Demand for used cardboard wavers

But, demand remains firm for most other grades of recovered (waste) paper, especially used newspapers and magazines

The downturn appears to have caught some UK mills by surprise as they have recently raised prices by as much as £5 a tonne in the face of reduced stocks and stiff competition from the Chinese markets.

At least two of the big Chinese buyers have pulled out of the market, for the short-term at least.

Credit crunch

With the credit crunch biting around the world, especially in the second half of March, the Chinese mills have opted to slow their demand for raw material. Consequently the export prices have fallen by as much as £10 per tonne with a significant drop in orders.

Now, the domestic mills face a conundrum of whether to maintain their prices to encourage more stock into their yards or to reduce their prices. The latter seems to be the most likely option, especially with prices on the Continent also reducing.

The latest developments come as the Bureau of International Recycling published its paper report for the first quarter of the year. In this, the president of the BIR paper division, Ranjit Baxi of UK firm J&H Sales International, said that in the first quarter of 2008, exporters of recovered fibre faced a major challenge “in balancing firm-to-strong overseas demand with a highly volatile US dollar and monthly freight changes as a result of variations in freight costs.”

He noted: “Demand into the New Year continued on a firmer basis, with steady increases in export prices for most grades of recovered paper. For 2008, the demand outlook from China and other Asian countries was positive, with more new capacities being announced – particularly in China.”

Some impact will eventually be felt on demand and liquidity within the industry

 
BIR Paper President, Ranjit Baxi

Mr Baxi commented on how demand from other Asian countries – such as India, Thailand, Indonesia, Vietnam and many others – has also continued to grow.

Shipping

One factor in the strong demand from China for UK-sourced material in the first quarter of the year was because of shortages of shipping containers for export material in the US. The paper division president also pointed to the changes in the market and said: “With the easing of winter weather conditions and the increased availability of fibre, as well as reduced container availability in the USA, the first signs were seen of a general slight weakening in the price of fibre.

“Between the middle and end of March, a small downward correction occurred in US OCC export prices from US$ 255-plus per tonne to nearer US$ 250-plus. At the same time, European OCC prices dipped from US$ 245-plus to US$ 240-plus, while OCC export prices from other parts of the world such as Japan and Australia were similarly adjusted.”

He ascribed one of the reasons for this being the sub-prime and wider economic crisis in the USA. “Some impact will eventually be felt on demand and liquidity within the industry. In the second and third quarters, supply and demand trends will pose new challenges for our industry which, in common with others, will have to work hard to ride out this difficult period.”