Low Grades Stabilizing

Over the past several months paper stock dealers have been hoping that the downward spiral in price for old corrugated would be stemmed. Every time a paper stock dealer would say the grade “couldn’t get any lower,” it seemed another mill cut its price, took downtime, or opted to halt purchases for an extended period of time.

The export market offered very little consolation. With most Asian mills pulling in their orders, only a handful of mills continued to buy. This trend allowed some mills to become more aggressive with their prices. At the same time, during this steep slide in OCC a host of paper stock dealers have been reporting a growth in the number of claims being filed.

However, as the end of the summer nears, there seems to be more positive signs. Over the past several weeks a number of dealers see OCC markets stabilizing. Several vendors are reporting modest price increases, although most paper stock dealers say that it is unlikely there will be much more downside risk for handlers of the grade.

While more paper stock dealers are forecasting some improved market conditions, any turnaround will be slow. A $5 a ton increase is nice. However, with some mills paying less than $50 a ton for baled OCC there is very little profit margin still available.

What may help spur better prices for the back half of this year will be the steep drop in generation of many bulk grades, especially OCC. There have been anecdotal reports that many waste hauling firms are opting not to collect some lower valued grades of recovered fiber, especially OCC. This could result in shortages cropping up over the next several months if some increases in demand take place.

A major wildcard in the market for OCC and, to a lesser degree, is the Asian market. Over the past quarter this region has seen some declines. However, there appears to be some signs that prices are starting to stabilize. If there continues to be tightness in the market, more mills may be re-entering the market looking to build up their inventories.