

Other regions of the country are seeing little improvement. With large OCC consumers off line it doesn't appear there will be any strengthening taking place over the next several weeks.

The OCC market in the Southwest is not much better than the East Coast. Prices have been sliding. The Mexican market appears to be fairly quiet as mills in the country also are loaded with excess inventory on hand. With very little buying by mills south of the borders domestic paperboard mills are flooded with excess supply on hand. This is causing mills in this region to curtail their intake of new OCC while they sit on high inventories of finished and new product.

It is not all doom and gloom. There seems to be a growing opinion that after the rough August expected it is very possible that offshore buyers will be looking to come into the market for larger blocks of material. If this happens prices will likely start to firm, and prices could begin moving upward.

August 2000
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