In a State of Flux

Following the recently concluded Paper Recycling Conference & Trade show, which was June 13-15 in Chicago, a number of paperstock dealers are expressing modest optimism that markets will hold up going forward. Despite this optimism, the short term will undoubtedly present challenges in terms of market conditions for some recovered fiber grades.

Old corrugated containers (OCC) continue to pose some challenges for paperstock dealers. Offshore demand is muted as Chinese buyers step away from the market because of higher prices. The impact of this slight backing off on the part of buyers for Chinese firms has caused price declines, though they have not been as severe as some had initially feared. Even with these lower prices, several dealers say the first part of the summer is typically slower, with a pickup in demand happening into the fall in anticipation of holiday buying. Therefore, softening in price and demand is not a surprise.

Even with the much-publicized problems in the newsprint industry (plant closings, Chapter 11 filings, decline in newsprint production), price and demand for ONP has been fairly strong during the past several months. Several recyclers say that even with the softer demand from the newsprint industry, the overall generation of new ONP supplies has been declining. This is creating shortages of material on the market.

Although ONP prices have been seeing a bit of resurgence, an issue that is becoming more widely discussed is the increased examination of several ONP grades. During the recently concluded Paper Recycling Conference, one session was dedicated to the need to update standards for several news grades. A number of paperstock dealers and mill buyers say the quality of regular No. 6 ONP and de-inked news (No. 8) has degraded quite quickly. Even with better sorting and cleaning systems at single-stream MRFs (material recovery facilities), more paper mills are saying the quality of ONP has become so bad that some mills are downgrading the material to a mixed paper grade. Other paperstock dealers are questioning if there will be a future at all for a clean grade of ONP.

A recent report from the American Forest & Paper Association (AF&PA) reiterates the modest improvement that has been seen in the paper recycling market. Reflecting the improved market for recovered fiber, domestic paperstock consumption increased by 7.1 percent in May compared to May 2009 as well as increasing by 1.3 percent from April 2010. Further indicative of a recovery, throughout the first five months of this year, domestic paperstock consumption increased by 8.5 percent compared to the first five months of 2009, the AF&PA reports.

Leading the way has been OCC, which saw domestic consumption increase by 11.7 percent, followed by mixed paper at 5.3 percent and ONP at 5.2 percent.

Recovered fiber exports also grew. For May, a total of 1.8 million tons of recovered fiber were exported, a 7.7 percent increase from the same time last year. For the first five months of this year paper stock exports increased by 3.5 percent, compared to the same time last year.

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