Waste paper sector facing up to shipping shortage

The decision by Maersk Line has prompted further concerns in the recovered or waste paper sector that a volatile month in pricing terms lies ahead in the face of higher charges to export material and a shortage of containers created by reduced shipping availability.

But, the general consensus of those involved, from merchants to shipping lines, is that this is not a prolonged downturn in world market and will be remedied in a few months time.

February 2012 was a relatively strong month in terms of the recovered paper sector with firm prices and good demand, especially for Old KLS (used cardboard) as well as mixed material.

This month, export orders have weakened in the face of the reduced availability of containers. In the domestic market the situation has been compounded by some logistics difficulties involving Bibbys, which has a 40 million deal to deliver material to the new Saica mill in Manchester although this is said to be being remedied.

Concern

Commenting on the market situation, one merchant in southern England said: We are facing a growing and soon to be chronic problem in finding sea containers for export and this will see buying prices reduced along the chain in April.

Some deep sea orders are being cancelled, commuted or transferred to UK and Europe as a consequence of the shortage.

The shipping lines are looking to get price increases in at the same time as the shortage of containers. It typically costs $800-1000 per container and the lines would like a rise of about $200 per container.

Some in the recovered paper trade have commented that the lines are unfairly all putting their prices up at the same time while others suggest that when demand for containers weakens some of the lines at least will have to reduce their rates.

Maersk has sent a statement to exporters saying that as a result of exceptional demand for Maersk Lines eastbound product to the Far East exacerbated by a number of consecutive vessel cancellations following Chinese New Year, a significant cargo backlog has been created in North Europe.

Consequently, Maersk said that has necessitated a complete booking stop which is temporary and on current estimates would see the backlog cleared by early May.

One exporter to China said: There is a bit of a lack of confidence at the moment because of the shortage of vessels and material agreed now will not be shipping for some time. This is being compounded by a lack of imports into the country. But, there is still some capacity and it is too extreme.

Adrian Jackson, president of the Recycling Association, said: I believe we are now seeing a reduction in availability of ships and containers because the poor state of economies in Europe is seeing less goods being bought from the Far East. The austerity measures are starting to hit hard.

Future

He added that while he believed the sector had a very bright future and strong demand would return, the next few months could prove difficult with prices under pressure, especially at the end of March and into April.

Mr Jackson added: When the market comes back we could even see a mini-boom.
Paul Briggs of Mark Lyndon UK, said: From a Chinese perspective, mills are suffering like most mills around the world with lower than anticipated order books and weakening linerboard prices. At the moment a lot of Chinese mills are living on domestically generated OCC (cardboard).

However, Mr Briggs added that he did expect a return to stronger orders as the high season for demand in China will start later this spring.

One shipping company, which did not want to be named, told letsrecycle.com, that the current situation is a result of running of blank voyages, effectively ships not sailing on some routes after Chinese New Year and that this is still happening. There are more than enough vessels to serve this route but demand over the past month has not been strong enough in terms of exports to Europe. Different lines will be taking different views.

On the multigrade side, one exporter commented: We are currently seeing much less demand for multigrade from India which is going to have an effect. At the moment they are able to buy it cheaper from the US and the Middle East.

• In the recovered plastics sector, exporters have said that demand remains strong for higher quality material but they too are facing shortages of containers and there are signs of a build-up of some potential exports.