An expected softening in market prices for used cardboard has spread into other grades faster than was expected.
Over the past 10 days, prices for Old KLS used cardboard have started to move down and this week were below the 110 a tonne level for some export orders. At the beginning of the month prices were some 15+ higher but a reduction in the price of new cardboard (linerboard) in China has prompted the downturn in Old KLS prices.
Chinese mill operators have been described as extremely nervous and are concerned that in many parts of the world there is great economic uncertainty.
While the linerboard price has fallen this has not spurred many extra orders for new material and so producers in the Far East are seeking to reduce costs, largely through paying less for used material. And, the picture is similarly poor on the Continent where demand has weakened in the face of uncertainty in the Eurozone.
As a consequence the UK board sector is also seeing price falls with prices being reduced by 10-15 a tonne or more.
The real surprise has been the speed of the impact of the fall in the Old KLS market on other paper grades. In particular high value grades, for best whites and office material, have taken a further knock, having already been under pressure from reduced pulp prices.
Speaking to letsrecycle.com, Adrian Jackson, president of The Recycling Association, said: The falling market reflects poor order books at the mills so this is being reflected in their orders for waste paper. I believe that this is different from the dip of 2008 when there was a general banking financial crisis. Now it is a sovereign crisis affecting confidence in individual states. It will be very important to see how the sovereign debts, such as in Greece, are handled.
Nick Watson, of board exporter ACN Europe, said: Everyone is facing similar problems. The situation is the same whether you are in Europe, South America, China or Japan. We are hearing reports generally of a lack of sales orders and mills have decent amounts of stock.
Another exporter, Paul Briggs of Mark Lyndon UK, confirmed that market prices were falling for used material. This reflects the pressure in the marketplace because of the reduced demand for new material and the lower prices for finished product.
Merchants and brokers are now watching closely to see how the market develops in the coming weeks with the biggest concern over whether orders are achieved. Some merchants are having difficulties in securing orders for higher grades and some office material and there are also some rumours that at least one export consignment of mixed papers is on the water, without a home.
The consensus of opinion appears to be that the waste paper market had reached a surprisingly high level of value during a time when the world was still in recession and the market correction was to be expected.
Going forward, there is a belief that while some prices will certainly reduce in November, there is also the potential for further falls at the beginning of 2012 before some stability is achieved. Few in the waste paper or recovered paper sector believe that the fall will mirror the crash in 2008, three years ago this autumn. One managing director commented: Then we were at the top of the bubble with lots of stock and arisings and now we are in a recession with lower arisings.
Newspapers
Prices in the newsprint sector have been particularly buoyant despite overcapacity in Europe and continuing falls in newspaper sales.
Used newspaper prices impact particularly on local authorities. Some have achieved deals at high prices which now look out of kilter with market rates and new contracts are expected to be at lower levels although agreements are still being made at least 15-25 above spot market rates.
A fall in the value of used newspapers a reduction is expected next month will also impact on the value of commingled material for which local authorities have been getting surprisingly attractive gate fees.
One recycling company spokesman told letsrecycle.com: Local authorities might have to be more realistic about their prices.
Pulp
The pulp sector is also adding a separate dimension to the pressures in the waste paper market. Pulp prices have been falling and there are considerable efforts in wood producing countries, such as Finland, to secure market for material. More and more forests are being certified under environmental standards and more efficient pulp producing facilities will come online in the next few years.
Accordingly, some paper producers are expected to see pulp, rather than recycled material as an attractive proposition assuming the pulp price remains competitive. Added to this is the need to use a certain amount of virgin fibre for some papermaking because of the loss of fibres which occurs because of the continuous recycling of some paper grades.
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