Waste paper markets see fall in prices

Waste(or recovered) paper sector experts say the price falls and lower demand are not yet causing a market crisis. But, they are seen as causing considerably difficult conditions for some businesses and as a consequence prices paid to suppliers are having to reduce.

The mid-grades, principally office and printer material, are under particular pressure although some merchants say that sorted office waste, which includes shredded material, is faring a little better.

Multigrade

Export prices for multigrade, typically printers material and some office material, are reduced in the face of weak India-export demand while prices for used cardboard are under pressure because of a slowing of orders from China and ongoing price rises for shipping containers.

The ongoing problems in the European economy are seen as a big factor with Chinese exporters of products having lower orders to Europe and so there is ample new packaging material available within the Chinese paper market.

Shipping lines continue to maintain higher prices all round having forced these up substantially in recent months and there is little expectation of any breaking of ranks among the lines over the higher price rates for at least three months.

Unpopular

The approach of the shipping lines is making them unpopular among exporters and some of the major Chinese buyers are believed to be buying extra tonnage from the United States to make up for the tonnages they are not purchasing in the UK. One line, Maersk, has said it is increasing the availability of containers but one paper trader said that he fully believed the shipping lines had gone too far with their price rises.

One merchant said: We appreciate that rates were possibly too low but now the very high rates are actually stopping trade and the lines will suffer and unless you are ordering large numbers of boxes, they are still proving hard to get. We have been helped by orders from the Continent for OCC (used cardboard) but it seems as though mills there are getting as full as the UK mills.

He added: I am not surprised the UK mills have taken advantage of the export debacle to reduce their prices as fast as possible. If China starts buying any sort of volumes (mixed and OCC), there could be a shortage again as most producers do not have big stocks.

One export buyer said: Sales of finished product in China are slow and more domestic material is being used although there is still demand for material from the UK in other markets such as Indonesia. What we are not seeing is the usual annual uplift in demand which usually starts around now and I now dont expect this until June or July.

Domestic

In the domestic used cardboard market, both DS Smith and Smurfit Kappa are seeing, or have seen, some maintenance of machines which will cause downtime. The pair are thought to be well-stocked and paying reduced prices in light of the reductions in export demand and are also not buying much material in the spot-market largely because their own contracts are generating sufficient material. There is also an emphasis on quality with cleaner material preferred.

SAICA, which has the new Manchester board mill, has facedpoor production levels because of various difficulties which have included teething problems with its effluent treatment plant.

The Spanish-owned mill was paying some of the highest domestic prices earlier this year but in the wake of reduced Chinese interest in used cardboard since March, it has reduced its buying price too.

Now, it is not expected to be at close to full production in the UKuntil at least next month. SAICAs merchant arm is said to have been actively buying material, including loose tonnage, but has not been seeking additional material as would have been expected. However, merchants are optimistic that the Manchester mill will increase its demand should full production start again in June.

Some waste paper sector experts say that stronger ordering by the main Chinese buyers in the summer with stronger demand from SAICA could help bring prices back up although there is also some desire to see stability with prices in the 90 a tonne range. At present they have fallen to about 80 in the domestic market with exports 5-10 higher and could reduce more before stabilising.

Recession

Simon Ellin, chief executive of the Recycling Association, said: I think we are seeing one of the worst market situations in a long time with a crippling recession. Recycling, particularly of paper, is a good indication of how the economy is going. If people are not buying goods then the packaging does not appear on the market. And, we can see that printers are printing far less as advertising is down and so there is less and less in the market..

He continued: “I think overall we are 20% down on the volumes in the market than we were two years ago and more people are chasing the material.

However, Mr Ellin said he accepted that the sector had seen some good prices over the past year and that historically a price for used cardboard in the mid-eighties could be seen as a good price. I think overall the outlook in the longer term has to still be positive with the world demand for paper still there but we are seeing a big market correction at present.