Chinese mills in particular have built stocks in recent months at high prices and some in the paper sector say that this downturn in demand and pricing was inevitable.
One senior UK paper expert told letsrecycle.com today: “Yes the world is seeing an economic downturn but this is more about the Chinese needing to balance their books. Their mills are full of expensive stock and if the price falls to below £40 a tonne or less they will start buying again.”
Others in the sector are convinced that some tonnages of mixed paper and card will have to be landfilled or incinerated in the UK if no demand is found. And, some merchants are already storing material with the aim of selling it in the future.
So, WRAP's meeting on Thursday (October 23) in London is being seen as important in revealing whether the recycling organisation or the Department for Environment, Food and Rural Affairs have any advice or practical solutions to offer.
Chris White, president of the recovered paper section of the UK's Confederation of Paper Industries, said: “As president, I am obviously representing all sides, and it is obviously a difficult time for all members. The government needs to make sure that the export markets run as seamlessly as possible – otherwise there is over 4.5 million tonnes of paper that could have nowhere to go.”
Quality
In the past WRAP has concentrated more on the issue of quality than any threats to UK markets. In a recent exports study it said: “The key consideration for the UK is that it should not be the marginal supplier of paper to China. If demand is lower than forecast, then it will be the marginal exporters – likely to be those with the highest cost and/or lowest quality paper – that will suffer disproportionately.”
WRAP suggested that: “One way to mitigate this risk might be for collection agents and exporters to work directly with overseas-based paper mills to ensure that they collect and supply paper to the required specification”. This is already happening in the US. US OCC has emerged as a preferred grade of recovered packaging fibre in China because of its high quality and reliable delivery, but its position is also being consolidated by ties between US collectors and merchants, and Chinese paper mills.
Liz Goodwin, chief executive of WRAP, said this week about the meeting on Thursday (October 23): “Against the background of global economic slowdown, volatile primary raw materials markets and renewed determination to tackle climate change, secondary materials are becoming ever more important. In parallel, the volume of recovered materials continues to grow.
“This means we need to ensure a balanced set of economically and environmentally sustainable end markets, both domestic and, where appropriate, overseas. The latter constitute a significant share of the end markets for some materials. As such, there is mounting interest in understanding the international markets for recovered materials. The event is being held to promote industry knowledge and address these issues,” she added.
WRAP is to share the findings from several reports and models developed since an International Markets event held in June 2007 – some in direct response to the discussion on that day. The event, said WRAP, creates a platform for a number of open panel sessions and key speakers will offer their views from across the industry, including Valpak, the Environment Agency and Defra.
Conclusions
Past studies by WRAP have noted that UK exports of recovered paper have grown considerably since 2000 as increased collection rates have coincided with the closure of domestic paper mills. “Global trade in recovered paper has also grown considerably over the past few years as other developed countries improve their collection rates, while less developed countries increase their demand for recovered paper. These trends look set to continue over the next few years,” it said.
And, WRAP reports on the paper market have suggested an increase in exports had been likely: “The forecast two million tonnes of additional recovered paper exports from the UK represents only a small proportion of the possible 35 million tonnes of growth in the global trade in recovered fibre over the next ten years. So it is tempting to conclude that the reliance on export markets poses little risk to the UK.
“However, the forecasts outlined above are very sensitive to the assumptions made about growth in production, consumption, utilisation rates and domestic collection rates: small changes in those assumptions could dramatically change the outcomes.
“For example, an increase in the Chinese domestic recovery rate of 2 percentage points by 2015 would lead to the collection of an additional 2.2 million tonnes of paper per annum. It is possible that this paper would primarily displace imports of lower quality recovered paper grades.”
The WRAP report on markets added: “Moreover, as the global supply of recovered paper has been determined in large part by legislative drivers, supplies might not change in response to changes in demand. A shortfall in demand relative to supply could lead to sharp falls in price which may, in turn, have negative consequences for commercial paper recovery businesses.”
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