FMN Supplement -- Steadying for a Strong Year

Fluctuations in prices are inherent to any commodity, and recovered fiber is a commodity like any other. Although municipal recycling programs place some environmental emphasis on grades such as old cardboard, old news and office paper, the basic premise is the same: supply and demand are driven by economic indicators such as new housing starts, durable goods orders, unemployment rates, and interest rates, among others.

The general state of the world economy, more than anything else, is likely to be one of the driving forces for the market. Although the U.S. economy has been humming along over the past several years, the overseas market has experienced varying stages of distress. A continued key for stronger markets in the future will be the success of the overseas market, as well as the role Mexico and Canada will play in the paper stock market.

OCC – Feast To Famine

Of the fiber grades, old corrugated markets have been on the sharpest rollercoaster ride over the past several years. Record high prices for the grade, followed by plummeting prices has been the modus operandi since late 1994.

Earlier this summer it appeared prices were back on their upward track. But this swing, as of last month, appeared to have cooled.

Pete Grogan, manager of market development for Weyerhaeuser Recycling, expects OCC markets to “settle down” and move at close to the present level for the next several quarters. “Exports will be the next driver of the OCC market,” says Grogan. At the same time, he cautions that intercountry trading is becoming more prevalent in Asia. “The minute prices spike in the U.S., Asia will shift to Europe,” he says.

Old News

ONP has been one of the more inconsistent grades over the past year. Although the overall trend for the grade is down, there are sections of the country reporting some strength. In the upper Midwest, steady buying by Canadian mills, along with some strength from mills in the upper Midwest, have allowed for stronger markets for the material.

While the export market has been  quiet for ONP, it is an area to carefully watch, notes Bob Tucker, fiber procurement manager for Bowater’s Calhoun, Tenn., newsprint mill. Although the mill is in Tennessee, the mill pulls material “from throughout the East and Southeast.” This trend requires some attention to the activity of the overseas market.

Even though prices haven’t shown the buoyancy of OCC, the market outlook seems to be steadying. As for the next several quarters, expectations are strong  deinked news will continue to show growth.

Office Paper

The office paper market appears to be stable, although many of the newer deinking pulp facilities have been struggling with difficult market conditions. According to a recent article in Forbes, seven of the new facilities that have been built over the past several years have had their bonds either in default, sold, or pending default. On a positive note, several of the closed mills may reopen next year.

Consumers of the grade are not limited to new deinking facilities. A number of buyers are tissue mills, including Kimberly-Clark and the newly formed Fort James. Several board mills also are purchasing more of the grade.

Other consumers are integrated mills such as International Paper, Selma, Ala., and Union Camp, Franklin, Va. Although these mills are suffering under the yoke of difficult prices, they have gradually increased their consumption and are producing a fairly clean finished product.

Mike Finn, vice president of Recycling Services, a Chicago-based paper stock operation, feels the grade is fairly stable at the present time, despite many of the problems with new office paper deinking facilities. As the pulp market improves, demand for deinked pulp should improve.

Mixed Paper: A Mixed Bag

Mixed paper is enjoying a renaissance of sorts. As corrugated jumped in price earlier this year, more mills began using larger amounts of mixed paper as an extender. While losing some of the fiber strength of OCC, mixed paper has a price difference that can be justified. With OCC prices now coming back down, mixed paper demand still appears to be holding its own.

Although there are reservations, most vendors do feel that many of the key factors are in place for a steady growth in the market.  –

The author is senior editor of Recycling Today and editor of Fibre Market News.