Commodity Report

As the first quarter of 2012 progresses, it appears many grades of recovered paper have found better footing. Prices are stabilizing after a sharp decline during the fourth quarter of 2011. Movement of recovered fiber also has stabilized in many regions of the country.

According to several sources, coated book stock has seen a pickup in interest, as domestic tissue mills are returning to the market after the holidays with slightly larger orders. Central and South American markets, notably Mexico, also have shown more interest in the material.

While Mexican mills purchased less recovered fiber late last year, some of these same mills are now increasing their orders. Mills in Mexico had, for the most part, dropped out of the market toward the end of last year. However, it appears as if in early 2012 Mexican tissue mills are buying office grades once again. Influencing the drop in shipments to Mexico toward the end of 2011 were the tax repercussions of holding large amounts of inventory.

Adding to the positive signs emerging from Mexico, Fabrica De Papel San Francisco S.A. de C.V., based in Mexicali, Baja California, is installing a new tissue paper line that will consume recovered fiber, primarily office paper, exclusively. The company says it expects the new machine to be operational by the middle of 2013.

Some sources are calling for caution, saying new capacity may exceed demand, which could create some problems later this year.

While demand from Mexico has improved, South American mills, on the other hand, boosted their purchases of coated book and some office grades late last year and are now easing back on new purchases.

Sorted white ledger in the Northeast has displayed modest strength, a source says. The grade is trading at the $270-per-ton level, according to reports. While demand has improved, new generation is muted, which is contributing to pricing increases.

Deinking grades could be affected by the growing use of pulp by some European tissue mills. Growth in the use of pulp as a swing grade could cap an increase in demand (and price) for office grades going forward.

(Additional 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.)