Commodity Report

CAUTIOUSLY OPTIMISTIC

Earlier this year, a number of paperstock dealers expressed concern that soaring prices for some recovered fiber grades might result in a sharp downward correction. Initial speculation was that after Chinese New Year concluded in the middle of February, significant price declines would occur as Chinese mills opted to stay out of the market.
However, those concerns have yet to be realized. In fact, with spring in full bloom, the U.S. paperstock market seems to have a more optimistic bent. Several paperstock dealers say they are seeing modestly improved markets, depending on the recovered fiber grade.

Several dealers say they expect to see old corrugated containers (OCC) take a modest dip of perhaps $10 per ton in May in light of signals that China will be easing back its purchases. One paperstock dealer points out that China has been reducing its inventory levels of OCC recently. This reduction in inventory may bode well for paperstock dealers, as it may require Chinese mills to buy material on a more consistent basis throughout the next several quarters, as these same mills won’t have the luxury of jumping out of the market because of higher prices.

Domestically, many paperboard mills have increased prices for their finished products to reflect their higher raw material costs. To hold finished prices at this level, paper mills may not push to sharply reduce mill buying prices for their raw materials, according to one paperstock dealer.

Recent statistics from the American Forest & Paper Association (AF&PA), Washington, D.C., show paperboard production for March increased by 15.6 percent from paperboard production in March 2009. For first quarter of 2010, production increased by 13.2 percent compared with the same time in 2009.

(More information on secondary paper markets, including breaking news and consuming industry reports, is available from SDB’s sister publication Recycling Today at
www.RecyclingToday.com.)