Paper - Commodity Report

Rate increases for ocean-going freight have had West Coast exporters of recovered fiber scrambling in the first few weeks of the New Year.

According to one California-based recycler, freight increases have "come in hot and heavy," and have increased per-container rates by hundreds of dollars in some cases, which has caused some market turmoil in the region. The recycler reports further increases for bunker fuel could be coming in February as well.

Not only have freight rates increased, but containers themselves are scarce, according to a Southwestern recycler, adding to transportation woes. "Containers are very tight," he says. "There’s a lack of availability." He says this is partly because of competition from other commodities, like grain, which command higher prices. This has lead some recyclers to look for other export destinations that can be reached by ground transportation, like Mexico, which still has a healthy appetite for North American recovered paper.

Unless additional container capacity is added or demand decreases, the California recycler says the high costs are likely here to stay for the near future.

"On top of that," he adds, "surprisingly, the price of OCC, news, white ledger and office pack went up in addition to the freight increases. That’s the big story—[scrap] paper prices have gone up, freight has gone way up, and it’s odd to have them happen at the same time."

Prices for most grades went up or held steady across, sources say. Two weeks of mid-week holidays in late December didn’t disrupt material movement too much, they add.

Prices held steady in the Midwest, "a good way to start the New Year," says one Chicago-area-based recycler. However, sources reported some trouble in the Southeast, where mills were not keen to follow a published price increase for news.

Sources report a tight supply of material. Newspapers, for one, tend to be thinner on this side of the holiday season, the Midwestern recycler says. "In December, a week of newspapers weighs 10 pounds, in January, a week’s worth of newspapers weighs 6 pounds—it always happens," he says.

Demand has remained as strong as ever, placing increasing pressure on a tight supply. "It’s just very tumultuous," says a Southwestern recycler. "Mill demand is exceeding supply, and the mills just want to ensure they can continue running." He adds that mills are likely anticipating the seasonal slowdown in generation and, therefore, are buying to keep inventories up.

High prices are appreciated, but the recycler adds that the higher the price goes, the steeper the eventual drop.

An early January thaw brought a reprieve to a typically slow time in the Midwest, adds one recycler. From a productivity standpoint, winter cold and precipitation complicates many aspects of business, he says. With snow, ice and cold temperatures, there’s "the practical matter that it takes the truck two hours to do a one-hour round trip," he says. Additionally, winter weather makes just getting around the yard a challenge, he says. However, the unusually warm January level has kept Midwest recyclers moving at a high rate of productivity, helping them to meet the strong demand for material.