OCC Markets Turning

Early this year several paper stock dealers said that a sharp drop in generation of old corrugated could mean a run-up toward the middle of this year.

Several months ago a number of paper stock dealers were saying they could sense an improvement coming for old corrugated markets.

During the Paper Week show in New York City early last month a raft of dealers noted that more inquiries were trickling in. While not totally bullish, the tone of many of these paper stock dealers was optimistic. Many felt that the worst was behind, at least for OCC, with improved markets occurring sooner than later.

At the present, it looks like the most optimistic vendors have been right. While OCC generation has declined, a noticeable increase in offshore shipments has created some sharpening strength over the past several weeks.

Although some of the trends taking place right now may ease back, more than a few paper stock dealers expect to see continued strengthening over the next several months.

April OCC prices at the mill have moved up $10 in most regions of the country. Further, several vendors expect to see additional price increases over the next several months as domestic mills enter the market in larger degrees to buy more OCC.

Sources in the Midwest, South, North East and Southwest all have noted an improving environment for OCC. There have been some scattered reports of domestic mills running short on supply as many domestic mills opted to move toward a just-in-time inventory approach of material.

The condition of the market, some note, is similar to the environment from the mid 1990’s when shortages of OCC resulted in a rapid price spike for OCC, as well as a host of other grades. To a one vendors add that they hope the price doesn’t spiral out of control as it did when OCC topped $200 a ton, creating a frenzy throughout the country as paper stock dealers bid up prices for tonnage.

One dealer in the Southeast says that lately he has been getting more calls from brokers and mills than he has over the past two years.

While OCC prices have been moving upward, the generation of supply still lags. Over the past several years, as the OCC market slumped, some waste management companies either opted out of handling OCC all together, or scaled back their collection and processing amounts.

The prolonged slump also drove some paper stock dealers out of business, further reducing the amount of OCC being collected.

In fact, over the past year, as OCC markets slumped, most paper stock dealers said that their supply/demand for the grade was in balance, reflecting the drop in collected amounts.

If the upward swing in OCC continues for a few months, the situation could intensify. Many paper stock dealers and waste management companies may be less willing to pursue additional tonnage unless there is a significant financial incentive. Even with the recent increase in price, it will likely take some time to access more material. This could cause prices to surge through the middle of this year.

While OCC has been gaining most of the recent optimism, some vendors say that mixed paper also has been benefiting from the strength. With OCC supplies in tight balance right now, some consumers are opting, if their equipment can handle it, of buying more mixed paper.

Prices for this grade have strengthened, although not nearly as much as OCC.