Commodity Report

Worldwide economic conditions have not been kind to the recycled paper market. High grades like sorted office paper (SOP) have been somewhat insulated, while bulk grades like OCC (old corrugated containers) and ONP (old newspapers) have suffered the greater hit, but prices and demand have declined in the market overall.

"We always expected a downturn, and we expected it to be gradual," says one packer location in the Midwest. "But it plunged this time."

News and OCC recorded some hard hits in pricing, dropping considerably in mid-October. SOP prices also declined. "We knew it was going to come," says the packer. "SOP was way too high for way too long."

Sources report in some cases, price isn’t the only problem. Many mills have full inventories and are not taking new material, period. "It’s not just a case of picking up the phone and selling material for less money," says one Midwestern recycler. "Nothing is scheduling."

Compounding the problem is a weakening export market. Sources report weak orders coming in from Asia for low-end bulk grades, such as news and OCC.

However, generation, particularly for SOP from shredding operations, continues to be relatively strong, in spite of the lagging economy. "The shredding industry is still strong," reports one Midwestern secure destruction company operator. "We’ve had some crunches from hospitals when it comes to cost; they’re looking to cut where they can, but shredding is still something they have to do."

While unwelcome, the downturn in the recycled paper market was anticipated by many, sources say. "It’s inevitable, although no one likes it," says a Southwestern recycler. "It’s not all doom and gloom—for the veterans of the industry, you know it’s going to happen."