Domestic Paper Stock Use Dips in January

The consumption of recovered fiber at domestic mills declined by 3.5 percent for January, compared to figures the same time last year. According to the most recent report from the American Forest and Paper Association, paper stock consumption stands at 2.843 million tons, compared to last January’s figure of 2.945 million tons.

The sharp drop in consumption at domestic mills can be attributed to a significant amount of downtime taken at paperboard and paper mills throughout the country. The ample amount of downtime taken hit the old corrugated container and old newspaper market harder than most.

For ONP, the move by Abitibi-Consolidated to permanently idle its Sheldon, Tex., mill has been a bit hit, especially in the Southwest.

As for OCC, many of the largest paperboard companies, including Smurfit-Stone and Weyerhaeuser, have been taken sizable downtime throughout their network of mills. While consumption dropped for the month, a more positive sign lately has been the improvement in inventory levels. The inventory of recovered fiber at the end of January stands at 1.125 million tons, a 2.2 percent increase from figures the same time last year. At the same time, the inventory level is a modest 0.9 percent increase from figures the previous month.

While inventory levels are firming up, overall days of supply on hand have been declining. According to the AFPA, at the end of January the number of days of supply stands at 24, a sharp drop from the last several months.

While domestic use softened during the first month of this year, one of the saving graces has been the strength in offshore markets. A number of Asian countries, especially China, have jumped into the void left by reduced domestic buying by snapping up sizable blocks of OCC.

Reflecting the improvement in export conditions, paper stock shipments outside the United States climbed by 8.3 percent last year to about 11.4 million tons. The surge in shipments has kept prices for many of the grades, including bulk grades, somewhat firm.

Looking forward, there are expectations that the market for recovered fiber moving forward should be fairly strong, leading to a move by domestic mills to start becoming more competitive by purchasing more material at higher prices.