Inertia Sets In
The low grades are either flat, stabilizing or inert, depending on the individual paper stock dealer’s perspective. Old corrugated containers (OCC) are not having too much difficulty finding a home. However, there are some concerns that markets are only in balance due to the sharp drop in generation.
There continue to be reports of high inventories at paperboard mills throughout the country. Downtime continues to play a factor in the market. More announcements of additional downtime continue to be made.
Along with extended downtime, some paperboard mills are announcing plans to permanently remove capacity from the market. While this could help expedite a balanced environment, over the short term this displacement could put further pressure on paper stock markets.
Added to the short-term uncertainties, Temple-Inland recently announced plans to acquire Gaylord Container. The announcement was made in late September. Gaylord has been a significant consumer of OCC and a number of other low grades. It is too early to determine the impact of the acquisition.
The old newspapers grade (ONP) also holds little short-term promise. Offshore activity is mixed, with uncertain signals coming from South Korea, a key consumer of the grade. Pulp substitutes, however, are showing a modicum of strength.
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