Cardboard packaging business DS Smith said today (29 April) that it had managed to push up the price it charges for new cardboard in the face of higher prices for used feedstock material which it recycles at its mills.
Referencing the higher prices the company has had to pay for used cardboard (OCC or Old KLS), which it needs to make new material at its Kemsley mill in Kent and on the European Continent, group chief executive Miles Roberts said: “Input costs, including OCC, have increased significantly during the second half of the financial year.
“This is due to a combination of high levels of demand and lower availability of raw materials due to the Covid-19 impact on the market, which has also resulted in substantially higher paper prices. However, we are making good progress in recovering these higher costs through increased packaging prices, with the usual lag, as we move into our next financial year.”
Mr Roberts’ comments came in a DS Smith pre-close trading update for the year to 20 April 2021.
DS Smith looks set to face higher costs also for mixed paper which it also uses as 20-30%+ of the mix for the mill as this grade has soared in value compared to 12 months ago. A rise in the value of mixed paper has been driven by strong demand from the European Continent which is seeing strong demand for paper packaging, partly driven by a shortage of material as a consequence of lockdowns and lower arisings in some regions of Germany and in other countries.
South East Asia
However, there are suggestions now that there will be something of a market correction with South East Asian buyers reluctant to pay the higher prices that have been seen for material in Europe. Added to this are concerns about the Covid-19 situation in India which could disrupt ports and mills, although most mills are said to be away from the major cities hit hardest by the virus.
However, one paper recycler said that the whole market remains “volatile”. He said: “We are seeing all sorts of unusual patterns, ranging from newsprint mills buying office grade paper as they are short of used newspapers through to German mills who have been keen to buy mixed papers from materials recycling facilities.”