The Climb Continues

Late this summer many paper stock dealers said markets for recovered paper grades would soften through the end of 2010. This opinion gained some traction as old corrugated container (OCC) prices dipped in September. However, in October, prices have climbed back from that decline and could be strengthening as 2010 comes to a close.

Several paper stock dealers note that prices for OCC moved up by $10 per ton through many parts of the country. While generation of material is slow, it is keeping supply and demand in tight balance.

Chinese buyers are steady in their purchasing, which, along with domestic mills’ purchases, are allowing for better-than-expected prices for most bulk grades, according to sources.

With higher recovered paper prices through most of this year, many paperboard producers have been pushing through multiple price increases. However, some end consumers appear to be resisting further price increases.

A similar scenario is taking place with old newspapers (ONP). Fewer newspapers are in circulation, which means less ONP is being collected. The combination of purchases from domestic newsprint producers along with large orders from offshore buyers are resulting in a fairly tight supply of material and moderately higher prices.

On the East Coast, the export market continues to grow as a key end market for many recovered fiber grades.

The European paper stock market is showing further improvement as the economy in Europe gains strength. Domestic demand in Europe along with orders to China has allowed for better-than-expected movement and better pricing for various paper stock grades.

According to recent figures from the American Forest & Paper Association (AF&PA), Washington, D.C., total consumption of recovered fiber in August reached 2.71 million tons, a 14 percent increase from August of 2009. Domestic consumption during the first eight months of 2010 is up 9 percent from the same period in 2009.

Meanwhile, paper stock exports increased by 5 percent in July from the prior month. However, the AF&PA reports, exports over the first seven months of this year are down 2 percent from the same period in 2009.

The strength of bulk grades such as OCC and, to a lesser degree, ONP is helping the mixed paper market. Movement of mixed paper appears better than expected during the first three weeks of October, according to sources. Several paper stock dealers say they expect mixed paper to remain in good shape going into 2011.

On the high end of the paper stock spectrum, several deinking and pulp substitute grades have been pulled up by higher pulp prices. However, several brokers say consumers are resisting the higher pulp prices that are being pushed by producers. Offshore, there are reports that Chinese buyers are trying to step out of the market, which is softening several pulp grades. This ultimately is putting downward pressure on higher end paper stock grades.