Market for used cardboard set to edge down

Industry experts today told letsrecycle.com that with the speed of the recession unprecedented, it was too early to say that the market had recovered even though there has been stability over the year end.

After the price collapse in October last year, demand increased for all materials and prices also made a recovery, particularly for the mid-grade office material used for tissue-making. However, there are now signs that one of the three main markets – used cardboard – is once again facing a fall in price.

The Waste & Resources Action Programme, which has started to issue pricing updates after taking fright at the price falls, has recently said that “recovered materials are holding onto price gains.” It has also pointed to rises of £15 a tonne for cardboard.

But, some experts in the marketplace consider that WRAP's reassurances are premature.

There are three main sectors within the UK market – used newspapers; office grades; and used cardboard – and letsrecycle.com has been told that while prices are currently rising for office grades and there is stability for newspapers, a downturn is looming for cardboard.

In contrast to WRAP's claims that cardboard is now worth £50 per tonne, while some orders are still being achieved at £40 in the UK, the typical mill price is moving well below this level with a price decrease expected next month.

And, prices are also falling on the export market having rallied after the slump at the end of 2008 to beyond £55 which was driven by good demand from the two leading  Chinese buyers and some smaller Chinese mills. The export prices are expected to be at £50 or below in March.

The main factor now behind the fall in the value of used cardboard is because of difficulties in selling finished products at the mills both in the UK and in China with some mills taking down time to reduce production.

Stocks of finished product are said to be high and retailers are also demanding that the price they pay for their finished products is reduced because of the economic crisis. Consequently, price pressure is feeding back into the raw material side of the chain with reprocessors looking to cut the amount they pay for used cardboard and even considering using more pulp where possible, as pulp prices have fallen.

Guangdong

And, in China, with general manufacturing order books down there is less demand for packaging. One merchant remarked: “It has taken the Chinese a long time to realise how bad things are.” Recent data from Guangdong show that the region's manufacturing exports were 24% down in January this year in comparison to January 2008; the area is the principal user of cardboard in China.

Others also point to the Chinese buyers having successfully restocked in January and February after purchasing little in the last two months of 2008.

Another factor in the price falls is the value of the PRN – the packaging waste recovery note – which has reduced from around £10 earlier in the year and is now expected to be below £7.

In terms of the market for used newspapers, there is said to be good and steady demand and this is expected to continue during 2009. Prices for mixed paper are also stable, particularly for better quality material, because of the demand for office grade material spurred on by demand from the Indian market and a reduction in arisings in the UK. However, both sectors remain apprehensive about unforeseen economic and demand impacts on the marketplace.