Commodity Report

A Step Back

Transportation woes and sluggish overall economic conditions have continued to chip away at the recovered paper market. For much of the first part of 2008, the market seemed somewhat impervious to the lackluster economy, however, prices for sorted office paper (SOP) slipped back in early June after months of strong prices.

"Most of the grades are a little soft," including white ledger and office pack, according to a recycler based in California. A recycler based in the Southwest agrees that the market has cooled somewhat in the early summer. "A lot of mills are getting full," he says, adding that some mills in the South have taken some production downtime to whittle down their inventories.

The California recycler lays much of the blame on current transportation troubles. "The cost of transportation is a big issue, be it domestic or export," he says, adding that steamship lines lately have been able to dictate prices with unprecedented control. Companies are seeing freight rates double and triple what they were in the past, he adds, which are considerable costs to try to absorb.

Historically speaking, however, prices remain strong. "It’s still a good market," says the Southwest recycler.

The general economic downturn could spell trouble for tissue mills, which, as major consumers of SOP, could have a ripple effect on the market for that grade. "A lot of tissue manufacturers make away-from-home products, tissue-products used by airlines and hotels," says the Texas-based recycler. "If you have fewer people traveling, fewer planes flying, instead of their 1,000 cases of napkins, they only need 750."

As for generation, sources report the usual summer slowdown that typically occurs once schools are out of session. The vacation season also contributes to a slight decrease in supply of office grades.