Cautiously Optimistic

Earlier this year, a number of paperstock dealers expressed concern that soaring prices for some recovered fiber grades might result in a sharp downward correction. Their initial speculation was that after Chinese New Year concluded in the middle of February, significant price declines would occur as Chinese mills opted to stay out of the market.

However, those concerns have yet to be realized. In fact, with spring in full bloom, the U.S. paperstock market seems to have a more optimistic bent. Several paperstock dealers say they are seeing modestly improved markets, depending on the recovered fiber grade.

Several dealers say they expect to see old corrugated containers (OCC) take a modest dip of perhaps $10 per ton in May in light of signals that China will be easing back its purchases. One paperstock dealer points out that China has been reducing its inventory levels of OCC recently. This reduction in inventory may bode well for paperstock dealers, as it may require Chinese mills to buy material on a more consistent level throughout the next several quarters, as these same mills won’t have the luxury of jumping out of the market because of higher prices.

Even with a possible modest price dip, most paperstock dealers say they have no problem moving OCC and the margins are wide enough to operate profitably.

Domestically, many paperboard mills have pushed through price increases for their finished products to reflect their higher raw material prices. To hold finished prices at this level, paper mills may not push their suppliers to sharply reduce mill buying prices for their raw material, according to one paperstock dealer.

The old newspapers (ONP) grade should see modest strengthening for May, according to sources. Despite the woes in the newsprint industry, domestic and export demand remains steady. This is largely because of the lack of ONP available. Despite challenging times for the newspaper industry, demand for ONP is sufficient to keep material flowing steadily. Also, as a paperstock dealer notes, the decline in newspaper readership is resulting in generation of less ONP; therefore, the available material is moving at a fairly decent price.

Following on the strength in the ONP market, one paperstock dealer in the East Coast says prices for mixed paper “have gone crazy.” In some instances, he notes, mixed paper prices have climbed higher than ONP prices.

In the South, mixed paper and OCC have been in high demand, especially with the opening of Pratt’s Shreveport, La., paperboard mill. That mill has been pulling a significant amount of these grades from the general area, leaving little material on the open market.

Mixed paper prices moved from approximately $175 per ton at the beginning of this year to approximately $195 per ton by Chinese New Year in mid-February. While prices dipped back from that earlier high, prices are holding firm at these modestly lower levels and could creep upward again if demand ticks up.