Paper

WIND AT ITS BACK

It looks as if the worst may be behind the recovered fiber market, though the future is not necessarily going to be bright. Many paper stock dealers say they see a number of potential problems, most notably the near-term challenges of a Chinese market that appears to be reducing orders. However, the difficultly associated with markets for paper stock grades witnessed during the first quarter of this year has lessened. More recently, paper stock dealers have seen price increases and steady demand for their recovered fiber, though generation of material has been reduced.

Throughout the past several quarters, Chinese buying has propelled orders for many paper stock grades (as well as a number of other commodities, including scrap metal). However, Chinese demand, which helped push prices higher in the past several quarters, is starting to ebb and orders are slowing. The prevailing sense is that prices have climbed too high and that Chinese mills are loaded with inventory.

One West Coast exporter says OCC (old corrugated containers) could take a pause as Chinese buyers back out of the market, leaving exporters to wonder how long their orders may be down. A reduction in orders for recovered fiber, especially bulk grades, could result in downward price adjustments.

Adding to the challenge going forward, effective Sept. 1, members of the Westbound Transpacific Stabilization Agreement (WTSA) have raised dry cargo rates by $150 per 40-foot (FEU) container and $120 per 20-foot (TEU) container from the U.S. West Coast and by $200 per FEU and $160 per TEU for intermodal moves or all-water shipments from the U.S. East and Gulf Coasts.

The rate hike is an attempt to recover from steep rate declines seen earlier this year. In announcing the hike, the WTSA says that rates "have eroded to a point where serious action is needed to address basic service requirements."

Generation of OCC remains low relative to levels at the same time in 2008. One paperstock dealer says the volume of OCC being collected may be off by as much as 25 percent to 30 percent compared to last year.

The export market also is being challenged by several new directives, passed by a few developing countries, that aim to curb the import of materials that are deemed recyclable but contain mostly waste.

According to a report from the Bureau of International Recycling (BIR), Brussels, Indonesia is looking to implement inspections of all incoming containers classified as "waste" by this September. And India, which has seen a significant amount of substandard material being shipped to the country falsely classified as "recyclables," also has put restrictions on these imports.

On the positive side, active involvement by various groups affiliated with the recycling industry, such as the BIR and the Institute of Scrap Recycling Industries Inc., has led these countries to modify their initial policies.

Another positive development is that mill activity in the United States, while not significantly strong, has shown some signs of life recently.

(Additional news on paper recycling markets, including pricing information, is available at www.RecyclingToday.com.)