the market: office paper, pulp subs take a dive isri spec, not

Volume 30, Number 7 � June 1, 2019

By Ken McEntee

By Ken McEntee

Visit The Paper Stock Report online: paperstockreport.com See us onFacebook

Highlights� Current recovered paper prices

�30 percent contaminationcharged in MRF suit

� Kentucky mill reopens(See Dive, page 4)

(See Hudson Valley, page 3)

The Market:Office paper, pulpsubs take a dive

Recovered paper prices continued todrop this month. But it is officepaper and pulp subs rather than

old corrugated containers (OCC) that aretaking the brunt of the hit, traders re-ported.

At the beginning of June, the averagenational domestic mill buying price forsorted office paper (SOP) was $130 perton, FOB seller's dock. That average rep-resented as $93 per ton drop since the be-ginning of the year and a $40 per ton de-scent from the beginning of May.

"Deinking grades are getting crushed,"said a West Coast broker. "They will be thesacrificial lamb this month."

Following the rapid fall of global mar-ket pulp prices, pulp substitute grades arefairly no better. Hard white shavings thismonth are selling at a national average of$430 per ton compared to $505 per ton atthe start of the year and $485 at the be-ginning of May.

"Things are dismal in a way that Ihaven't seen since the early 1990s," ac-cording to a Northeast broker. "It is grim."

Old corrugatedOCC prices in the middle of the month

dropped to a level that many traders de-clared to be the bottom. The national av-

The recently announced HudsonValley Paperboard lightweight re-cycled containerboard mill is ex-

pected to consume more than 330,000annual tons of old corrugated containers(OCC) and mixed paper. And it will pro-vide markets for material that confirms tothe traditional No. 11 OCC specification,said Jan Lambert, executive vice presidentof CorrVentures LLC, the firm that plansto develop the new mill in Rensselaer,N.Y., south of Albany.

Lambert, who also is the owner of FirstFiber Corp., near Philadelphia, saidHudson Valley will work with private andpublic recovered paper suppliers to feed

ISRI spec, not China's will feedHudson Valley Paperboard

the mill."I am delighted to tell you that our spec

is not by any means driven or defined byChina's specifications," he said. "Our stockprep capabilities will be exceptional to useOCC#11 the way you and I have known itfrom time immemorial."

Lambert said the percentage of mixed

GradeGradeGradeGradeGrade NewEngNewEngNewEngNewEngNewEng SEastSEastSEastSEastSEast PITTS/PITTS/PITTS/PITTS/PITTS/ MWestMWestMWestMWestMWest SWestSWestSWestSWestSWest NWestNWestNWestNWestNWestN.Y.N.Y.N.Y.N.Y.N.Y. BOSBOSBOSBOSBOS ATLATLATLATLATL CLEVCLEVCLEVCLEVCLEV CHICCHICCHICCHICCHIC TexTexTexTexTex L.A.L.A.L.A.L.A.L.A. SEATSEATSEATSEATSEAT

Mixed paper, at generator�s dock: -60/0 -60/0 -50/0 -55/0 -55/0 -50/0 -60/0 -60/0Mixed office paper, generator�s dock: 0/50 0/50 40/75 50/70 50/70 40/75 20/60 0/65White ledger, at generator�s dock: 90/130 90/130 90/120 110/140 110/140 105/140 90/130 80/140Old newspaper, delivered to dealer: -25/0 -25/0 -15/0 -15/0 -15/0 -15/0 -25/0 -25/0Old corrugated containers, delivered to dealer: -25/0 -25/0 -25/0 -25/0 -25/0 -25/0 -25/0 -25/0Old corrugated containers, supermarket-sized bales 5/30 5/30 5/40 5/30 5/30 5/40 10/50 5/50Old magazines, delivered to dealer: 0/40 0/40 0/40 0/40 0/40 0/50 0/50 0/45

Recovered Scrap Paper Prices: Mill Buying PricesThese figures are average prices paid by paper and board mills for the grades listed. Prices are listed in dollars per short ton, baled, FOB seller's dock (exclusive offreight), packed to PS-2017 specifications. Numbers in parenthesis are PS-2018 grade defintion numbers.

Recovered Scrap Paper Prices: Dealer/Processor Prices

The Paper Stock Report / June 1, 2019

These prices reflect the estimated value of recovered scrap paper accepted by or sold to paper stock dealers and/or recycling centers unless otherwise indicated.Prices are listed in dollars per short ton for loose (not baled) material in small quantities, unless otherwise noted. Negative values indicate a charge to accept thematerials. Estimated prices are based on surveys of buyers and sellers and are not binding. Prices for grades marked "at generator's dock" indicate the estimatedvalue for material picked up by a dealer from the place where material is generated. Prices for grades marked "at dealer's scale" indicate the estimated value ofmaterial brought to the dealer's plant or recycling center.

Join the survey...The Paper Stock Report surveys scrap paper traders twice a month to obtain current, unbiased market prices.

Fill in the anonymous survey online athttp://paperstockreport.com/market-survey/ or email [email protected].

It�ll take less than a minute.Weigh in...Use the survey form to submit your observations about current scrap paper markets.

Copyright 2019, McEntee Media Corp. All rights reserved. Reproduction of The Paper Stock Report, in whole or in part, without permission of publisher, isprohibited by law.

Post-consumer grades:Post-consumer grades:Post-consumer grades:Post-consumer grades:Post-consumer grades: NortheastNortheastNortheastNortheastNortheast SoutheastSoutheastSoutheastSoutheastSoutheast MidwestMidwestMidwestMidwestMidwest SouthwestSouthwestSouthwestSouthwestSouthwest LALALALALA NorthwestNorthwestNorthwestNorthwestNorthwest Natl AvgNatl AvgNatl AvgNatl AvgNatl Avg Last IssueLast IssueLast IssueLast IssueLast Issue Last MonthLast MonthLast MonthLast MonthLast Month Last YearLast YearLast YearLast YearLast YearMixed paper (54) 0/5 0/15 0/10 0/25 N/A 0/5 5.00 5.00 5.00 2.50Sorted resid. papers & news (56) 10/35 20/40 20/40 20/40 10/20 10/35 25.00 25.00 25.00 5.42Sorted clean news (58) 85/95 75/90 65/75 75/90 50/70 50/90 75.83 75.83 109.17 98.33Old corrugated (OCC) (11) 25/40 25/50 25/40 25/50 35/50 35/55 37.92 38.33 49.17 69.58Sorted office paper (37) 115/140 120/140 115/140 120/150 120/140 120/140 130.00 146.67 169.17 180.83White ledger, post-consumer (40) 250/270 250/270 260/280 260/290 240/260 230/270 260.83 260.83 288.33 258.33Old magazines (10) 50/80 60/100 60/90 60/90 80/100 70/90 77.50 77.50 92.50 127.50Industrial / Commercial gradesIndustrial / Commercial gradesIndustrial / Commercial gradesIndustrial / Commercial gradesIndustrial / Commercial grades NortheastNortheastNortheastNortheastNortheast SoutheastSoutheastSoutheastSoutheastSoutheast MidwestMidwestMidwestMidwestMidwest SouthwestSouthwestSouthwestSouthwestSouthwest LALALALALA NorthwestNorthwestNorthwestNorthwestNorthwest Natl AvgNatl AvgNatl AvgNatl AvgNatl Avg Last issueLast issueLast issueLast issueLast issue Last MonthLast MonthLast MonthLast MonthLast Month Last YearLast YearLast YearLast YearLast YearBoxboard cuttings (4) 30/45 25/35 25/35 30/45 30/50 30/50 35.83 48.33 48.33 93.75New double-lined kraft (DLK) (13) 60/70 70/80 60/70 70/80 60/80 60/80 70.00 70.00 76.25 110.83White news blanks (24) 170/220 190/220 180/220 210/250 170/210 170/190 200.00 275.00 275.00 270.00Coated soft white shavings (28) 300/320 300/320 300/320 300/320 310/340 300/330 313.33 343.33 363.33 263.33Hard white shavings (30) 420/440 420/440 420/440 420/440 420/440 420/440 430.00 460.00 485.00 422.50White ledger, post-consumer (40) 250/270 250/270 260/280 260/290 240/260 230/270 260.83 260.83 288.33 258.33Coated book stock (43) 115/145 120/145 120/145 120/155 120/145 120/145 132.50 143.33 165.00 180.83Coated groundwood sections (44) 50/85 60/100 60/95 60/95 80/105 70/95 79.58 79.58 92.50 137.50Unprint bleached sulfate (SBS) (47) 350/380 350/380 350/380 350/380 350/380 350/380 365.00 390.00 405.00 422.50Weighted average national price 66.13 71.14 78.99 100.96


(See Hudson Valley, page 4)

Effective April 1,The Paper Stock Report is now pub-lishing recovered paper prices on the1st and 15th days of the month.Previously we published on the 10thand 25th. Learn more and try a freeonline trial subscription at:

paperstockreport.com

Capacity

By Ken McEntee

The development of a new 330,000ton-per-year recycledcontainerboard mill has been an-

nounced for Rensselaer, N.Y., south of Al-bany. The Hudson Valley PaperboardProject was announced by CorrVenturesLLC (CVL), a private development firmthat says it specializes in strategic projectdevelopment in the pulp and paper, andcorrugated packaging markets.

The mill's geographic location is well-suited to secure old corrugated containers(OCC), available to the mill by commoncarrier, rail and deep-water barge, CVLsaid.

The company said the corporate invest-ment and off-take partners participatingin this venture will consist of major inde-pendent corrugated packaging and corru-gated sheet feeder operations based in theNorth Central and Northeastern UnitedStates and Canada. Each of these compa-nies will be selected for approach based ontheir established history and strong repu-tation of success in the industry.

CVL said at least 200 new constructionjobs will be created directly as a result ofthe project, with substantial additionaljobs being created through the multipliereffect to the surrounding RensselaerCounty community.

The project schedule currently antici-pates a financial closing in the fourth quar-ter this year, with commencement of com-mercial operations in the fourth quarterof 2021.

The project is subject to approval ofstate and local incentives, which have beenoffered to projects of a similar nature inNew York, including sizable New YorkState Brownfield Program refundable taxcredits.

The CVL development team said it hashas substantial experience and prior suc-cess in designing, building and operating

New recycledboard mill planned

for New York

business facilities similar to those plannedfor the project, as well as in managingprinting and packaging businesses withsignificant purchase requirements for re-cycled containerboard.

The founders of CVL include ChairmanCharles P. Klass, President and CEOStephen R. Read, Executive Vice PresidentJan Lambert and Executive Vice Presidentand Treasurer Eric Lawrence.

According to a CVL press release, theproject will be built by a globally recog-nized firm that will have complete respon-sibility for the design, engineering, pro-curement and construction of the newlightweight containerboard mill opera-tions. The DEPC contractor will provideappropriate completion and performanceguarantees as required by the Project lend-ers and stakeholders.

CVL has retained Piper Jaffray as itsexclusive investment banker to assist instructuring and placing the non-recoursesenior secured financing for the project.Acorn Street Capital, of Boston, has re-cently joined the CVL team as an invest-ment partner.

Operations will highlight state-of-the-art proven recycling and papermakingtechnologies from across North Americaand abroad, CVL said. The paper machinewill include starch surface treatment andoptimized calendering to provide en-hanced strength and excellent printabil-ity.

Hudson ValleyFrom page 1

paper used at the mill could be in the 13 to22 percent range, but that the exact fibermix will depend on customer specs for itslightweight containerboard product andthe markets for mixed paper and OCCwhen the mill ramps up - projected to besomewhere around the fourth quarter2021.

"I am glad that we will be able to take46,000 pound loads and we won't have todemand 54,000 pound (export) loads tofill a container, and I am glad to say thehigh density bales that are in place, andthe systems that were put in place to cleanthe tons are satisfactory to us based on thelast generation of retooling the MRFs had

to go through," Lambert said. "We're notdemanding a China spec. I think the MRFsthat we can support are fine the way theyare. They don't have to slow down any-more to make tons for us. We want themto run as fast as possible within reason andproduce (recovered paper) within the ISRIdefinition. It's a spec that we think is fair."

Lambert added that Hudson Valley mayalso use higher quality grades, like indus-trial OCC and double-lined Kraft.

"We also will function to some extentto support our customers with the use ofdouble-line or industrial OCC from themarketplace because the people who ownthose companies are suffering also, andthose tons exist in the market too and theyneed a home," he said.

Lambert was less clear about how mixedpaper would be used at the new mill otherthan to say that the mill would consumeas much mixed paper as possible.

"That's a little hard to say because it isn'tonly a matter of what the buying price isfor mixed paper and corrugated," he said."You have to look at the blending of thefibers to get the density, and the needs ofthe customer and the marketplace."

The quality requirements of mixed pa-per used at the mill haven't been estab-lished, but Lambert said, "Our demand willnot be based whatsoever on China specs.We're not interested in catching the waveof issues that have affected our very re-sponsive MRF owners, whether they arepublic companies or private MRFs,whether you call them clean MRFs or dirtyMRFs."

Lambert noted that before China beganto dominate the market for mixed paper,the grade was packed according to theneeds of North American mills.

"For 30 years we divided mixed paper


Hudson ValleyFrom page 3

Capacity

DiveFrom page 1

into hard mix and soft mix depending onwhether it had a high percentage ofgroundwood or a low percentage ofgroundwood," he said. "For the last 15years the mixed paper marketplace wasdriven by the needs of the Chinese mills,which needed longer fibers. It changed thewhole nature of mixed paper in the U.S."

Hudson Valley, Lambert said, hopefullywill create a market for a traditional U.S.grade of mixed paper.

The company has already spoken withpotential OCC and mixed paper suppliersfor the mill.

"We've got some early commitmentsthat are non-binding because the mill isn'tbuilt yet, but we're comfortable about thenature of the sources of supply, which willbe a combination of private and public in-tegrated haulers," he said. "The mill willbe designed to take advantage of a growthmarket in lightweight containerboard, andwe feel very strongly about our regionalpositioning for fiber supply. We don't feelthat we're in the business to interrupt theneeds of competitors. We feel stronglyabout building integrative supply relation-ships based on supporting the people we'reworking with. We're not out there to try totake the bottom out of the market."

Although projects like Hudson Valleywill help to absorb the surplus of OCC andmixed paper currently on the market, theyare unlikely to make up for the reductionin Chinese buying, Lambert said. Since2011, U.S. OCC exports to China have gen-erally ranged between 7 million and 8 mil-lion short tons per year before droppingoff to about 6.5 million tons last year. Thisyear, China is on pace to take about 4.5million tons. If the Chinese governmentcarries through on its threat to ban theimportation of all recyclables, the impactcould be around 8 million tons of OCC thatno longer have a market.

"We think the recycled Kraft market isvery positive with projects like those inBiron, Wisc., Rumsford, Maine andFairmont, W.Va. (all Nine Dragons Paper

projects) and a few more machines that areslated to convert, but when you add themup you're talking about a million tons ofrecycled Kraft pulp, that's all," Lambertsaid. "It's not going to solve the problemfor our (recovered paper) dealers."

Charles Klass, chairman ofCorrVentures and owner of Klass Associ-ates, said he feels confident about theproject despite the fact the containerboardmills are taking market downtime. Thekey, he said is that the mill will producelightweight board, which he believes is agrowth market in the U.S.

"There is demand for lightweight andoverall containerboard in the Northeast,but a lot of the production is in the South-east," he said. "We're going to be able tosupport the Northeast market."

The mill will produce about 70 percentlinerboard and 30 percent corrugatingmedium, he said.

Klass said the new mill will be guidedby experienced leadership. He noted thatSteven Read, president and CEO ofCorrVentures, was president ofSchiffenhaus Industries when that com-pany partnered with two other box mak-ers to create Solvay Paperboard, near Syra-cuse, N.Y., which was later sold to RockTenn and is now operated by WestRock.Read served on the Solvay board of direc-tors.

Lambert's family has been in the papermanufacturing business for four genera-tions.

"Jan has done a lot of research on theuse of mixed paper," Klass said. "And Ithink his research is more credible thansome others that I have seen.

Klass said he is hopeful that financingfor the Hudson Valley project will be inplace by the end of the year.

erage domestic OCC price on May 15 wasabout $38 per ton according to tradersreporting to The Paper Stock Report, andtraders generally anticipated that the "of-ficial" index price would catch up thismonth with reduction of $5 to $10 per ton.

"People are gladly selling me OCC be-low the RISI price," said a Northeasttrader.

Meanwhile, however, some traders re-ported seeing some positive signs that OCCmarkets could be on the verge of improv-ing - possibly before the four-day Indepen-dence Day holiday weekend. Reports fromoverseas are less optimistic.

"We had 800 tons of orders in May andinventoried a lot of OCC," a Midwest recy-cler said. "This month we have orders for2,100 tons with some mills suggesting theymay be back for more later, prior to July 4holiday. A step in the right direction, butthere is an enormous amount of inventory

Market

nounced.�A lot of hard work by many people went

into making this a safe and successfulstartup,� said General Manager CraigTatum. �It is an honor to be a part of sucha dedicated and committed team.�

Tom Lawson, director of strategy NorthAmerica, said the restart of the mill is thefirst step in the North American growthstrategy for Phoenix and its parent com-pany, Shanying International, one of thelargest paper making companies in China.Shanying also owns CycleLink Interna-tional Holdings Ltd., a recovered papersupplier based in Diamond Bar, Calif.

When Shanying purchased the idledmill from Verso last summer, the companysaid it would produce pulp and brown pa-per packaging. Mill officials were not im-mediately available this morning to dis-cuss those plans.

A press release said that once fully op-timized, the mill will produce about300,000 tons of product per year and thatthe mill employs about 224 people. Ear-lier, the company said it expects the millto employ about 500 people.

Phoenix Paperstarts Kentucky

mill

Phoenix Paper Wickliffe LLC. said itsuccessfully restarted operations ofthe Wickliffe, Kentucky paper mill

formerly owned and operated by Verso Pa-per. The first roll of bleached hardwoodpulp was safely produced, the company an-


(See Dive, page 6)

to clean up before the price moves up."According to a West Coast broker,

containerboard mill operating rates areimproving and most mills' planned main-tenance downtime has been taken as theindustry moves toward is peak operatingseason.

"OCC generation is going to drop in thesummer and the demand is going to in-crease," he said. "I think prices will con-tinue to fall this month, but hopefully thisis the bottom, as mills might be looking tobuild inventories for the long Fourth ofJuly weekend. I think the market has achance to flatten out in July and August,with a possible increase in September.Unfortunately, after that, mills start toslow down again and generation starts toincrease again, so basically the whole yearis lost."

A Chicago trader said fellow brokers inhis company are divided about whether theOCC market will sink further this monthor begin to improve.

"I personally think the price could comeback a little," he said. "The last two or threeweeks have been flat, but generation isn'twhere it was and some suppliers are start-ing to ask for a little more. On the otherend, though, I'm not able to get any in-creases from my customers."

He said, however, that he expects a"slow upward crawl" in OCC prices by theend of June.

In Asia, sources say OCC markets con-tinue to weaken while most mills have al-ready expended their import licenses.

In China, finished containerboardprices have reportedly dropped by $25 pershort ton in the past week, with local OCCprices keeping pace, with reductions of $13to $25 per ton. Further reductions are ex-pected in the next week. U.S. OCC was re-portedly moving into China at $112 to $120per ton. Japanese tonnage, meanwhile,was moving into China dropped about $20last week, to less than $100 per ton, whileorders from Europe were arriving at $100to $105 this week. It was unclear whetherthe European prices were being quote forshort tons or metric tonnes.

According to media reports in HongKong, a large paper maker in mainlandChina has plans to cut the price it paysHong Kong waste exporters for OCC to

US$70 per ton. The reduction is report-edly due to lower demand for cardboardamong Chinese factories caught in thecrossfire of the U.S.-China trade war.

That price is half the price Hong Kongrecyclers were receiving in December.

The local reports said Hong Kong ex-porters were declining to ship material at$70 per ton, but were filling previous or-ders for about $110 per ton.

Meanwhile, the reports said, Chinesesuppliers were still getting about US$250per ton for OCC.

The Hong Kong government reportedlymay provide temporary warehousing forlocal recycling firms to store their paperwaste, so they could sell them when theprice surge again.

A West Coast exporter reported that anOCC consumer in Vietnam is seeking OCCwith no more than 1 percent prohibitives,but were willing to pay a No. 11 OCC pricefor the material. The buyer said 2 percentprohibitives would cause a high risk of re-jection, and a moisture level of 20 percentalso would cause a high risky of rejection.

"I have no desire to pursue that order,"the exporter said.

Meanwhile, Indonesia was crackingdown on scrap paper imports, announc-ing that all shipments would require pre-inspection.

"There was some upward momentumfor OCC until this Indonesia thing cameinto play and I think some customers areattempting to use that as an excuse to droppricing," said a broker in Chicago.

Some traders reported that mixed pa-per prices markets have somewhat stabi-lized, but with OCC prices dipping so slow,mills have incentives to use more OCC atthe expense of mixed paper.

Office paperOffice paper, in the words of more than

one trader, is in a "complete free fall.""There is an overwhelming abundance

of sorted office paper and coated bookstock," said one broker.

Some suppliers expressed optimismabout Marcal Paper, in Elmwood Park,N.J., starting up a machine after a fire thatclosed the mill down earlier this year. Oth-ers, however, said Marcal's impactwouldn't be significant as the machine

ramps up."They're so slow right now that unless

you can throw a rock and hit the mill,you're not going to get a load in there,"according to one supplier.

Traders in the Northeast and Midwestsaid SOP can be picked up as low as $110per ton.

A mid-May fire at Georgia-Pacific'sMuskogee, Okla. mill impacted demand,but traders said domestic and overseasmarkets were taking well before that in-terruption.

A supplier in the Midwest said while theaway-from-home towel and tissue seasonis about to start, many mills are buyingmarket pulp instead of office paper andother deinking grades because of the avail-ability and low price for pulp.

Pulp substitutesThe availability of cheap market pulp

also causing the bottom to fall out of thepulp subs market, traders said.

"The market is flooded with pulp andmarkets are limited," said a broker in Chi-cago. "Every time I turn around its goingdown $20 or $30. Many of the mills we'reselling to have the option of using virginrather than recycled. Some need to buy thepulp subs for the recycled content. Eachmill is a different story, but generally thepulp subs are going to flow downwardalong with pulp."

An East Coast trader said he was find-ing no buyers domestically or overseas.

"One European company said theyaren't buying a pound of anything untilthey see how long pulp prices go in June,"he said.

Meanwhile, a broker with a large firmsaid it has been a struggle trying to get or-ders for hard white shavings.

"One of our guys just flew to Europe try-ing to secure us some orders," he said.

NewspaperMost traders said newspaper grades

were as sloppy as pulp subs."The issue is that the insulators are hav-

ing a very bad year because of the rainyweather," one broker said. "On top of thatthe only consistent overseas buyer has


Litigation

30 percentcontamination

charged inMRF suitBy Ken McEntee

ing for monetary damages to be deter-mined at trial. MIRA�s failure to enforcethe terms of the parties� agreement and toensure that only acceptable loads are de-livered to the facility results in more than$279,000 per month in additional costs,or more than $3 million per year, FCR said.

In the suit, FRC alleges several breachesin the contract that it originally signed tooperate the MIRA-owned facility in Hart-ford in 2013. The contract, made withMIRA's predecessor agency - the Connecti-cut Resources Recovery Authority (CRRA),placed a contamination limit of 5 percentunrecoverable materials on loads deliv-ered to the facility by about 70 municipali-ties. The contract also said FCR would nothave to process loads that originated frommore than a single municipality - a provi-sion that helped the company to hold vio-lating municipalities accountable for con-taminated loads.

Both of those provisions, the lawsuitsays, were repeatedly violated by MIRA.

Further, the suit says, MIRA did notenforce its operating permit from the Con-necticut Department of Energy (DEEP),which prohibit the MRF from acceptingsingle stream recycling loads that exceed2 percent non-recyclables.

MIRA operates the Connecticut SolidWaste System (�CSWS�), a system thatprocesses the single-stream recyclables ofabout 70 municipalities throughout thestate. As part of that system, municipali-ties� single-stream recyclables are deliv-ered to the MIRA-owned recycling facil-ity.

The MRF sorts and screens incomingrecyclables into different categories ofrecyclables, such as mixed paper, PETplastics and aluminum cans, which arethen sold in bulk to specialized process-ing facilities throughout the United Statesand abroad, where they are turned intoreusable raw materials.

CRRA in 2013 entered into an agree-ment with FCR to operate and maintainthe recycling facility. The contract trans-ferred to MIRA when it replaced CRRA in2014. The original contract expired onJune 20, 2017, but gave CRRA/MIRA theoption to exercise four one-year renewals.According to the lawsuit, on March 25,2019, MIRA notified FCR of its intention

DiveFrom page 5

been Korea and they have been gettingslow because of some really bad qualityloads from certain exporters."

Prices for No. 56 - sorted residentialpapers and news - is one of the most diffi-cult grades to price. For every source whoreports that the grade is worth no morethan mixed paper, another reports a pricenot far below the price for No. 58 - sortedclean news.

"While (No. 56) is a little sloppy cur-rently, probably until July, it is underval-ued on most indexes," said a supplier inthe Midwest. "Demand for this grade isvery good, if clean and dry, and most buy-ers recognize that the available supply ofONP (old newspaper) is dropping."

According to another Midwest supplier,"There are a few people who are making acleaned-up curbside (news) and gettinghigher prices, but that is being buffered bygetting a lot of claims. They might get $80,but then they get a $30 claim on it."

A West Coast broker said the Asianmarket for ONP has collapsed.

"China is focusing on digital over news-papers," he said. "India was a big exporterof finished news to China and the demandis not there. Japan was getting $250 (permetric tonne) - a huge premium - becausetheir paper is so clean. That has collapsedand the prevailing price is at around $135."

This broker later received an email that

Marketthe price had dropped to $120.

"With each email it gets worse," he said."That's a drop of $250 to $120 in onemonth."

The export price for newspaper out ofthe Midwest U.S., he said, is now in themid-$30s, compared to the $40s in May.

"Unlike office paper, there isn't muchmore room to fall," he said.

White news blanks have shown a simi-lar free fall. Prices varied by region, butgenerally saw massive reductions com-pared to last month.

A lawsuit filed by a contracted MRFoperator against Connecticut'sMaterials Innovation and Recy-

cling Authority (MIRA) says MIRA al-lowed municipalities to deliver loads ofsingle stream recyclables that containedmore than 30 percent "unacceptable" ma-terials - more than six times the contami-nation limit established by a contract.

FCR LLC, now owned by Republic Ser-vices, has filed a lawsuit in ConnecticutSuperior Court for breach of contractagainst MIRA, asking for the terminationof the contract without penalty, and ask-


to exercise its third renewal, carrying thecontract through June 30, 2020, despiteFCR having notified MIRA that it was inviolation of contamination levels and theprovision that prohibited the delivery ofloads that originated from multiple mu-nicipalities.

Under the contract, the sale of recov-ered recyclables is FCR's only form of rev-enue. To protect FCR's revenue stream, thelawsuit said, MIRA agreed to reject loadsthat violated the contract.

"These requirements, particularly thecontamination limit, were integral to theparties� agreement," the lawsuit says. "Themore contaminated the incoming recy-cling, the greater the processing costs FCRmust incur to refine the stream into sal-able sorted recyclables."

Excessively contaminated recycling alsorequires FCR to pay more to dispose ofunrecoverable residue, reduces the volumeof salable sorted recyclables FCR can re-cover from the incoming recycling streamand creates excessive wear and tear on theprocessing machinery that FCR is required

to maintain under the agreement.According to the suit, when FCR and

MIRA entered the agreement, they recog-nized that the scope of services FCR wouldprovide may change over time. MIRAtherefore reserved the right to unilaterallymodify FCR�s obligations, including byexpanding the categories or definitions ofthe recyclables FCR must accept and pro-cess. However, MIRA recognized that uni-laterally changing the scope of requiredservices could have an adverse effect onFCR. MIRA therefore agreed that if FCRdemonstrated that a required change inthe scope of services would result in in-creased costs for FCR, then MIRA wouldnegotiate in good faith with FCR to deter-mine the amount of additional compen-sation FCR was owed.

"FCR has repeatedly raised these issueswith MIRA, but it refuses to address them,"the lawsuit says. "MIRA knows that therecycling material coming into the recy-cling facility far exceeds the contaminationlimits set by the agreement but MIRA isunwilling to hold municipalities to the

terms of their municipal service agree-ments or to ask them to pay more in feesto cover the costs their contaminated re-cycling material is imposing on FCR."

At the same time, the lawsuit says,MIRA has refused to negotiate with FCRregarding additional compensation to re-imburse it for the substantial additionalexpenses it incurs because of MIRA�s fail-ure to take any steps to curtail the deliv-ery of contaminated and unacceptableloads.

"Instead, in public comments, MIRAleadership has recognized that it is payingFCR far below the market rate to processsingle-stream recyclables," the lawsuitsays. "By its own admission, and contraryto its obligations under the agreement,MIRA plans to continue paying as little asit can for as long as it can, until the agree-ment finally expires in 2021."

Earlier this year, FCR retained the ser-vices of MSW Consultants to conduct anaudit of the incoming recycling stream.

(See Contamination, page 8)

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ContaminationFrom page 7

Litigation More news as it happensPaper Stock Report

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MSW's findings confirmed contaminationlevels in incoming loads greatly exceed

the threshold at which MIRA is requiredto reject loads.

"Simply put, MIRA is knowingly requir-ing FCR to process a stream of recyclingthat is five to six times as contaminated asthe maximum contamination level FCRagreed to process when it entered theagreement," the lawsuit says.

On March 21, 2019, the lawsuit says,MIRA formally refused to even participatein negotiations regarding additional com-pensation. MIRA contended that becauseit has never formally amended the defini-tions of the types of recycling material thatFCR must process under the agreement,FCR is not entitled to any additional com-pensation. On May 30, FCR filed a De-mand for Disclosure of Defense, whichgives MIRA 10 days to inform the court ofits intention to defend the case.

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