The Market: $150 SOP shocks traders

Published by The Paper Stock Report - www.recycle.cc

By Ken McEntee

October 14, 2011

Sources on October 14 confirmed that Georgia Pacific is dropping its price of non-contract sorted office paper (SOP) and coated book stock (CBS) to $150 a ton effective on October 17 for its Eastern and Midwestern mills. Information was unclear whether that price also would include mills that draw from the west, such as the Muskogee, Okla. mill.

That price, which no other company has reportedly matched as of October 14, represents a decrease of more than $100 a ton for SOP in less than a month.

That free fall in prices trivialized a $30 to $50 per ton drop in SOP prices reportedly being paid in the Northeast U.S. and Eastern Canada – a decline that otherwise would have been described as astonishing.

“The Canadian mills are still paying in the $220 to $230 range,” said one broker.

Meanwhile, traders speculated on how much lower SOP prices might go as early as next week.

Prices at the Green Bay mill dropped from $250 in September to $200 on October 1 to $150 in mid-October..

“If Georgia Pacific is paying $150 for prime material, there is no telling where Fibrek and Kimberly Clark are going to be for the lower quality of fiber they buy,” said one. “I see this as a very strong statement about the state of the market. I anticipate a continuing erosion of pricing.”

The timing of Georgia Pacific’s announcement sets up an interesting pricing sheet in this issue of The Paper Stock Report. As of the close of business on October 14, sources said Canadian producers Cascades and Kruger had not yet responded to GP’s drop. But they anticipated a nationwide free fall in SOP prices during the week of October 17. As this issue stands, Eastern mill prices are still listed at $200 to $220, while other Southeast and Midwest prices reflect the $15o price being paid by GP mills.

Traders said domestic mills that use SOP and CBS are loaded with inventory, while export demand also is lackluster.

“CBS and SOP are very ugly,” said an East Coast broker before the word spread about GP’s price drop. “Coated book is at 200 or well under. South America has been out of the market for the last three months. SOP at the NY pier was $230 on October 1 and it is down to $210 today.”

The drop in prices of sorted white ledger (SWL), so far, have not been as dramatic as SOP. One reason, sources said, is that there is not a lot of SWL available on the market.

“I had a hard time putting five loads together this week,” one broker reported.

At the same time, though, large Southern consumers like International Paper and Boise reportedly were turning the grade away.

Nevertheless, with a huge price difference between SOP and SWL, packers are expected to start sorting more ledgers out of their office paper.

There may be a small window of time for that strategy to work, but in a sort time you can expect ledger prices to drop in line with the other white grades, traders said. Along with drops in deinking grades, pulp substitutes also continued to weaken this month in line with wood pulp prices.

According to a broker in the Northwest, Waste Management and GP Harmon Recycling, which have indexed contracts with large document destruction companies, stand to take huge hits on SOP.

“They are paying $270 a ton for paper and selling into Mexico for $210,” the broker said.

Before GP’s announcement, traders noted a “chaotic” market, but many described is as a large market correction and no reason to panic. Afterward, all bets were off.

“In the long term, we’re still in a fiber-short world,” said one broker. “Demand will continue to outstrip supply. My suppliers are in shock right now, but I think were going to find a balance in the next few weeks. Last time I checked people were still using toilet paper.”

Another broker questioned low prices would actually go.

“Mills understand that they need a supply network,” he said. “It is not good to shock the market.”

OCC

With SOP making the biggest news, the fall of old corrugated has almost gone unnoticed.

“The worm has turned on OCC,” said an east Coast broker. “I’m not sure why. All of my suppliers are busier with OCC than they have been in a while. Although none of the mills seem to be in the market to buy extra tonnage, the market is not horrifyingly out of balance. I just visited 10 to 15 suppliers and nobody was backed up with OCC.”

Regardless, domestic and Chinese mills have stopped buying and some traders were bracing for a price tumble.

According to one source, International Paper’s Cedar Rapids mill in Iowa has told its suppliers to sell its tonnage off elsewhere through the end of November. If you have to ship OCC to the mill in November, you’ll get $100 a ton, the source said.

On the export market, Ralison International, which buys for China’s Lee and Man Paper, reportedly has told suppliers not to ship any more tonnage this month.

According to one broker, American Chung Nam, which supplies China’s giant Nine Dragons Paper, is issuing purchase order with the price “to be determined.”

“You can ship, but the containers will be on the water before you know what you’re getting paid,” he said.

An East Coast exporter described the OCC market as “unglued.”

Traders said some of the market weakness predated China’s annual National Day holiday that starts on October 1. But there was some panic when buyers returned to the office after a week off.

“It’s not something that suppliers shouldn’t anticipate,” said one broker. “But there is anxiety when you’re trying to call your customers and they are not answering the phone. Then when the buyer gets back to the office he is bombarded with 15 people panicking to reach him on the phone. I don’t blame the buyers for wanting to step back and take a breath.”

Before the holiday week, U.S. OCC was reportedly moving to China from Los Angeles for $271 per metric tonne, delivered to major Chinese ports. After the holiday prices were around $242. Exporters at mid month were paying suppliers about $210 per ton FAS in Los Angeles and around $190 in Seattle, traders reported.

“The Chinese buyers aren’t really aren’t saying very much right now,” said one broker. “And some of them are not placing orders or releasing prices.”

According to an East Coast broker, “America Chung Nam is staying out of the market as an attempt to bring prices down.”

Domestically, traders said, board mills are generally sticking to contracts and taking virtually nothing else.

“There is a lot of downtime in China and the price of OCC was too high for too long,” said a West Coast broker. “Now mills are waiting for prices to come down. The mills we’re selling to figure that if the CIF price is $240 today, if they wait a week it will be down to $215 maybe. The CIF price has fallen $35 a ton since the end of September.”

Traders noted the Chinese government’s tighter control of credit as another factor in reducing containerboard demand.

“How is a box shop going to buy from a linerboard mill when they can’t get the credit?” asked one exporter. “Inflation in China is a lot higher than the government is reporting. Normal people with college degrees can’t afford the basic necessities. Nine Dragons has a huge debt to equity ratio. That’s bad. After all that expansion the mills are running very slow.”

Import licensing also has been cited as a factor to watch over the next two months. Chinese mills need to apply for licenses to import recovered paper for 2012. Under current licenses, tonnage needs to arrive before December 20, one exporter said.

“There is no doubt the big players like Nine Dragons, Lee and Man and Asian Pulp and Paper are going to get their licenses,” he said. “But the government is really cracking down on the smaller guys.”

Some traders say that while OCC prices are dropping now, Chinese mills will want to be sure to get orders received by December 20.

That’s one reason why U.S. scrap paper exports generally see an upward bump in volume between October and December.

“We’re always very strong in the fourth quarter,” one export says. “Normally the Chinese buyers know that prices are down from the summer and they come in pretty strong.”

That’s what one brokerage is expecting.

“We’re betting that by November the OCC price is going to start back up due to increased export demand,” said an exporter there. “I am looking for bump up in the beginning of November, then some downward movement for the next several months.

Nine Dragons threw another fly into the ointment last month with the announcement that the start-up of six new paper machines has the delayed. Nine Dragons brought on substantial new capacity this year, bringing the company’s total capacity to 11.5 million tons per year. The six new machines, which were scheduled to start up this year, would have added about 2.4 million tons of new capacity.

Cascades invests in New York containerboard mill

Cascades invests in New York containerboard mill
June 27, 2011
Cascades Inc. said its Norampac division will invest in Greenpac Mill LLC, a corporation created with the Caisse de dépôt et placement du Québec, Jamestown Container and one other industry partner for the purpose of constructing and operating a state of the art containerboard mill to be located in New York state.

The Greenpac mill will be constructed for a total cost of $430 million on property located adjacent to an existing Norampac facility in Niagara Falls, N.Y. Greenpac will manufacture a light weight linerboard, made with 100 percent recycled fibers, on a single machine having a width of 328 inches, with an annual production capacity of 540,000 short tons. This machine will be one of the largest of its kind in North America.

Fiber supply will be carried out by Cascades and its recovery operations. Sources of old corrugated containers are numerous and significant in the region where the mill will be built, which will impact favorably Greenpac's raw material procurement, the company said. With regards to sales, customers have already been secured for more than 80 percent – or 435,000 short tons - of production. Norampac converting operations will purchase 170,000 short tons of the production.

"The investment that we are announcing today is the result of the combined efforts of Cascades and its partners and is consistent with our development strategy which aims to position the company amongst the leaders in terms of productivity and profitability in the packaging and tissue sectors," said Alain Lemaire, president and CEO of Cascades. "As we have stated in the past, we strongly believe that Cascades' future success will be dependent on our ability to offer high performance innovative products which will better meet the needs of our customers, at a cost that will be amongst the lowest in the industry. Moreover, the innovative structure of this partnership will allow us to reach this objective while maintaining the financial flexibility achieved through recent divestitures. We are also confident in regards to industry's mid and long-term perspectives and we strongly believe that Greenpac will contribute positively to our net profitability once full ramp-up is achieved."

Marc-André Dépin, president and CEO of Norampac, said the Greenpac mill will include numerous technological advances, making it a unique project of its kind in North America.

“In particular, the linerboard that will be produced on the new machine will be able to achieve optimal strength while maintaining a low basis weight thereby allowing our customers to better respond to the growing trend towards lightweight packaging," Depin said.

Moreover, the building and the machinery will be designed for optimal energy efficiency and many operations will be automated. Process water will be treated and reused in order to reduce consumption as much as possible and the state of the art management system for recycled fibers will have a positive effect on the environmental performance of the mill.

The paper machine will be manufactured by Metso, Voith will provide the stock preparation equipment and anaerobic effluent treatment plant and Siemens will provide the power and control technology.

Financing and Partnership

The $430 million cost of the project will be financed by a $140 million equity investment in Greenpac of, which $83.6 million will be invested by Cascades, $28.3 million will be invested by the Caisse and $28.1 million will be invested by Jamestown Container and another industry partner. The remainder of the financing will be in the form of debt, including senior debt in the amount of $228.9 million, which was led by GE Capital, and subordinated debt in the amount of $61 million.

Senior debt will be provided by an international banking syndicate managed by GE Capital. The subordinated debt will be provided by the Caisse and will serve to bridge expected refundable tax credits.

The construction of the mill will create 108 new jobs in the State of New York, as well as contribute to the economical development of the region.

New DuPont herbicide will contaminate compost

New herbicide will contaminate compost
Composting News
By Ken McEntee
June 17, 2011
In reply to the U.S. Composting Council’s (USCC) request for a special review of the registration for the new herbicide Imprelis, the U.S. EPA Office of Pesticide Programs said it is seeking the advice of legal council about the matter. Imprelis, made by DuPont, can survive the composting process and remain active in a finished compost product.
The product label specifies that clippings from lawns treated with Imprelis should not be used as a mulch or placed in a compost pile.
Imprelis has been registered in every state except California and New York for use by licensed applicators on lawns and other turf areas for control of broadleaf weeds like dandelion, clover and plantain. The Composting Council of Canada said it doesn’t appear that Imprelis is available for sale in Canada, having yet to be registered through Health Canada’s Pest Management Regulatory Agency (PMRA).
USCC last month issued an alert warning composters to watch out for grass clippings contaminated with the new herbicide. USCC said grass from treated lawns could end up in a compost pile, and unlike most herbicides, Imprelis will survive the composting process and still be active in the finished compost. Preliminary research has shown that Imprelis does not break down significantly faster than the leaves and grass in the compost, so the concentration stays about the same. An unsuspecting gardener using contaminated compost could end up damaging their flowers and vegetables, most of which are also broad-leafed.
The product label contains a warning about composting:
“Do not use grass clippings from treated areas for mulching or compost, or allow for collection to composting facilities. Grass clippings must either be left on the treated area, or, if allowed by local yard waste regulations, disposed of in the trash. Applicators must give verbal or written notice to property owner/property manager/residents to not use grass clippings from treated turf for mulch or compost.”
In March, DuPont issued suggested language for applicators to use regarding management of grass clippings from areas treated with Imprelis:
“Today we have treated your lawn with an innovative weed control product from DuPont. The product label requires that you do not use grass clippings from areas treated with Imprelis for mulching or compost, or allow for collection to composting facilities. Grass clippings must either be left on the treated area, or, if allowed by local yard waste regulations, disposed of in the trash.”
"One problem is that the warning is on page seven of a nine page label," said Dr. Stuart Buckner, executive director of the USCC. “Unfortunately not everyone reads or follows the label. We are requesting the U.S. EPA initiate a special review of the registration due to the likelihood of residual herbicide levels in compost damaging non-target plants."
He said he received a reply from the EPA acknowledging the request and saying that the Office of Pesticide Programs is seeking the advice of counsel. No timeframe was given.
USCC said it is unlikely that municipal or commercial compost will contain significant amounts of Imprelis, though it is possible in suburban areas where a large amount of clippings could come from commercially treated lawns. It could especially be an issue for places like schools, recreational fields or golf courses that use their grass clippings to make compost and then use the compost in landscape beds or gardens instead of placing back on turf.
"We are alerting our members to this issue, that they need to make sure their haulers are informed to not bring them grass clippings that have been treated with Imprelis," Buckner said. "We also suggest they work with their state's bureau of pesticide applicator licenses to ensure applicators know about this restriction.”
DuPont said Imprelis, an innovative product to control a wide spectrum of broadleaf weeds, is the “most scientifically advanced turf herbicide in over 40 years.” Imprelis contains a single active ingredient – Aptexor - that is absorbed by the roots and shoots of target weeds providing consistent performance.
Aptexor, the first compound in an advanced generation of carboxylic acid herbicides, has unique properties at both the molecular and whole plant levels that translate into more powerful herbicidal activity. The most noticeable symptoms after application include the bending and twisting of stems and the cupping of leaves.

The Market: Recovered paper could see big shortages over the summer

From The Paper Stock Report, June 10, 2011
Copyright 2011, McEntee Media Corporation

June 10, 2011
By Ken McEntee

Scrap paper traders are wondering whether summer will bring a spike in prices of old corrugated containers (OCC) and other grades. Since the beginning of June, export prices for OCC have moved upward about $10 a ton. But prior to that, even as OCC was been shipped out of the country in unprecedented levels during the first four months of the year, prices were relatively steady. In fact, pier prices in most markets actually were lower in May than in February and March.

In April, the latest month for which trade data is available from the U.S. Commerce Department, OCC exports to China reached 781,000 short tons – 10 percent higher than the record 710,000 tons in March. Yet FAS prices for China-bound OCC actually declined slightly between late March and late April. In New York, for example, prices dropped from about $202 per ton at the end of March, to about $199 per ton at the end of April, before sliding back up to about $202 in late May.

But traders note the seasonal downturn in OCC generation, and suggest that strong demand by domestic mills, along with Chinese mills kicking into high production season for end of the year holiday boxes could leave mills struggling to find tonnage.

On the other hand, other sources says, record volumes moving to China earlier in the year may have built inventories enough to avoid a surge in summer buying from mills in that country. Also, according to a West Coast broker, flooding and other severe weather conditions may reduce the supply of agricultural products this summer, meaning containerboard mills will be needing less OCC.

However, he says, “Mills are all saying that they have strong orders and they are nervous about the ability to gather up enough OCC through the summer.”

Export prices for OCC reached $230 per ton (FAS) at the Port of Long Beach during the second week of June, while going at $210 in Seattle. OCC exports out of New York were hitting the $210 per ton mark.

“OCC prices were flat for a long time,” said a broker in the Northeast. “Prices are starting to move.”

Still, he said he doesn’t expect to see a huge surge.

“I don’t know that we’ll see a huge spike, but if generation is down and demand stays strong, prices will only get stronger,” he said.

He, along with several other traders, noted that the three-day Independence Day weekend has some buyers nervous.

Traders reported that old newspaper prices (ONP) continue to hold steady despite a significant downtime and other reductions in ONP usage.

“Catalyst Paper’s Snowflake, Ariz. mill is down to half its normal consumption of ONP,” one supplier said. “At one point they has 215 boxcars from the Midwest lined up. They were delayed by the flooding and now they have a lot of fiber sitting down there.”

In Dublin, Ga., SP Newsprint was reportedly using about 500 tons less ONP per day than normal.

AbitibiBowater took market-related downtime at several of its mills in the Southeast U.S. and in Ontario. That was on top of mill closings by Blue Heron Paper, Oregon City, Ore., in February, and the, Katahdin Paper mill in East Millinocket, Maine, in April.

All of these capacity reductions are coming despite a weaker-than-normal U.S. dollar that is making U.S. newsprint attractive on the global market.

“Newsprint is a grade that is really hurting,” understated a supplier on the West Coast.

Chemical deinking grades, meanwhile, are in extreme short supply, causing some traders to wonder how mills will keep themselves furnished through the summer.

“Sorted office paper is under assault,” said a broker in the Northeast. “The pipeline is dry and there is nothing on the horizon to derail that trend. While the demand for away-from-home napkins is showing some signs of life, those mills are going to need fiber to produce their product. The price could go to the moon, but that isn’t going to create more paper.”

Sorted Office Paper (SOP) this month pushed up about $10 a ton.

Along with declining supply has come deteriorating quality.

A couple mill buyers reported that their old nemesis – self-adhesive labels – are beginning to be a problem.

“We’ve had a deinking specialist in this week to see what we can do about it,” said the buyer for a Northeastern tissue mill.

China’s crackdown on small mills helps Orient Paper

Source: The Paper Stock Report / Paper Recycling Online

The Chinese government claims its mandated closure of hundreds of small, independent paper mills is due to the pollution caused by these mills. Is that the real reason, or is the government squashing small business to the advantage of giant, publicly traded paper making corporations?

May 10, 2011

Double digit growth in revenue and net income for China’s Orient Paper Inc. was partially attributed to the government’s crackdown on small mills. Orient Paper, a leading manufacturer and distributor of diversified paper products in northern China, said first quarter revenue increased 25.6 percent year-over-year to $33.2 million and gross profit increased 60.6 percent year-over-year to $7.8 million, with gross margin of 23.4 percent. Net income increased 55.2 percent year-over-year to $4.9 million.

"Our double digit growth in revenue and net income during the first quarter of 2011 was largely due to higher selling prices resulting from factors related to inflation on commodity costs in China and strong market demand and a supply shortage caused by the government-mandated closure of smaller paper manufacturers in the second half of 2010," said Zhenyong Liu, chairman and CEO.

Due to the loss of an old corrugating medium paper production line since June 2010 to make room for the new production line under construction, revenue from corrugating medium paper amounted to $8.5 million in the first quarter of 2011, representing a decline of 10.5 percent compared to $9.5 million in the year ago period.

Despite a decrease of 9,139 tons in total quantity sold, ASP for corrugating medium paper rose 26.6 percent from $304 per ton in the first quarter of 2010 to $385 per ton in the first quarter of 2011 as a result of increasing customer demand and regional shortage in supply of paper products, caused by government mandated closures of other smaller paper manufacturers Orient said.

More...

Amazon now selling more Kindle books than paper books

May 19, 2011

The demand for paper books is on the decline, according to Amazon.com. Less than four years after introducing Kindle electronic books, Amazon’s customers are now purchasing more Kindle books than all print books – hardcover and paperback – combined.

“We had high hopes that this would happen eventually, but we never imagined it would happen this quickly, said Jeff Bezos, Amazon’s founder and CEO. “We've been selling print books for 15 years and Kindle books for less than four years.”

More...

Composting Council to search for new executive director

From Composting News, May 2011

By Ken McEntee

Frank Franciosi, president of the U.S. Composting Council, said the USCC board will conduct a nationwide search for an executive director. Present executive director Stu Buckner’s contract expires at the end of 2011. Buckner will be considered as part of the search if he wishes to be.
Franciosi said the USCC board has retained the services of Sterling Martin Associates, a national firm, to conduct the search.
“This will be an open and transparent search that will include our existing executive director, staff and members, as well as individuals within and outside the composting industry,” Franciosi said. “We are confident that Sterling Martin Associates possesses the skills and experience to deliver the leadership that the USCC wants and deserves.”
“The search is due diligence on our part as a board, to see who is available and at what salary,” Franciosi said.
The board in 2010 did a compensation study for the executive director’s position and other positions within the organization. However, he said, salary is not an issue in Buckner’s possible replacement, noting that Buckner’s earnings as executive director are substantially incentive based.
Franciosi said in the announcement that USCC is entering a “new phase of growth.”
He didn’t indicate that the board has any philosophical differences with Buckner regarding the future direction of the organization.
The search process is expected to launch in early May.
Buckner, who previously served as USCC president, was hired as executive director of the struggling organization in December 2001. Since that time, USCC membership has grown substantially and is on a solid financial footing. Net assets as of the end of 2009 exceeded $715,000.
Matt Cotton, who served three years as president, acknowledged the progress made by the organization during Buckner’s leaders, but said conducting the national search “is the responsible thing to do.”

Paper recycling market update

IN BRIEF:Short investories have bitten some mills in the backside. After expecting a mild February, short supplies of groundwood and old corrugated containers have driven prices upward. Citing a bad deal for shareholders of Smurfit Stone Container Corp, investment firms that claim to hold 9 percent of Smurfit's common stock have expressed their intention to vote against the merger of Smurfit with Rock Tenn Corp.

See the latest issue of The Paper Stock Report or Paper Recycling Online for the latest information.

January 2011 Composting News

Headlines from the January 2011 issue of Composting News

Ohio releases updates to composting rules

Dow to restrict aminopyralid usage to limit compost exposure

Enviva LP plans North Carolina wood pellet plant

Michigan extends public comment on compost rules

EPA to defer greenhouse gas permitting for biomass plants

National compost prices

SWANA e-session: best practices in food waste programs

EPA releases data on animal feeding operations

Waste Management to open organics plant in Florida

Compost product news: Morbark, Vertal, Peterson