On the Floor?

Autumn has not been kind to the paper recycling industry. Prices for most paper stock grades tumbled throughout the fall, with prices for some high grades falling by as much as 50 percent from their summer highs.

As December approaches, there is sense that prices may be near the bottom, though several paper stock dealers say some recovered fiber grades could decline by an additional $5 to $10 per ton during the month.

During the past three months, sorted office paper (SOP) and coated book stock, which topped the $300-per-ton level, have fallen to the $160-per-ton level on the West Coast, according to one source. The sharp correction has been driven in part by downtime mills throughout the country are taking.

For instance, Montreal-based Fibrek, a significant consumer of many deinking grades, opted to extend its downtime from two weeks to four weeks at its Fairmont, W.Va., deinking pulp mill this fall. Fibrek said higher recovered paper prices contributed to its decision to extend its downtime.

Index is based on 1982 averages prices as 100; Source: U.S. Bureau of Labor Statistics. Information unavailable for Aug. 2011

Several tissue mills also have scaled back their purchases of SOP in light of slowing demand for their finished products. This has helped to accelerate price declines for SOP.

One East Coast paper stock dealer says mills were getting hit pretty hard when prices for high grades were soaring earlier this year. "When the opportunities came up, they felt that our industry took advantage of them and [they] knocked down prices," he says.

While additional price declines may be in store for high grades, several recyclers say they are resisting the price declines. A packer in the Midwest and one in the East say they are inventorying more high grades in anticipation of higher prices in the next three months.

Pulp substitutes, which traditionally follow pulp prices, also have been trending downward, as domestic consumers continue to cut buying prices and demand for various high grades.

Prices for bulk grades, such as old corrugated containers (OCC) and mixed paper, also have been declining throughout the fall. Several sources say prices could fall below the $100-per-ton level in some regions of the United States.

On a more positive note, several large paper stock dealers report that offshore shipments of OCC are improving. One large dealer says buyers for Chinese mills are buying more OCC, though he says "they are 'sneaking orders'" to keep pricing for the material at its current level.

A paper stock dealer affiliated with a paper company says that while prices aren't where he would like them to be, he says they are steadily increasing. Several of the large paperboard mills in China have low inventories and may have to be a bit more aggressive to build up their supplies, he surmises.

Despite fairly healthy prices for old newspaper, the newsprint sector continues to struggle. The most recent company to fall victim to the diminishing demand for newsprint is SP Newsprint, which filed for Chapter 11 bankruptcy protection this fall. The Dublin, Ga.-based company reported sluggish demand for its finished product as a main reason for the shutdown.

(Additional information on secondary paper markets, including breaking news and consuming industry reports, is available at www.RecyclingToday.com.)