Commodity Report

Prices and overall market conditions remain strong for recovered fiber, but the industry is facing troubles moving its material on a number of transportation fronts.

One of the hottest topics of conversation—and biggest points of contention—for paper recyclers is the shortage of shipping containers. Some recyclers are reporting a lag time of two to three weeks for containers. "We are suffering on the West Coast," says one California-based shredder.

Competition from other high-priced commodities, such as scrap metal, is contributing to the shortage, says one Midwestern recycler. "A lot of people are shipping scrap iron in containers; we’ve not seen that before, so that’s one of the reasons they’re scarce," he says.

Recyclers who find their overseas shipping stunted by the container shortage are often having equally poor luck moving freight via land-bound means. Trucking is also less reliable lately, reports one recycler based in the Southwest. "Gas prices are still high, and trucking in general is harder to schedule," he says.

Aside from frustrations on the roads and waterways, the market continues to enjoy strong demand and high, stable prices for sorted office paper.

The weak U.S. dollar continues to keep export demand strong, particularly in Asian markets such as China and India. While the talk of a U.S. recession continues, recyclers don’t see much effect on the paper market yet. Demand—both domestic and global—remains strong for products made from recovered fiber, particularly tissue-based necessities like paper towels, which keeps the market healthy.

Generation also remains robust. According to one Midwestern shredder, purges were practically at all-time highs in the first quarter of 2008. "It seems like there’s been a substantial generation of volume with lots of purges," she says, adding that May and June can be some of the shredding industry’s busiest times in the wake of tax season.

However, high volumes create concern about market saturation. One shredder says the surge of supply could lead to high mill inventories and an eventual drop in prices.

Sources say a drop can be expected, though many anticipate that it will be gradual. "I would be surprised to see a dramatic fall," says one Midwestern shredder.