Paper

Paper stock markets appear to be prime for steady to strong performance through the next several quarters. As the general economy improves, domestic and offshore demand show signs of steady to strong buying.

Mixed paper continues to be the hot grade in the market. Because this grade is far from reaching its maximum recovery level, demand and supply for this grade are expected to remain fairly strong for an extended period of time.

OCC continues to hold its own, despite a modest downtick in early March. Chinese interests backed out of the market to a degree, softening prices for dealers. However, these same buyers are expected to jump back into the market, especially with more capacity coming on line during the next several years.

Along with offshore orders, many domestic paperboard mills are looking to build up their inventories and have been more aggressive with their purchases. Several mills have reportedly hiked their premiums to guarantee incoming tonnage. This is keeping material moving at a good clip.

High grades may start showing signs of an improvement in light of modest improvements in pulp prices. Pulp substitutes and de-inking grades are more closely tethered to the overall pulp market. With more signs pointing to an improved world economy, more pulp producers hope to push through price increases.

At the same time, the drop in activity during the past several years has reduced the supply of available pulp substitutes, cutting into available tonnage.

The one grade that continues to be clouded in uncertainty is the old news market. Despite efforts by North American newsprint producers to slash capacity, demand has been iffy. While newsprint mills are now pushing for newsprint price increases, demand remains only tepidly better.

(Additional news about paper recycling markets, including breaking news and pricing, is available online at www.RecyclingToday.com.)

David Clapp, senior economist with Resource Information Systems Inc. (RISI), Bedford, Mass., offered attendees of the Paper Stock Industries (PSI) Fall 2003 Conference his company’s views on the impact the Chinese paper industry is having on the world paperstock market.

In his presentation titled "Chinese Capacity Expansions: Impact on North American Markets," Clapp outlined the changing dynamics of the Chinese paper industry. One key point Clapp noted is that China is no longer the importer it once was for graphic-quality paper. As an example, he said North American suppliers have fewer opportunities, as Chinese producers are meeting a larger percentage of the demand.

Meanwhile, Clapp said, opportunities for North American paper packaging producers are also diminished. Recycled-content grades are displacing kraft liner. Also, more broadly, there is less demand for packaging in the U.S. in light of rising imports of Chinese merchandise into this country.

"China is now the leading destination for U.S. recovered paper exports," Clapp noted. The availability of high quality North American supplies is seen as crucial to the Chinese paper industry. Meanwhile, Chinese demand is a major factor in supporting higher U.S. recovered paper prices.

Along with recovered fiber, market pulp demand has been positively affected. However, Clapp added, "Suppliers outside of North America have been primary beneficiaries of rising demand."

World recovered paper usage is expected to grow by 16 million metric tons by the end of 2005. While world demand will increase, Clapp said that almost 30 percent of the increase will come from new capacity from China.

Concluding his presentation, Clapp noted that Chinese capacity growth will have a strong influence on fiber markets during the next two years. In addition to recovered fiber demand, China will account for almost 40 percent of the growth in world market pulp demand.

Another recovered paper inventory build-up ahead of massive capacity investments in China is most likely yet to come. This move will be joined by stronger true consumption as demand in North America begins moving forward, pending a recovering economy.

Initially, a weak supply response will give prices plenty of running room. However, he said, "Overcapacity and low operating rates, especially in China, will rein in prices."

FCR Inc., Charlotte, N.C., has begun performing on a five-year contract extension for recycling processing services for Sarasota County, Fla.

FCR, which operates its own materials recovery facility (MRF) in Sarasota, has provided processing services to the county for nine years. Sarasota County manages a curbside collection program that generates 40,000 tons per year of dual commingled streams.

A national residential recycling facility operator, FCR operates 23 MRFs in the eastern U.S. and processes more than 1 million tons of recyclables each year. FCR is a subsidiary of Casella Waste Systems Inc., Rutland, Vt., a regional, non-hazardous solid waste services company (www.casella.com).

The Paper Stock Industries (PSI) chapter of the Institute of Scrap Recycling Industries (ISRI) has exceeded its end-of-year membership goal for 2003, having reached 123 members.

So far in 2004, Frank Cozzi of Cozzi Enterprises, an Illinois-based company; and Wang Dongzing of Century Sunshine Paper, a paper mill located in China, have joined PSI.

ISRI’s PSI Chapter has grown by more than 30 percent in the past four years, according to chapter officers. Membership in the PSI Chapter is open to companies involved in paper recycling. Current membership is made up of a combination of dealers/packers, brokers, consumers and suppliers in the United States as well as internationally.

Those seeking more information on membership in the Paper Stock Industries Chapter can contact ISRI’s Member Services Department at (877) 367-4774.