Paper stock markets are holding up surprisingly well during the first few months of 2012. Helping keep price and demand steady is reduced generation, which is typical of the first few months of the year. However, a fairly temperate winter through much of the country has resulted in more supply than usual.
Adding to the general sense of optimism is an overall improvement in demand from offshore sources. However, a number of paper stock dealers say they feel this improvement will be limited at best. One source says old corrugated container (OCC) markets “got ahead of themselves” in early 2011 and corrected sharply downward toward the close of the year. All recovered paper grades declined in pricing toward the end of 2011.
Since then, he says most paper stock grades have found solid footing at present price levels. He speculates prices will see only modest improvements during the first half of 2012, however. “There will be perhaps linear improvements in prices. It is unlikely we will see the peaks we saw last year,” he adds.
Despite an overall sense that OCC prices are gaining, soft spots remain. One source in the Southeast says markets in that region are a bit soft because of downtime at a number of recycled board mills.
Another vendor, operating on the East Coast, says he thinks China will require more OCC this year, which should help buoy the market. He says new recycled board capacity continues to come online in China, which should help to keep the flow of recovered material from U.S. sources steady.
The East Coast paper recycler anticipates less volatility in the recovered fiber markets, as Chinese buyers try to avoid “jumping in and out of the market.”
While India holds some opportunities for paper stock dealers, several exporters say buyers for Indian mills are highly concerned with getting quality fiber shipments and moisture claims are a typical issue suppliers have to deal with.
On the domestic side, several sources say it is unlikely the acquisition of Temple-Inland by International Paper will have a significant effect on paper stock markets, though it may be a prelude to further consolidation. The consolidation of these two companies hinges on the requirement that International Paper sell off a number of assets, including several board mills on the West Coast. The U.S. Department of Justice has required IP to divest nearly 970,000 tons of containerboard mill capacity as a condition of approval of the acquisition.
The old newspaper market, a West Coast paper stock dealer says, is a bit soft. There isn’t much enthusiasm on the domestic side from newsprint mills. Several ONP collectors say they are apprehensive about shipping loads to these struggling mills because of payment concerns. With more North American newsprint mills in a financial pinch, paper stock dealers are finding fewer domestic end markets for their ONP.
High grades are seeing a rebound. One West Coast paper recycler says that after seeing a sharp drop in prices for office pack and ledger grades at the end of last year, there has been a bit of a rally, with prices up around the $200-per-ton level.
(Additional information on secondary paper markets, including breaking news and consuming industry reports, is available at www.RecyclingToday.com.)