Paper

After a steady start to the summer, the recovered fiber market is heating up. July saw an unexpected upturn in published pricing, which packers and processors welcomed.

"The market is looking active, pretty hot," says one Southwestern recycler. While some sources had anticipated a small increase, the larger across-the-board hike came as a welcome surprise. "I’ve never seen a hike up at this time of year," says one Midwestern packer. "Prices usually don’t go up until September."

Sources attribute the high prices for old corrugated containers (OCC), old newspapers (ONP), mixed paper and high grades to summer slowdowns in generation and domestic mills trying to hold their ground against offshore buyers.

A Midwestern source says the current high demand could be coming from mills buying aggressively now in anticipation of an even greater price hike this fall, around September or October, when prices traditionally rise.

The market saw little to no disruption during the Fourth of July holiday. Sources say the holiday taking place mid-week kept work flowing at a usual pace compared to the typical slowdown experienced when it creates a long weekend.

However, the holiday aside, generation of recovered fiber has been slow in the summer months, which is a pretty typical market condition, sources say. With schools out of session and vacation time being used, less paper is printed in summer months, a Texas-based recycler says. Industrial sources tend to dry up, too, as factories take downtime.

Municipal collection also tends to drop during the summer, a Midwestern packer says. Areas with curbside service tend to suffer less, but those that rely on drop-off programs tend to see far less participation during summer months.

As the season progresses, weather could also contribute to more demand and higher prices, some sources say. In mid-July, many regions of the country were in the grips of extreme weather: sweltering heat on the West Coast, droughts in the upper Midwest and floods in the plains. "Weather is going to be a player," according to one source. Inclement weather can lead to more aggressive buying to shore up inventories to keep production running smoothly. However, another Midwestern recycler says weather problems are more likely to affect transportation, not to change buying patterns.

Extreme heat has also been known to lead to mill closures to cut power usage, says one Midwestern source. "It happens on occasion during really hot summers," the packer says. "That means more supply is out there, and mills won’t be able to consume it."

July also brought an increase in the asking price for ONP, though some sources question whether the increase represented the real price or a price correction, as demand for ONP is still stilted in light of the depressed housing market.

While sources can’t predict the weather, they are mostly confident in the market conditions for the remainder of the year. Sources say they expect prices to remain strong for the rest of the summer, leading into the paper market’s busiest season, when schools go back in session, and the retail industry prepares for the busy Christmas holiday season.

On the logistic front, the market is operating as usual, dealing with the "never-ending battle" of high transportation and energy costs, says one Midwestern recycler. "There’s not a problem moving freight—it’s just expensive."

Some sources reported some trouble moving product during the first week of July, but nothing staggering. One Midwestern source cautions packers and anyone trying to move product that they could run into trouble come August in agricultural areas when freight and trucking will be usurped to move agricultural products.

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