Office paper market continues comeback in July

By Ken McEntee

Following the long Independence Day weekend, markets for office paper and other white deinking grades remained strong, continuing on an upward trend that is generally expected to carry at least through August. In the weeks prior to July Fourth, traders speculated that heavy buying to get domestic mills through the long weekend would push scrap paper prices upward.

What they weren't sure about was what would happen after the holiday.

A week after Independence Day, markets remained strong. Sorted office paper (SOP) prices averaged $108.75 per ton, the highest since February 2005, when the grade averaged $112.92 per ton. Also hot were pre- and post-consumer white ledger and coated book stock (CBS). The latter averaged $120.42 per ton, the highest since February 2005.

Most traders of office paper said the market for SOP remained tight in early July, noting that some mills reportedly had extremely low inventories. Several suppliers noted that SOP and CBS inventories at Georgia-Pacific's Muskogee, Okla. mill were very low following the holiday. According to one trader, CBS stocks in Muskogee were down to three days. That, according to one broker, was the exception and not the rule.

"Coming out of this weekend after the holiday, nobody I talked to is really desperate for tonnage," he said.

SOP prices in the Northeast U.S. and Eastern Canada were reportedly as high as $135 a ton, but were mainly being reported between $110 and $125 a ton. "The high price for SOP that respects the PSI standards for No. 37 office paper is $135, but there is very little of that grade around," said one buyer in that region. "That is maybe 10 percent of what comes in to us."

Most SOP going to that company is being downgraded to a price of $125, and for highly contaminated paper, as low as 60 percent of that price. "To get $135 the paper has to be not shredded and have no contaminants - no groundwood and no OCC," the buyer said.

SOP prices were reported as high as $110 a ton in the Midwest and Southeastern regions, with lower grades of office paper selling at $75 a ton. A buyer said prices were being driven up in part by “panic buying” by mills that were holding light inventories.

With the strong markets for SOP, some packers said they have little incentive to pull whites out of office paper to make sorted white ledger (SWL). SWL was reportedly selling between $175 and $195 in the Northeast, averaging about a $10 to $12 gain compared to last month.

"With SOP at $125 and sorted white at $175, it's not worth it for us to sort out the whites," said a packer in New York. "To sort out the sorted white ledger we would have to pay four people $13 an hour including benefits to pull a ton out in an hour. That would cost us $52 an hour for a ton. It's not really worth it to bother at that point."

A supplier in the Southeast, noting a larger margin between SOP and SWL in his region, said sorting out the whites would be well worth it. "With office pack at $110 and white ledger at $200, there's a $90 difference," he said. "That should be enough to entice packers to sort the whites out. The thing is that so much of the SOP today is coming from shredders. If you have a mobile shredder you don't have the chance to pull anything out. If you're going to take it back to your plant you can do some sorting."

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