As the new year unfolds, pricing for each of the major recovered fiber grades purchased for the domestic market dropped or remained unchanged, reflecting what sources say will be a challenging year for recovered fiber mills and dealers.
Domestic pricing for mixed paper, old corrugated containers (OCC), old newspapers (ONP) and sorted office paper (SOP) fell by $5 to $10 or remained unchanged in every U.S. region compared with the month prior, according to Boston-based research firm RISI’s PPI Pulp & Paper Week pricing survey reported Jan. 6.
A recovered fiber broker based out of New Jersey says China’s demand for material from the United States has been much weaker than it has been historically.
As for 2016, he says he doesn’t see much to be optimistic about regarding recovered paper markets in part because of slower growth being seen in China’s economy.
“Do you remember Rocky 3 when they asked Clubber Lang, ‘What’s your prediction of the fight?’ and he said, ‘Pain. And lots of it.’?” the broker asks, adding, “I think unless something in China dramatically improves, it’s going to be an extremely tough year for the industry.”
He adds that China continues to play an immense role in the direction of the market.
“My hope as an exporter and a businessman would be that China would sort out their problems sometime within 2016, preferably by the midpoint of 2016,” the broker says.
In addition to China, the East Coast-based exporter says his company ships a lot of material to India, which has seen slower economic growth and is struggling as China has in the past year.
Paper mills in these two countries as well as in Indonesia, South America and South Korea each share a similar problem, “and that’s just that business is not very good,” the dealer says.
While the brokerage has an internationally diverse lineup of mill customers and can find enough activity in the market, it is always a matter of pricing, he says.
In the United States, he credits strong domestic demand for OCC for preventing prices from plunging for that paper stock grade.
“Domestic mills have been running pretty well, and that’s one of the main reasons OCC pricing has remained as steady as it has in the last nine to 12 months because the export demand has been very, very weak,” the broker says.
A source based in the Pacific Northwest says “nobody is turning away corrugated,” referring to domestic consumers.
While he says this is typically a slow period for domestic demand related to OCC because its largest consumer, the agriculture sector, is experiencing a seasonal slowdown, mills are taking what is being offered to them.
The overseas market is another story, however. “There are plenty of mills that need to replenish, but there’s so much volume right now other than corrugated, it’s not real attractive to export corrugated,” the source in the Pacific Northwest says.
Export prices to China declined for mixed paper, OCC and ONP in each U.S. region. SOP experienced the only positive price change, increasing $3 in the Los Angeles and San Francisco/Oakland regions and $4 in New York, according to PPI.
The Pacific Northwest source points to yet another problem with China: The Chinese government was “very slow” to issue 2016 import licenses to U.S. mills. As a result, many U.S. mills still need material.
“There are plenty of mills that need to replenish, but there’s so much volume right now other than corrugated, it’s not real attractive to export corrugated.” – a broker based in the Pacific Northwest
The West Coast-based broker explains, “Their inventories were drawn down in December when they weren’t able to buy because they didn’t have their 2016 import licenses.” He says mills were reluctant to buy fiber for import because they didn’t have their licenses.
Mexico, on the other hand, has been buying more than in recent months, he adds. “That’s helping in the Southwest and in Texas,” he says.