A NOT-SO-HAPPY HOLIDAY
There is not likely to be any great cheer in the paper markets as 2009 comes to an end. Prices may have rebounded nicely from the beginning of the year, however, as 2009 comes to an end, it appears those price increases are ebbing.
Prices softened in October as Chinese interests reined in their buying. Their steady buying had strengthened markets for many bulk grades during the past several months, though prices started to feel resistance in September.
October pricing started to ease back, while November prices will likely be flat at best, with a number of bulk grades showing price declines. OCC (old corrugated containers), mixed paper and ONP (old newspaper) will have some challenges going forward, as demand is expected to remain slack through the end of this year and early into next year.
While paper stock markets were stable to strong through most of the summer, buying on the part of domestic mills will not be enough to sustain markets as offshore consumers take a breather. Buying on the part of Chinese consumers is not expected to increase until sometime in the first quarter of 2010.
Another factor that could play a larger role in the paper market is the sharp weakening of the U.S. dollar. With the dollar declining against many other world currencies, the price disparity provides incentive to move material offshore.
However, counterbalancing the weakened dollar have been increased container shipping costs. The shortage of containers is one reason for the price increase. Also, many shipping lines have raised prices sharply to recoup costs they incurred earlier in the year when high fuel costs cut into their profitability.
(Additional news on paper recycling markets, including pricing information, is available from SDB’s sister publication Recycling Today at www.RecyclingToday.com.)