Price trends on the cusp?

Higher demand for most grades in Europe, coupled with signs of a softening market in some US regions, paint an uncertain picture for the future.

The trend in Europe is on the upswing, at least for mixed paper, cardboard and deinked paper. Prices for mixed paper, cardboard and deinked paper increased in mid-February. One contributing factor is persistently low valuation but, as this has been the case for some time, other factors are at play.

These include a noticeable surge in demand from Germany and a potential catch-up by paper mills with low inventories of the raw material, old paper. Market analysts also note the emergence of buyers who have been quiet for an extended period.

But for premium grades, the situation appears to be the opposite. Although these mid-range and premium grades are not the bulk of volumes for most paper recyclers, historically they have been lucrative.

USA: SOFTENING DEMAND

In the US, months of low generation of recovered fibre have caused nervousness from mills about getting an adequate supply. The result has been price increases virtually every month over the past year. For OCC at domestic mills, for example, this has meant a run up of pricing from the US$ 30 range 15 months ago to over US$ 100 recently.

As we enter the second quarter, there appears to be some softening of demand, and hence pricing, especially for OCC. The west coast has seen slight falls, mostly caused by slightly slower export demand. The Midwest and east coast continue to see strong demand for OCC but some softening could be occurring with small price drops being reported. 

VIRGIN PUSH-BACK

Significant new paper mill capacity has come online in the US over the past 24 months and, as these mills scale up production, demand and prices have driven up. However, some older mills that can use either virgin pulp or recycled have become disenchanted with the continued rise in OCC.

Some are pushing back on higher prices and using more virgin pulp. Newly built or converted mills needing 100% recycled fibre cannot alter their feedstock, however.

Some softening for mixed paper is being reported on the west coast as MRFs seem to have had better supply than in recent months with suppliers are offering more for sale. In the east coast and southwest, generation of mixed paper is weaker and supply is tighter.

The one constant across the entire country is low generation of DLK and demand for this higher quality, pre-consumer, material seems to be strong everywhere so prices have been maintained. Supply and demand for high grades and pulp substitutes appear to be in balance although pulp prices seem to be increasing. If the trend continues, there will be more demand for pulp substitutes.

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