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show signs of recovery, 1993 will be a closely watched year. With the U.S.
economy slowly improving, concern is spreading to the world economy.
Demand on the export side continues to slip. This trend could continue as
European and Asian countries suffer lingering economic problems.
Additionally, greater competition with European paper stock operations will
put greater pressure on U.S. exporters of paper stock.
While the United States exported more than $615 million in recovered
fiber last year, there is speculation export totals could shrink over the next
several years as higher prices and the growth of Europe as a supply area
cut demand for paper stock from the United States to Asia.
Despite this, North American capacity continues to grow. New plants
are starting, while other mills putting in equipment upgrades to handle
more recovered fiber. With these changes happening many paper stock
dealers feel the business is poised for a much stronger 1993.
PULP SUBSTITUTES
Pulp substitutes started last year strongly, faltered, improved toward the
middle of the year, and toward the end dropped. While superficially it
appears the grade is showing seasonal cycles, the reality is much
different. Prices during the beginning of the year were caused by a short-
age of supply from the previous year. After a number of mills filled inven-
tories, paper mills began backing out of the market for pulp substitutes.
One reason is many mills realized soft inventories, which caused
concern. The inventory of paper stock grades were filled and prices
dropped. During the middle of the year a labor strike at British Columbia
pulp mills created some panic buying which drove up the price for wood
pulp on the open market, which translated into higher prices for pulp
substitutes. There was concern a strike could last for an extended time,
which could then create shortages of pulp.
When indications appeared pulp inventories were high enough to
sustain demand, prices for pulp and pulp substitutes declined.
Toward the end of last year prices continued to fall, and there is little in
the way of optimism about pulp substitute prices improving this year.
As orders for finished products remained flat, the oversupply of wood
pulp on the market was magnified. Because pulp substitutes follow wood
pulp trends very closely, the price of both grades declined. At the same
time there is a growing demand for postconsumer recovered fibers. While
it is still unclear what impact this interest is, demand for pulp substitutes
will see several large consumers drop out of the market, opting instead for
deinking grades and office grades. Although possible, it is unlikely the pulp
substitute market will show strong improvements this year. To see a
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