Commodity Report

The sharp drop in paper stock prices this fall was a shock to many paper recyclers. While many of these recyclers had said prices climbed too high earlier in 2011 and they expected a correction, the steepness of drop was a surprise. Moving into the end of 2011, most paper stock grades have tumbled, though sorted office grades, printers' grades and coated book stock seem to have taken the biggest hits.

Several paper stock dealers say prices for some office grades dropped by $60 per ton or more this fall. Adding to this steep drop in prices, according to several sources, has been the tough stance mills have taken with their suppliers. A large paper stock dealer on the East Coast says several mills are adopting a "take it or leave it" approach regarding recovered fiber pricing.

The price decline, which started in September and accelerated into October, seems to be stabilizing. Several paper stock dealers say a modest price dip for some office grades may occur in December, though it may not be as severe as the decline seen in the fall.

"We are at a bottom," a paper stock dealer based in the Midwest says. "We are starting to see some interest offshore as well."

Some paper stock dealers say they are resisting these sharply lower prices, however. Several recyclers report that they are opting to inventory material at this time with the expectation that recovered fiber prices will rebound in early 2012.

A number of large consumers of recovered office paper took downtime at their mills during the fall, driving the sharp decline in pricing. In one instance, the paper company Fibrek extended downtime at its Fairmont, W.Va., deinking mill from two weeks to four weeks. While the company had scheduled downtime to perform maintenance at its mill, Fibrek also acknowledged that higher recovered paper prices contributed to the extended downtime.

Reports also indicate that mills in Mexico, traditionally significant buyers of recovered office grades from the United States, continue to reduce their purchases of deinking paper grades from the U.S.
 

(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.)