OCC holds flat into August as domestic mills stay covered

Old corrugated containers traded flat to down $5 per ton across most US regions in July, according to packers and mill buyers, with the Southeast and Gulf holding steady and pockets of the Midwest showing modest weakness on the low end.

Mill buyers described inventories as comfortable. “We are covered through September on contract and we are not chasing spot tons,” said one containerboard purchasing manager at a Southeastern producer who asked not to be named because he is not authorised to discuss pricing. Two packers independently reported mills declining incremental offers rather than bidding for them.

Generation is down, and it has not mattered

Retail and distribution generation typically softens in July, and this year is no exception — several packers put collected volumes 4 to 7 percent below June. In a normal cycle that would tighten the market. It has not, which packers attribute to two things.

First, board demand has been unremarkable. Box shipments have been described by converters as steady rather than growing, and mills running below full schedule do not need to build fibre inventory. Second, the export bid has thinned. Offers into Southeast Asian tissue and testliner producers have been reported at levels that do not clear freight from most inland yards, leaving coastal packers as the only sellers with a viable export alternative.

Quality complaints are getting louder

Separately, several mill buyers said they are becoming more aggressive on prohibitives and outthrows in delivered OCC. The most frequent complaints are moisture above specification on loads collected during wet weeks, and increasing volumes of wax-alternative coated board that behaves poorly in repulping.

“We have rejected more loads in the last two quarters than in the previous four combined,” said Halvard Steen, fibre supply manager at Northbank Fibre Co. “It is not that the material got worse overnight. It is that when a mill is comfortable, it enforces the spec it always had.”

That observation is worth noting for packers: enforcement intensity tends to track market slack, and a rejection in a soft market is far more expensive than one in a tight market.

What to watch

Three variables will decide direction into the autumn. Retail restocking ahead of the fourth quarter is the largest — a genuine pickup in box demand would draw down mill inventories quickly. Any announced containerboard downtime would work the other way. And the export bid remains the swing factor for coastal supply, where a $10 per ton improvement in offshore offers would pull tonnage off the domestic market fast enough to move the published number.

Packers contacted for this article generally expect August to look like July.