U.S. West Coast Exports of OCC to Slow For Next Three Weeks

Baled OCC, Old Corrugated Cardboard, in 44,000-lb Loads

By Brook Edwards, Market Analyst, The Brown Sheet™

As overall domestic pricing in the U.S. moves up closer with export pricing on the West Coast, overseas buyers feel no advancement is warranted to attract tons they will need to purchase in November.

China Mills Slowing Down

Nov. 5, 2010 - Air quality issues have slowed manufacturing to a virtual standstill in the Southern City of Guangzhou in Guangdong Province, China, where the 2010 Asian Games are taking place November 12 - 17. This slowdown has been ongoing for the last month as officials try not to repeat what happened in 2008 at the Beijing Olympics — “Bad Air”.

(Note: Weeks prior to the 2008 Beijing Olympics, Chinese officials ordered hundreds of manufacturing plants shutdown in an effort to reduce air emissions and improve air quality for visitors and athletes.)

These games virtually affect all of the import business of raw fiber because Guangzhou is the leading city of China's Economic Development Reform that started back in 1978. The city prides itself on having built a business community of thousands of large, medium, and small sized enterprises which offer more job opportunity and make the city a heavily populated area. So the shutdown of manufacturing means less packaging needed, so nationally the paper mills slow their pace for the next 30 days as they continued to manufacture when one of its main hubs of manufacturing was not ordering packaging.

This now will start to affect West Coast prices as the intermediate high of $220 has been recorded for now, per our sources in Long Beach, California. This undoubtedly will affect the domestic buyers when they start getting a few more calls from generators wanting to move tons. So, the closing of the gap that took place for the last couple weeks might start to widen on the West Coast in the next few days as mill prices are posted to the public.

The Southeast might just be a market by itself. To stay on top of what is happening there I believe it would be necessary to live there. The market continues to use all tons available plus a good supply of pulp. Rumors are out weekly about the possibility of mills taking downtime, so their tons might be available?

As I am writing this the rumor of the day is that IP is releasing tons to cool the market, but that is far from being confirmed. In the Midwest — from Illinois east — one group of buyers is experiencing a lack of shipping containers where they are needed, but the domestic pricing still rose during the last half of October, so that does not seem to be affecting the marketing of the lower grades.

The office papers are trading on a generation/supply. Their market is high enough that both buyers and sellers are not quibbling over $5 to $15 movement either way.

The sales of Number 6 News is virtually off the books since the mills digest that in with Mixed paper at a high rate, so it is likely to be removed from existence.

All in all, as we start November and the official Holiday Season and we now know who will be going to Washington, the market is apparently in good shape, slightly favoring the generation side for now.

About The Brown Sheet™
The Brown Sheet is a brief bi-monthly newsletter that focuses on the recycled fiber market and provides recycled fiber producers with the knowledge they need to negotiate fair terms and prices for their baled product.

The Brown Sheet reports price changes for corrugated and low-grade fiber products and explores current and future markets.

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SOURCE: The Brown Sheet