Paper Commodity Report

Another month of negative economic news has done little to dampen the market for recovered paper. Economists and pundits continue to debate whether a recession is imminent for the U.S. economy, and general economic indicators like the number of home foreclosures paint a bleak overall picture. However, prices for recycled paper remain high across the country.

Prices for old corrugated containers (OCC) and old newspapers (ONP) both went up in the Midwest, joining higher prices other regions had been enjoying last month. SOP (sorted office paper) continues to stand out as a high-priced commodity that is also in great demand.

One Midwestern recycler reports hearing rumblings from his colleagues that they expect OCC and coated book could hit $200 and $300 per ton, respectively, in 2008. "That remains to be seen, of course," he adds.

Good economic news may be hard to come by in the United States so far this year, but the global nature of the paper industry is keeping markets so strong, according to one recycler based in the Southwest. "A lot of it has to do with export," he says. "Paper is becoming a commodity like copper or steel or oil. Those prices are going up, so paper goes along with it."

He also points out that the weakness in the general economy hasn’t been felt much in the paper industry yet because it hasn’t had an impact on demand for the products made from recovered fiber. "People still have to buy tissue and paper towels," he says.

However, the downturn in the construction market has had an impact on insulators, who consume ONP. The U.S. Commerce Department reported a sharp decline in total U.S. construction spending in January. Total spending fell 1.7 percent, following a 1.3 percent drop in December. Residential housing has suffered the most sustained declines, dropping 3 percent in January, according to the Commerce Department’s statistics. Further declines in new housing starts could certainly put limits on the insulator outlet as a consuming market for ONP, the recycler says.

With the 2008 primary elections in full swing, recyclers in some regions can expect a slight influx in generation, thanks to election-related material such as mailings. In an election year, "there’s a lot of paper used, and a lot of junk mail will be hitting curbside," says one Midwestern recycler.

Transportation continues to be problematic for some recyclers across the country. Exporters are plagued by continued container shortages, and winter weather has been making moving material by truck difficult as well.

"This has been a real winter again," says the Midwestern recycler, who adds that while his company has not had much trouble servicing its accounts in town, moving material over highways has been difficult thanks to a string of winter storms that have dumped snow and freezing rain over the Midwest in the late winter months.

A few transportation snarls have been among the only problems to report, however, sources say.

Prices are expected to remain strong heading into the second quarter of 2008. "Things are about as rosy as they can be as we head into spring and warmer weather," one recycler says.