Heavy Damage Projected for Deinking Paper Grades

By Ken McEntee

Recovered office paper and related deinking grades in the month of September remained strong, with white ledger in particularly high demand, scrap paper traders reported. Although most traders said they anticipated that off ice paper would bounce downward as generation picks up, the trend over the next year could be significantly upward.

A substantial amount of new deinking capacity is scheduled to start up over the next year, causing one broker to project that domestic sorted office paper (SOP) prices could reach close to $200 a ton next summer. The national average price for SOP in the middle of September was about $120 per ton.

Among the deinking projects slated to come on line early next year include the Augusta Tissue Mill, located at the former Ponderosa Fibers mill in Augusta, Ga. and a new deinking line at Kimberly Clark's Mobile, Ala. mill. Cascades Tissue has acquired the long-idled deinking mill in Hagerstown, Md. The company cited the availability of the equipment at an attractive price when it announced the deal, which suggests the possibility of using the Hagerstown equipment elsewhere.

There has been some speculation that the equipment might be moved to the idled deinking plant that Cascades recently acquired in Memphis, Tenn. A Cascades spokesman, when asked about the Memphis mill, said the company had not made a decision on what would be done with the Hagerstown mill or the equipment inside.

“Demand and supply are very much in balance right now for office paper,” said a broker in the Southeast. “But I think that over the next year we are going to see some real changes in the market with all of the new capacity coming on. By this time next year there could be more than 19,000 tons a month of additional demand.”

Some of that demand, however, may not be additional demand, but rather displacement of demand. The Kimberly Clark project, for example, will likely displace some deink market pulp that the mill is presently using.

As for now, traders said SOP movement remained strong this month, with some mills increasing prices and others holding. Although most mills paying at the high end of the price range tended to hold prices, the low-end prices in the Midwest and Southeast were up.

“Movement of office paper is not really strong, but there are pockets of export demand, like India in particular,” said a broker in New York. “The export prices are better than domestic prices. The same is true for coated book (CBS). It is very strong overseas and that is going to keep some pressure on domestic buyers who will have to pay to get tonnage.”

According to a broker on the West Coast, “Deinking grades are on fire. But historically, deinking grades should be picking up in volume, so supply should catch up to demand during the next couple months.”

Traders said the high percentage of shredded paper in the SOP market is a big factor driving up demand for ledger grades.

“Overseas buyers want unshredded SOP and there is not enough of the unshredded paper out there,” he said. “Two months ago you couldn't give away sorted white ledger and now it is the hottest grade out there. The theory is that there is too much junk in the shredded paper and the overall packs have been too contaminated with groundwood. So that has created a lot more demand for SWL. They need it to brighten up the pack.”

The author is editor and publisher of The Paper Stock Report and Paper Recycling Online. Get more information at www.recycle.cc.