Spring renewal. (Paper).

Uncertainty over geopolitical issues may be the issue du jour, but most paperstock dealers feel that old corrugated containers (OCC) should show some solid improvements moving into the spring.

Strong orders from offshore have helped fuel demand, with the spread in prices between OCC for domestic mills and offshore mills at about $30 per ton. The spread is resulting in more dealers taking a harder look at moving material offshore for the better prices.

Domestically, the paper industry is showing only tepid improvements. There have been some bright spots, although overall the market appears to be somewhat listless. Newsprint producers continue to slash production levels, while many paperboard companies have been taking downtime to remove excess capacity.

While March is still uncertain, more paperstock dealers are of the opinion that prices should start to climb by perhaps the second half of March and into April and further. The overall consensus seems to be that while domestic mills are trying to hold OCC prices at their present level, the shortage of supply and strong demand for the material offshore could force prices up sharply by this spring.

While there is a modest positive tone in the marketplace, the overall forest products industry continues to see difficulties. The recently announced production and capacity figures by the American Forest and Paper Association show that production declined last year for the second straight year. To add further bleakness in the market, the association forecasts further declines this year with only modest improvements over the next several years.

There is expected to be continued rationalization of production lines throughout North America as paper and paperboard companies continued to try to balance supply and demand.

While the overall trend is flat, there could be a decent rebound in a host of grades. Higher grades could see the benefit of better pulp prices. This could firm up markets for pulp substitutes, which had seen prices erode through a good portion of last year.

The battle continues between offshore buyers, who have been raising prices for a number of bulk grades, and domestic mill buyers, who are trying to hold their prices at their present level.

While price spreads between offshore and domestic sides are widening, the tone for many paper stock dealers seems to be that domestic mills will have to start raising prices if they hope to keep a steady flow of material coming through their doors.

The weather problems, especially on the East Coast, could further suppress supplies moving forward.

While the battleground seems to be March, when prices for domestic mills could increase, some vendors now feel that prices could move up sharply as supplies continue to remain tight, and mills attempt to buy more material from a diminished supply universe.

(Additional news on paper markets, including breaking news and pricing, is available at www.RecyclingToday.com.)

U.S. Producer Price Index/Mixed Paper

(per gross ton, monthly average)

Jan 02   174.3
Feb      175.3
Mar      175.8
Apr      227.1
May      262.2
June     499.6
July     658.8
Aug      607.4
Sept     565.8
Oct      551.8
Nov      506.8
Dec      483.7
Jan 03   468.3

Source: U.S. Bureau of Labor Statistics

Note: Table made from bar graph.