Paper

SEASONAL DEPRESSION

With supply up and mills seemingly full of inventory, the outlook for the old corrugated container (OCC) market is sluggish so far in the fourth quarter of 2006.

The OCC market has been weak since the late summer months and shows no signs of likely improvement, sources say. "The mills are full—I don’t see [prices] going up any time soon," says one Northeastern broker.

Part of the problem is the usual seasonal depression. Massive orders for packaging materials in advance of the busy December holiday season were made months ago, and as those goods find their way to America’s retail outlets, the packaging material has already found its way back into the supply chain, leaving the market saturated.

On the export front, China continues to buy material, but "not enough to take the edge off" the glut of domestic supply, says one Midwestern recycler.

While OCC has been lackluster lately, other grades have faired better, particularly old newspapers (ONP). Prices for that grade have either remained basically unchanged or even gone up a few dollars, depending on the region. Sources say the insulation market is the primary driver for the success of ONP, particularly now during insulators’ peak season as winter approaches.

Supply of ONP can be expected to increase in the coming weeks as many newspapers grow fatter with increased advertising in advance of the coming holidays.

High grades, particularly sorted office paper (SOP), are faring well, fetching the high end of published prices, or even $5 more in the Northeast. Mixed paper, however, has followed the OCC market more closely and has been slow to move in recent weeks.

Longer-term, major news publishers, such as Time Inc. and News Corp., are examining ways their organizations could leave a smaller footprint on the environment. While using less paper is one option, so is increasing the percentage of recycled-content paper.

(Additional news about paper recycling markets, including breaking news and pricing, is available online at www.RecyclingToday.com.)