Positive pricing and perspectives

Departments - Paper

Recovered fiber grades post increases.

February 8, 2017

OCC (purple circles); Mixed (2)/Mixed Paper (54) (black squares); *Average U.S. dollars per short ton for open market purchases by mills for delivery in January as reported by RISI’s PPW Yellow Sheet Jan. 5, 2017. Prices used with permission from PPW Yellow Sheet. Free trial available: www.risi.com/rt.

Unlike this time last year, pricing for and perspectives on the recovered fiber market are positive, with recyclers preparing for what they say will be a good first quarter. The one area of uncertainty is how the new administration under President Donald Trump will affect secondary paper markets, with his talk of imposing taxes on foreign goods to building a wall along the Mexico-U.S. border.

“There is concern that if Donald Trump does start to impose taxes on foreign goods being imported into the U.S. how that might trickle down,” says a recycler on the East Coast. “If he goes to battle with China … does China then come back and say, ‘That’s fine, we’re going to charge a tax on goods or raw materials coming into China from the U.S.’?”

He adds, “If there are tariffs, and Mexico and the U.S. get into a battle, does it impact prices and movement of paper over the border?”

A commercial paper exporter based on the West Coast says, beyond the first quarter, it is difficult to predict what will come of the new administration. There is much uncertainty, he says.

“We’ll see robust pricing and movements for the first half of the year,” the trader says, adding, “The second half we’ll take a price reduction, and then, depending on Mr. Trump’s macro policies, … it gets real hard to see because we don’t know what Trump’s going to do.”

Beyond unpredictable markets under a new U.S. president, the recycler on the East Coast says, with consumer confidence at a 13-year high, people are spending more money and the economy is doing well. He predicts pricing for recovered paper grades will continue to stay high. He refers to 2011 as “a great year for paper pricing,” and says 2017 could be another positive year. After 2011, pricing dropped until 2015, where it remained flat until well into 2016. Secondary fiber prices closed out 2016 on a positive note, and that has carried over into the new year.

“Where pricing is right now, this might have the potential to be the best year since 2011,” the recycler says.

At $81.67 per ton, mixed paper reached the highest pricing point it has seen since Recycling Today began publishing Boston-based research firm RISI’s pricing in July 2014. (Mixed paper pricing topped its previous high of $77 for the first time in December 2016.) This is the third consecutive month that it has set a new high in pricing.

*U.S. dollars per short ton for open market purchases by mills. Domestic prices are FOB seller’s dock for delivery in January as reported by RISI’s PPW Yellow Sheet Jan. 5, 2017, while export prices are FAS port of origin. New York includes ports in northern New Jersey and LA includes Long Beach and LA ports. Prices used with permission from PPW Yellow Sheet. Free trial available at www.risi.com/rt.

For old corrugated containers (OCC), pricing climbed in all nine U.S. regions, according to RISI’s Jan. 5 PPW Yellow Sheet.

The same is true for exports. For the third consecutive month, export pricing climbed from the month prior for every secondary paper grade shipped out of every U.S. port (with the exception of flatness in some regions in previous months for sorted office paper [SOP] pricing).

“Export markets are strong,” the West Coast-based exporter says. He cites robust demand pull from China and Southeast Asia. The recycler on the East Coast says his company also has seen more interest from Southeast Asia, as well as from India and Korea. With new mills coming online in the Philippines and in Vietnam, he sees even more demand coming from those regions in the future.

Sources say domestic demand is unquestionably solid. Generation volumes, meanwhile, are down because of snowstorms and holidays.

While pricing for secondary fiber grades is high, so are freight rates among steamship lines.

The Port of Virginia recently discussed upward pressure in freight rates, says the recycler who moves material out of that port.

The West Coast-based exporter says, as a result of diminishing rail services on that end of the country, moving material has been challenging. Getting material into Mexico has proved more difficult as well, he says.

“It’s just an annoyance, and it’s more expensive because I have to use third party,” he says of the lack of rail services.