My read on the ONP situtaion is tied to three phenominon:
1) Paper industry price gauging of three years ago
2) Consumer/advertiser preferences
3) Relatively high contamination
1) Price gauging of the past--as we all know, eveything in the paper
industry hit all time highs three years ago. For those firms that could
pass on the costs to their customers, fine, but for those marginal
papers, usually the "afternoon daily in major cities, the price spike in
news was the final nail in their coffin. their production costs doubled
at a time when their readers were increasingly less willling to abosrb a
price increase. Now that many of these afternoon dailies are gone,
there is nowhere near the previous level of demand for newsprint, and the
market has not had long enough to create new sources of demand. I call
this the too much newspaper chasing too fews newspaper companies scenario.
2) Consumer/advertiser preferences. News paper is increasingly an
unpopular medium to advertise on--it looks dull, and newspaper
experiments to make newspapers four- and six- color masterpieces (USA
notwithstanding) have failed miserably. People want to advertise on
something that looks sharp, which usually means coated paper, not news.
3) High levels of contamination--aside from OCC, which has much more
fiber strength, ONP is notoriously polluted with all sorts of junk that
affects the operating costs of a paper machine, so paper mills are less
willing to a pay a premium for a grade that is in abundanace AND is a
problem to run.
Prices have picked up here in the last few days, but the long term
prognosis for news, in my opinion, is not good.
Sincerely,
Bill McGowan
Rincon Recycling
UCSB
On Wed, 30 Apr 1997
chris.cloutier@moea.state.mn.us wrote:
>
> Here in Minnesota, the ONP situation is abysmal! Haulers are cut back to 50
> - 10% of normal deliveries to the local mill. Other large recyclers are only
> accepting #8 and for b/t $25 - $45 a ton. Is this a regional problem or are
> others seeing the same problem? Whats going on: lack of export markets;
> reduced demand for boxboard; oversupply?
>
> If it gets much worse, we are going to experiement with ONP bales as parts
> of dikes to contain the Red River!
>
> chris.cloutier@moea.state.mn.us
>