7 March 2017 by Steve Eminton

Exporters facing higher shipping costs

Rising prices for waste – recovered – paper could be pegged back by significant increases in the cost of container exports over the next six weeks.

Recent weeks have seen a surge in the value of used cardboard and mixed papers on the export market. This has come despite the imposition of ‘moderate’ price rises for the shipping of recyclables to overseas markets during the past few months.

On the domestic market too mill prices have risen in the wake of the higher export demand.

Maersk is among the shipping lines to have increased container prices in recent weeks

In the plastics market, exports have been under pressure due to increased scrutiny from Chinese customs authorities on imported scrap, and it is anticipated that prices paid for material could be impacted.

Now, exporters are voicing concerns about proposed further shipping price increases of about $500 per container which could particularly hit exports to the Far East.

A number of shipping lines have already brought into force a $250 per container price rise. This has seen the price per container rise to around 1350-1500$ with each container holding about 24-25 tonnes of material.

Increase

To date the costs of the increase appear to have been absorbed by the overseas buyers, notably mills in China which have been hungry for the waste cardboard or mixed papers from the UK.

However, the question today, said one exporter, is whether the mills are able or will be prepared to absorb the 500$ or more further increases being talked about by the shipping lines. If the lines are actually successful in imposing the increases, exporters could face higher shipping costs of as much as 25$ per tonne.

One large UK recycling business told letsrecycle.com: “There have even been reports of a 1,000$ increase from mid-March which would be ridiculous. People will dig in their heels and there will have to be negotiation – we are seeing a less competitive marketplace.”

Another said that he felt the rise could turn out to be of the 300$ to 500$ mark which would mean prices per container will still be about $1,000 more overall than they were last year. “Really what they are talking about is silly numbers but it is true that our choice of lines is more limited now. We are also seeing it a bit harder to find the higher High Cube containers which the industry often uses.”

This time of year can often see a surcharge because of a shortage of ships available in the wake of Chinese year. But, one exporter said: “There is more definitely a squeeze on space than usual and companies will have to secure allocations. However, it can be hard to book too long in advance as demand from mills varies and trade relates to price and where material is sourced from across the world.”

Competition

Another company involved in paper recycling said that reduced competition in the container shipping market was the main factor in the price rises. “We are seeing lines coming together, closures and so there is a reduction in competition. I think some of the smaller exporters and brokers will find this harder to take than some of the larger firms.”

“We have seen historically an overcapacity in the market and this has pressed pricing down. There is now more balanced supply in the market and, all things being equal, prices reflect the supply and demand situation.”


Maersk

A further view was that the shipping lines are getting “carried away with the idea of price rises. They also have to think long-term as their vessels still need filling with cargo and recycling has the volume they need.”

Among lines expected to put prices up are Hyundai, Maersk, MSC and United Arab Shipping.

Maersk is one example of consolidation within the sector with its recent acquisition of German line Hamburger Sud, a medium-sized business. This means that Maersk, which is the largest company, now has a market share of about 18%.

A spokesman for Maersk explained to letsrecycle.com: “We have seen historically an overcapacity in the market and this has pressed pricing down. There is now more balanced supply in the market and, all things being equal, prices reflect the supply and demand situation.”

Paula Hill, shipping manager at Mark Lyndon, one of the UK’s major recovered paper exporters, said that she was aware that in March and April there were blank sailing periods with a reduction in westbound sailings after Chinese New Year. “We are also seeing price pressures in the market with new alliances of container lines from April, acquisitions and of course last year’s loss of Hanjin Shipping.”

Craig Robinson, managing director at CycleLink UK which exports to China, said: “To some extent the size of the price increases have come as a bit of a surprise. The ex-works price may well have to reflect the rate increases but some mills might decide to wait in terms of orders and see if things cool off.”

Competition for containers is likely to affect scrap prices

India

Pankaj Chowdhary, director of Reliance Fibres, an exporter of waste paper to India, also felt that there might be some sort of cooling off in terms of despatching of orders and he took a circumspect view of the situation.

Mr Chowdhary said that while “availability of containers is not too bad we might take a rain check of the markets in April in view of the current dizzy situation”. He added that he would expect that “with the three large alliances kicking in from April and missed sailings softening out, there will be a steadier picture in May and June. They may push the market to see where they are but I don’t anticipate further large cost increases then.”

Another exporter commented that they felt: “The mills are trying to rule the roost at the moment and consequently exporters are unlikely to be able to continue to absorb the costs.”

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