What’s Happening with the Office Papers End Use Market?
December 2, 2015
By: Bill Moore, President Moore & Associates
Editor’s Note: The author will be speaking at NAID 2016 on the near-term and long-term outlook on recovered office paper, which is such an integral factor in hard copy destruction.
Here Bill shares his take on the immediate factors affecting that value. Those attending NAID 2016 will learn a lot more…
Sorted Office Papers (SOP) has been one of the weakest grades of recovered paper over the last six months. While the whole recovered paper market has been soft, SOP stands out with its falling prices. The bulk, low grades OCC, Mixed Paper, etc. had a strong upward price surge in the second quarter of 2015, but SOP was stable at best during the period. And while OCC and others have given up most of those price gains, SOP prices have fallen even further.
So what’s going on? Most keen watchers of the market have not reached a consensus of why the SOP market has been so soft, but there are a series of factors many agree on. Exports of SOP have been down, based on weaker global demand for the grade, Mexico generating more recovered office papers in their own country, and the strong US dollar versus the other major world currencies, making US material more expensive.
Another factor that is a reality is the use of more virgin based fiber in the tissue sector and a printing/writing papers sector that is declining steadily in the US. The market for recycled fiber content printing.writing papers has never matured much and the need for recycled pulp from SOP has been fairly flat for years.
Several tropic regions (e. g. Indonesia) of the world are rapidly increasing capacity to produce bleached market pulp from fast growing tropical hardwood trees. These capacity increases, coupled with reduced demand globally for printing/writing papers have moderated virgin pulps prices, making it an attractive alternative to recycled fiber for the tissue sector (an important market for SOP).
So a combination of things have led is to where we are at right now. The big question is where does the market go from here? With China’s overall demand for recovered staying weak, the market outlook in not a good one for sellers. However given the low prices for SOP, it is likely that the bottom of the current pricing cycle is at hand.
Click here to register for NAID 2016. Substantial discounts are available to those who act before Dec. 31.