The prices are rising for two main reasons. The first is that the Chinese authorities have retaliated to the steel tariffs by imposing restrictions over recovered paper exports from America to China. The second is that because of the downturn in the world economy last year with lower prices for waste paper and board, less material is available to meet demand as world economies improve.
The recovered paper market is now seeing price rises on almost a weekly basis with as much as 90 per tonne being offered ex-works for old-KLS in the export market. Some industry experts are now saying there could even be a substantial jump in the market not dissimilar to the boom in 1994 when prices soared to near 200 before dropping the following year. Others offer caution and say there is still a long way to go before prices are anyway near those of 1994.
All the UK's domestic mills have increased prices on at least two occasions in recent weeks, with merchants easily obtaining 70 a tonne in the south of England and at least 60 a tonne in the north. Several merchants have said that the UK mills need to raise prices further to meet export demand. And, merchants are also arguing that domestic mills have a subsidy of 25 or more per tonne from the PRN, issued as evidence to obligated companies under the packaging waste regulations.
In the wake of the price rises there are considerable fears that the high prices will damage the UK's domestic mills infrastructure. The mills are said to be finding the market very tough and it remains hard for them to pass on higher prices for finished products. But it is expected that retailers and packaging users will have to take on a share of the extra costs soon, especially as the pulp market is also likely to see price rises over the summer.
Caution
Kathy Bradley, director of external affairs for the Paper Federation, said: We are seeing a very volatile market. The message is treat the market with caution.” And, she warned that the export PRN or PERN is exacerbating the situation for home mills – domestic mills can issue PRNs while merchants sending cardboard for recycling overseas can usually obtain a PERN. “PERNs are helping to distort the market and making it even tougher for the packaging grade manufacturers,” said Mrs Bradley.
Future price rises will be influenced by how the tariff war develops and whether the Far Easst continues to seek more material from Europe. Whether prices continue to rise at the current rate could depend on the outcome of work by the World Trade Organisation. A panel has been set up by the organisation to try and resolve the situation but its first report is not expected for six months.
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