Are Prices Peaking?

Paper stock dealers say price, demand and movement of most grades of recovered fiber remain strong as spring advances. Looking forward, many dealers say they expect prices for most paper stock grades to hold up fairly well. The biggest issue, according to many recyclers, continues to be the shortage of material available on the market.

The shortage is most acute with old newspapers (ONP). Several paper stock dealers say little ONP is available. Declining quality is exacerbating the situation, according to sources. Deinked news (No. 8), which traditionally has been a sought-after grade for many newsprint mills, is practically extinct, according to several recyclers and mill officials. Contaminant and out-throw levels have climbed far past acceptable norms, they say. As a result, No. 8 news more closely resembles No. 6 news at best; at worst, the grade is a No. 1 mixed paper grade.

Recovered fiber quality may be declining, but prices keep escalating. One recycler says, “The market is reaching a saturation point where mills can’t absorb the costs. Even Asian mills can’t absorb the cost, plus pay the higher freight rates.”

On the export side, Asian mills are paying higher prices for bulk grades, such as old corrugated containers (OCC), ONP and mixed paper. This is helping to keep prices fairly high throughout the supply chain. While offshore demand continues to strengthen, customs officials and consuming mills are showing that they have growing concerns regarding the quality of recovered fiber.

One paper stock dealer notes that Chinese inspectors are starting to crack down on suspect loads of ONP being shipped to consumers in China from the United States. With single-stream material a growing part of the fiber stream, the dealer says he expects to see an increase in the number of shipments being rejected or of claims being filed because of inferior material quality.

Problem loads are not limited to Asian mills, however. A paper stock dealer in the Southwest says he has heard that a Mexican mill group has been filing inferior quality claims on incoming material. Reportedly, one suspect load was shipped from a single-stream processor, who is challenging the claim.

Looking into the future, sources say they feel that prices will remain stable over the next three months. Additionally, freight rates, which created challenges for exporters during much of the last year, seem to be easing. According to one exporter, a freight rate increase that was scheduled for April did not take hold. He says it is unlikely that another increase, scheduled for May, will pass.

Production downtime also is affecting end markets for ONP. Catalyst Paper has announced scheduled downtime during the first half of 2011 at its Snowflake, Ariz., recycled newsprint mill, though the company has yet to determine when that will be. The announcement came a few days before a fire destroyed ONP material the company had in storage.

Additionally, a mill buyer based in the Midwest says that SP Newsprint has decided to take 10 days of downtime at its Dublin, Ga., recycled newsprint mill.

(Additional information on secondary paper markets, including breaking news and consuming industry reports, is available at www.RecyclingToday.com.)