A cut of 5 this week in prices paid for Old KLS – used cardboard – has seen the home mills paying in the order of 45 for the material, on an ex works basis. With the UK market generally taking old-KLS as a form of market guide, merchants say that this time the cut could be sending the wrong signals.
In other markets old-KLS demand is firming. French buyers are looking for material and prices in the United States have risen a little, up by about $7-10 a tonne and the overall market in the US is also seen as being a little short in supply for some grades.
As a consequence of this, an upward movement in the price of old-KLS is considered more likely than a fall although there could be at least one month of stable prices in sight. The falling value of the PRN – packaging waste recovery notes – during the autumn of 2002 were used by the mills as a stick with which to beat UK merchants. Now, there is some expectation that with the PRN lower and likely to stay around the 15-20 for some time, mills will have no excuse to make further cuts because of falling PRN revenue.
Containers
Demand from the Far East is also putting pressure on domestic mills with large volumes of old-KLS being packed into containers for export to China, India and even Indonesia again. One merchant remarked: “The export price is better than in the UK. There is a healthy market in China.”
The American dock strike of 2002 is also having a knock-on effect. One exporter said: “American suppliers saw a lot of confidence lost in the Asian market with the US dock strike, with the Chinese and other countries looking to Europe and especially the UK where quality is usually better.”
One dampener hanging over the export of old-KLS is Environment Agency action over the export-PRN. Exporters of old-KLS can generate export PRNs once their receiving mill has been approved by the Environment Agency or its Scottish counterpart. Last year UK paper mills voiced strong concerns about the level of export PRNs and as a consequence the Environment Agency is thought to be being more careful this year about accrediting the overseas mills. It has some concerns about the validity of some export-PRNs issued last year and some delays in the issuing of export-PRNs is expected as a result of a more careful accreditation process.
Middle grades
Tissue mills had been considering imposing some price cuts but have decided not to and there are some hopes that there will be price rises on middle grades next month. Merchants had warned that any price cuts would seriously jeopardise supplies if they had been implemented, especially as stocks are generally low and printers' arisings are not at a high level. One explained: “If you take printers' waste for example. If the price of middle grades is dropped we have to charge the printers more to take the waste away. You only need 5% of printers to say they can't be bothered to recycle the paper and instead send it to landfill and you can have a knock-on effect into a famine for the industry.”
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