Paper

OCC Looking for a Floor Price

Is there a floor to the fast falling old corrugated container (OCC) market? Domestic mills are taking ample downtime. Meanwhile, exporters appear to still be sitting out the market, with reports that inquiries are only tentative. The result has been an OCC market that has been in a free fall since early this summer. A price of $150 per ton is just a distant memory for many vendors.

It appears more likely that domestic board mills are determined to get inventories under control. This means that substantial downtime will play a major role in the OCC market over the next several months.

Despite plenty of downtime already taken this summer, there are reports that a number of mills are looking to continue taking downtime, some intermittent over the next several months.

The decline in OCC is also reflected in a steady price decline in double lined kraft (DLK) cuttings. Due to a high inventory of the material, DLK prices have been sliding fairly sharply. Some vendors see DLK prices at less than $100 per ton at the mill. The oversupply of DLK is also evident by the build-up at box shops.

Earlier this summer there was some speculation that a pickup in orders would take place by the end of August or early September. The sense was that OCC prices had fallen so low that many Asian mills would be jumping back into the market to take advantage of what was perceived a rock bottom price.

Moving toward the middle of this month this mood has tempered a bit.

While many vendors still see OCC markets coming back, a number of packers are pushing back the time when there will be a bounce back.

One big factor for the export market has been the scaling back of demand by the Nine Dragons mill in China. This paperboard operation had been one of the biggest buyers for OCC. However, equipment problems have created problems with the mill’s rate of paper stock consumption.

Old newspaper (ONP) is having less of a tough time. Due to better balance in the newsprint market there seems to be some semblance of stability in the price. Demand has been fairly good, with larger consumers of the fiber helping keep the flow of material at a decent clip. Offshore orders also are helping keep ONP prices afloat.

On the domestic side, newsprint producers have had success reducing the oversupply on the market. Even now there are a number of moves that should solidify market conditions for ONP. Several newsprint machines have been idled, which should reduce the chance of a steep oversupply from filtering into the North American market.

An added incentive for the paper industry is the attempt by North American newsprint producers to push through a price increase the first of next month. According to comments by a number of newsprint analysts, there is a significant expectation that the proposed newsprint price increase will go through.

Higher prices for the finished newsprint should help keep prices for the raw material, especially ONP, in a good position moving into the stronger part of the year for the newsprint industry.

Republic Group Agrees to Acquisition

Republic Group Inc., Hutchinson, Kan., has agreed to be acquired by closely held Premier Construction Products Statutory Trust, San Francisco, for $410 million in cash and assumed debt.

Republic Group’s shareholders will receive $19 per share in cash at the sale’s closing, expected by the end of the year, Republic says. The transaction is valued at approximately $410 million (including debt).

Republic Group also has a backup agreement with Dallas-based Centex Construction Products Inc. to be acquired for $17.50 per share.

Faced with declining profits because of lower prices and slowing sales of gypsum wallboard, Republic Group said last month it was considering a sale or merger.

Republic Group Inc. and its wholly-owned operating Subsidiaries - Republic Paperboard Co., Republic Fiber Co., and Republic Gypsum Co.- are manufacturers and marketers of 100% recycled paperboard, recovered paper fiber and gypsum wallboard, servicing markets nationwide.

(FibreMarketNews.com is an electronic publication covering the paper stock markets and paper recycling industry.)