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Pricing for sorted office paper (SOP) and pulp substitutes decreased in November by $5/ton in most US regions for the first time this year, according to Fastmarkets’ PPI Pulp & Paper Week pricing survey and market report.
Mills have healthy inventories of deinking grades and pulp substitutes this fall, as well as for finished products, especially in the Away-from-Home (AfH) tissue sector, according to contacts.
SOP’s pricing fall marks its first average decline in two years. Pricing for SOP has either increased or remained unchanged month-over-month since November 2020.
Premiums, which had been elevated for much of this year as supplies outpaced demand, dropped to about $30-40/ton in many trades in November after climbing to more than $100 in some trades and holding mostly at $50-70/ton for months.
SOP’s $233/ton US average in November is a $4/ton decrease month-over-month vs $237/ton in October. Compared with last year, when SOP averaged $166/ton in November 2021, pricing for the high grade is up 40.4%, or $67/ton, year-over-year.
In two years, SOP pricing has shot up. In November 2020, SOP averaged $80/ton, an increase of 191%, or $153/ton, in two years. As the covid-19 pandemic shook up the AfH tissue sector and eliminated generation of SOP as workers stayed home rather than in offices, supplies of high deinking grades have suffered in the last two years.
At the start of October, even more supply disappeared when a Resolute mill caught fire, losing 25,000 tons of inventory, according to contacts. Resolute’s Menominee, MI, mill had a fire on Oct. 6, and warehousing space has yet to be replaced.
While all the high grade tons that typically sell to the Michigan mill found homes for November, contacts said order and volumes for high grades were down this month.
“Stuff that couldn’t go on containers, we asked for releases from our regular-sourced mills, and the releases are coming in slowly,” a supplier in multiple US regions said. “There’s definitely higher inventories at the domestic mills.”
Mill contacts said they have received more offers for tons than they can consider. Suppliers said it has taken more calls to get tons off floors.
“Kimberly-Clark (K-C) gave us a smaller order,” a seller said of SOP. “They’re getting offered a lot of material to them.”
K-C is one of the largest three tissue paper producers in the USA, along with Procter & Gamble and Georgia-Pacific.
Export buying also pulled back some in November, yet pricing held steady. Sellers at the start of October told of fewer order for US high deinking grades from mills in South America, notably Colombia and Ecuador. This buying lull remained into November.
Pricing for SOP export remained unchanged, at a high side of $390/ton FAS out of the New York/New Jersey ports, and a high side of $340/ton FAS out of the Long Beach/Los Angeles ports.
Mexico’s hunger for these grades is still apparent, contacts said. This is despite Mexican mills’ efforts every year to work down their inventories so as to not sit on so many tons at year end.
“High grades are still in demand, maybe a bit less since we are facing the end of the year and … Mexico historically lowers inventories at the (end) of the year,” a contact said.
Pulp substitutes pricing, too, fell for the first time this year, by $5/ton in most US regions. The price declines for virgin pulp have poured into secondary markets, contacts said, and pricing decreased. Mill contacts said they were able to negotiate lower premiums and pricing for pulp subs, especially hard white envelope cuttings (HWEC).
HWEC, at a US average of $443/ton in November, has increased 23.1%, or $83/ton, vs the $360/ton US average in November 2021.
“I’ve also been offered hundreds of tons (of HWEC) that were going to IP (International Paper) this week that IP was taking that they’ve pushed away from,” a mill buyer said on Nov. 3, in one example.