The dog days. (Paper).

The summer may be coming to an end, but for some paper stock grades, especially old corrugated containers (OCC), the dog days may last a while longer. OCC is giving back some of the gains that it saw during the first half of this year.

Prices had topped the $120 per ton level in a number of regions. Export orders were strong, with prices pushing the available tonnage more toward offshore mills.

However, the market has dipped noticeably over the past several weeks, with China, which had propelled much of the upward trend over the past several months, quieting.

Domestically, despite a flurry of announcements by a number of paperboard producers to hike finished product prices (attributing much of the reason to higher raw material costs--notably OCC), end markets are still not too strong. The economic malaise that has swept the U.S. continues to dampen any recovery.

While OCC has been seeing some price erosion, de-inking grades appear to be holding up fairly well. Prices have leveled off, though there does seem to be a more stable environment for the grade. One key reason is that while OCC prices spiked earlier this year and have been spending the past month coming off those highs, grades such as sorted and manifold white ledgers have been increasing more slowly.

With OCC prices slipping, mixed paper is likely to return to its hardluck status. The grade had enjoyed a bit of a renaissance as a substitute for OCC. However, with OCC declining, mixed paper ks becoming less valuable.

The one grade that has shown the least amount of activity through most of this summer is old newspapers (ONP). A sizable amount of downtime throughout North America has choked off many end markets for the grade. At the same time, South Korea, a key buyer of ONP, has not been taking in as much of the grade, reducing overall interest in the material.

Finally, despite significant downtime, it appears newsprint markets will continue to languish. Prices for finished newsprint remain weak, with very little optimism in the near term.

U.S. Producer Price Index/Mixed Paper
* Index based on 1982 average prices as 100

Paper

July 01      172.1
August       172.2
September    174.5
October      174.6
November     174.7
December     175.1

January 02   174.3
February     175.3
March        175.8
April        227.1
May          262.2
June         499.6
July         658.8

Source: U.S. Bureau of Labor Statistics

Note: Table made from bar graph.

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