In December 2009 the OBM Chicago high price for OCC #11 and ONP #8 were $70 per ton and $75 per ton respectively. Today these prices stand at $135 and $85, an increase of an astounding 90 percent for OCC but only slightly over 10 percent for ONP. In large part this is a tale of two cities. OCC is a primary feedstock for corrugated and folding carton packaging, while ONP primarily serves the production of newsprint. Packaging has rebounded over the past year in response to the overall modest improvement in the worldwide economy. Newsprint remains in a difficult position as a result in ongoing change in the dissemination of news and information from printed to electronic means. So it is not surprising that OCC and ONP have had different price trajectories. On the hedging front, swap prices for OCC have increased substantially. A one-year swap in December 2009 would have transacted in the range of $95 to $100, about a $30 per ton or 40 percent premium to the index. Today the equivalent transaction price would be more than $135, about on par with the current index price. Going forward, I have no doubt that OCC spot prices will continue to be volatile, since this has been the case since the mid 1990s. There are multiple moving parts affecting price, including fundamental OCC supply/ demand, international trade, currency movements, shipping cost, and economic development.
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