As a consequence, letsrecycle.com has recorded a second set of price indicators for the month to better reflect the export market. The first set, produced mid-month, showed marked falls from September and there have been some reductions since then, albeit on a smaller scale.
In the domestic market, UK mills are widely expected next month to try and push down the prices they pay for used materials, especially in the board and tissue making sectors. Falls in the newsprint sector are expected too although prices are relatively firm. Only one set of domestic price indicators will be shown for October because the market has proved more stable than on the export side.
Going forward there is some consensus that export prices will move down a little more but some stability will be reached, a view that would be strengthened if there is more agreement in the Eurozone as well as the drawing in of more orders from China at the lower prices and from India once the current holiday season is over.
Three years ago there was a sense of crisis when the markets fell in October. However, such a view is not apparent at present. This is partly because the market has not been at the high level it was in early 2008, even though prices have risen in recent months to levels which some in the sector have believed to be unsustainable.
However, of some concern is the demand for material in the mid-grades, typically from printers and offices where prices are down substantially. A strike at the Alize mill in northern France, which makes the Evolve range, is not helping and the potential closure of the mill will also impact in the UK.
Simon Ellin, chief executive of the Recycling Association, said: We have seen an expected market correction on the back of several factors. There is the general global economic weakness; in Europe we have the problems in Greece, Italy and Spain and there is uncertainty too in the States. All this is contributing to global weaknesses in commodities and reductions in consumer demand.
Mr Ellin added that a factor with the mid and high grades was that the pulp price had come down significantly.
And, he referred to the potential raised earlier this month (see letsrecycle.com story) for mills to switch to using pulp rather than using recycled materials, particularly in the tissue sector. Mr Ellin said: Those mills that have the ability to switch between virgin and recycled fibre will be aware of the much better price that can be found for pulp at present.
Concerns
While there is a consensus that the market correction was to have been expected, merchants and others in the recovered paper sector are voicing concerns that they do not want the market to go too low. Some believe they can operate effectively at current levels or even with a further modest fall but anything substantial would hit margins because of ongoing strong collection and sorting costs and also cause problems with customers where charges may have to be imposed in arrangements where these dont exist at present.
Looking further ahead, one exporter told letsrecycle.com: You have to remember that this may well be seen as a short-term price correction to reflect world economic volatility and weaker consumer demand for products. But, the demand is still there on a global scale, we will see huge growth in China, Indonesia and India and material will still be wanted, especially if arisings are down.
He added: there is certainly no need to see widespread market panic, this is a bit of a correction and we have to remember we are in a commodity market.
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