Paper stock markets have been residing in the
doldrums over the past several months. Despite some positive indicators about
markets rebounding early next year, there doesn’t appear to be much in the way
of any upward momentum for most grades.
For old corrugated markets there appears to be
minimal indications that board mills have been able to get their inventory
levels under control.
Weather problems could help firm up the situation
early next year. At the same time the short-term market conditions have created
some tough markets for a number of grades.
A concern lately has been the sharp decline in OCC.
The grade had been fairly flat as of late. Recently, several brokers have
reported export markets for OCC have been dropping. Several sources note of
less material being sought by Asian mills. Any decrease in the amount of fiber
being shipped overseas will likely have an impact on domestic mills. According
to one West Coast vendor prices for select OCC has dropped by more than $20 a ton
over the past month. This decline is hammering some suppliers who may be
sitting with high inventories on hand.
On the East Coast a number of exporters also are
reporting a slowdown in OCC demand offshore. Whether this is a short-term
situation or something that may grind on for several more quarters is still
uncertain.
The Southwest also is seeing some difficulties. The
OCC market, which had been holding up fairly well over the last few months is
seeing some slipping. Part of the problem has been the move by Mexican mills to
extend payments for OCC. The stretching out of payment is forcing some vendors
to redirect tonnage away from some large OCC buyers in Mexico toward other
sources. While Mexican buyers are looking to slow their payments, packers who are
redirecting tonnage to U.S. mills in the Southwest are finding high
inventories, reduced run times and some downtime curtailing any significant
demand for most of the grades.
One of the largest buyers of OCC from the Southwest,
International Paper’s Mansfield, La., board mill, has made a switch to focus
more on the mottled white linerboard. This change is further reducing their
demand for OCC from the region.
At the same time the mill is using more deinking and
office grades. Despite the switch, there doesn’t appear to be any sharp
improvement in that grade over the next several months.
The consensus appears to be that OCC will see a
modest $5 a ton decline in the Southwest. While not as sharp as other regions
of the country, the decline indicates that the rest of the year may be
experiencing continued oversupply of raw material on hand.
Market conditions should start to firm up early next
year. With prices for OCC fairly low throughout the county, inventory levels
are expected to be further depleted by early next year, setting up a more
robust market for a number of grades.
In the Midwest stability seems to be the word. While
there have been some concerns about mills shutting down, at the present time
there hasn’t been any significant shifts in price for OCC. The grade seems to
be holding, although the price level is far from the level seen earlier this
year.
Double-lined kraft cuttings also have been seeing
steady declines in both price and demand. With the plethora of substitute
grades on the market, the spread between DLK and OCC has narrowed
significantly. The question some are asking is how low can the grade drop
before there is a rally.
Pulp substitutes continue to see downward price
pressures. Orders are starting to slow. The most apparent reason for the sharp
drop in pulp substitute prices has been the oversupply of market pulp. With
market pulp producers hoping to firm prices for early next year a significant
amount of downtime is being taken to reduce the supply of market pulp.
Reflecting the softening high grade market, more pulp
mills, both in North America as well as Asia, are opting to take more downtime
to bring supply and demand back into balance.
The downward pressure is being made as pulp producers
look toward the first quarter of next year when they hope to push through
another price increase.
Old news markets may start to see some slowdowns.
Deinked news had been immune to many of the problems afflicting OCC through the
fall. While the trend appears to be up, short term several packers report of
mills in the United States getting fairly full of raw material. Prices are
starting to flatten out, with some sources noting prices decreasing. Whether
this trend continues through the rest month is still uncertain.
While the old news market has surprised many people,
it now seems like there has been some softening in the grade lately. A number
of East Coast recyclers see a decline in offshore orders for the grade. At the
same time, a number of U.S. and Canadian mills are seeing this weakening of offshore
orders and looking to cut their own purchases.
Prices are primed to dip this month for the grade.
The decline follows several months of stronger prices.
Along with softening markets for ONP it appears that mixed paper prices are starting to show some softening. Demand for the grade earlier this fall had pushed price for the material to a level close to OCC prices. The improvement of the grade is partly attributed to strong buying by Chinese interests earlier over the past several months. Although demand for the grade is still stable, it appears prices have peaked for the short term. Prices may begin dipping this month.
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