ARE ASIAN ORDERS DRYING UP?
Paper stock markets have been showing interesting movement over the past month. Depending on the grade, there is optimism or uncertainty over where near-term markets are heading.
Bulk grades, notably old corrugated and old news, continue to move, although there has been some concern that downtime at a number of board mills could back up demand. OCC had been moving earlier this year due to a combination of steady/strong offshore orders, reduced supply and better orders for the finished product. However, moving into the spring OCC generally increases. At the same time, while there is optimism that linerboard mills will see higher finished product prices, a number of mills are expected to idle machines, which could slow new demand for OCC.
Also, there is less certainty about orders into Asia. Several exporters note that after a flurry of demand earlier this year there appears to be some slowing of demand. Some vendors point to the post Chinese New Year as a time when there is traditionally some slowing of demand.
During the Paper Week program, held last month, several exporters noted that European paper stock supplies are high. With European paper stock dealers becoming more competitive with U.S. paper stock dealers for the Asian market, an oversupply of material in Europe will work to keep U.S. OCC prices subdued.
While there is short-term concern about OCC, longer term, a number of questions are arising. With the announced plan by Allied Waste to acquire Browning Ferris Industries, the role BFI’s recycling division will play is uncertain. Moves made by Allied, which has already announced plans to sell off “non-core” assets, may have a long-term impact on OCC supplies.
Markets for ONP continue to look promising, despite significant downtime cropping up at newsprint mills throughout North America. Most North American newsprint mills have announced plans to take inventory adjustment downtime for anywhere between several days to several weeks.
Donohue Industries announced plans to idle their Sheldon, Tex., newsprint mills for 10 days the end of March. Other mills scheduling downtime include Smurfit-Stone’s Pomona, Calif., mill, early in April; Smurfit’s Newberg, Ore., for a week later in April; Bowater, at its Quebec mill, this month; and Abitibi-Consolidated, in late March.
As uncertain as the OCC market is, office grades, including office pack, and sorted white ledger, continue to show strong promise. Domestic and Canadian buying has remained steady. Traditional buyers have helped keep the grade moving. At the same time, offshore orders, especially to South Korea, are keeping the movement of material strong. Purchases by Indonesian and Philippine sources also have helped keep SWL markets steady.
Along with these sources, vendors in the Southwest note that Mexican mills continue to play an active role in the paper stock market. This has allowed for better than expected movement and higher prices for the grades.
One of the most promising signs in the paper business continues to be the activity of tissue manufacturers. These mills have been playing a more active role in buying both SWL and office pack. These steady buyers have been augmented by consistent orders from a number of deinking mills in North America. While prices may be hitting their short-term maximum, the grade is not expected to show much in the way of any further slipping. There have been reports that a number of vendors have been looking to increase their intake of SWL, which should have a positive impact on markets moving into the spring.
The role of the stand-alone deinking pulp operations continues to be the wildcard for the office paper industry. Many of the deinking operations which opened up over the past several years have closed down due to a combination of difficult markets for the finished product, inconsistent quality levels, and equipment problems. If, and many vendors note this is a large caveat, a number of these are able to re-open, markets for office grades could definitely improve.
Further up, pulp substitutes are showing mixed signals. With pulp prices low, concern continues over whether there will be any turnaround in pulp substitute prices. Hard white shavings and cuttings have languished in many parts of the country due to the inability of pulp producers to push through any significant price increase. While many vendors report being able to move all the pulp subs they are packing, there still is concern that prices may not show any serious price increase to push up pulp sub demand.
CARAUSTAR INKS TWO DEALS
Caraustar Industries, Austell, Ga., has been on an acquisition roll lately. The company, which originally had been a producer of specialty recycled boxboard products, has inked several dealers recently, which has stretched its production significantly. The first deal Caraustar inked was to acquire Halifax Paper Board, which operates a recycled board mill in Roanoke Rapids, N.C., as well as a specialty paperboard converting plant in Richmond, Va. The deal was expected to close the end of March.
The second deal is for Caraustar to acquire International Paper’s recycled boxboard mill in Sprague, Conn. This second deal is expected to close during the first half of this year. The Sprague mill has a capacity of 210,000 tons for the production of clay coated recycled boxboard.
MEXICO’S DURANGO GROUP DROPS PIPSA BID
Grupo Durango, a Mexican conglomerate, announced plans to back off from its previous plan to acquire the Mexican government owned Pipsa paper mill complex.
In December Gidusa agreed to take a 49% stake in state paper firm Pipsamex, which provides about 80% of newspaper in the country. Gidusa was to contribute to Pipsamex a cellulose plant worth $39 million in exchange for its stake.
But after reporting a loss for 1998, the company abruptly said it would sell off its Pipsamex holding to concentrate on its core business.
CONSOLIDATED PAPERS, ST. LAURENT SIGN SALE AGREEMENT
Consolidated Papers Inc., Wisconsin Rapids, Wisc., and St. Laurent Paperboard Inc., Montreal, announced that the two companies have an agreement in principle relating to the sale of the assets of Castle Rock Container Co., a division of Consolidated Papers, Inc., to St. Laurent Paperboard.
St. Laurent owns and operates four mills with a production capacity of about 1.5 million short tons and 11 converting facilities in various Canadian and American cities, including a new facility in Milwaukee.
Castle Rock Container Co. was offered for sale by Consolidated Papers last October with the intent of allowing Consolidated to focus on its core business, the manufacturing of coated and super-calendered printing papers.
The Castle Rock division manufacturers corrugated packaging, point-of-purchase displays and communication kits. Consolidated Papers acquired the facility in 1970.
NEWSPRINT GIANT CLOSES MACHINE
Abitibi-Consolidated has announced the permanent shutdown of a paper machine at its Iroquois Falls, Ontario, Canada, operation due to sluggish market conditions. This will move the mill from a three paper machine operation to two machines, reducing mill and company capacity by 58,000 metric tons.
“The challenge of the two machine operation is to improve on Iroquois Falls’ cornerstone newsprint costs, offsetting the lower volume, and building stability for the division and the town of Iroquois Falls” says Alain Grandmont, vice president of Newsprint Operations.
KC MEXICO PLANS EXPANSION OF TISSUE MILL
Kimberly-Clark de Mexico SA, Mexico’s largest paper products company, plans to invest $350 million by the end of next year to expand production of tissues, toilet paper, diapers and paper towels.
Kimberly-Clark de Mexico, 47 percent owned by Kimberly-Clark Corp., will invest $150 million this year and $200 million in 2000.
The company expects volume sales to increase 5 percent this year and plans to raise prices 2-3 percent above the annual inflation level.
G-P ACQUIRES PA. RECYCLED BOARD PLANT
Georgia-Pacific Corp. and Connelly Containers reached an agreement in principle for Georgia-Pacific to purchase Connelly’s packaging facility at Bala Cynwyd, Pa.
Connelly Containers manufactures corrugated packaging and manufactures triple-wall corrugated products and graphics.