BIR World Mirror Paper 04/2010

Strong demand

The swing in business trends following the world’s emergence from recession became very noticeable at the start of 2010. Strong demand from Asia, and especially China, was accompanied by equally strong demand within Europe.

The container shipping lines, which were projected to post losses of around US$ 20bn for 2009, continued their drive to increase basic freight rates and also started imposing new surcharges, examples of these being: BAF (bunker adjustment factor) and CAF (currency adjustment factor) increases, as well as STF (Suez Canal surcharge), ERC (emergency risk surcharge), EBS (emergency bunker surcharge), THC (terminal handling charge) and piracy surcharges. The total freight cost payable was therefore the freight charge supplemented by all the other surcharges, making export pricing more challenging than ever. In the first quarter of the year, exporters were forced to absorb total freight increases of US$ 400-500 per 40-foot container, with a further increase of US$ 150-200 already announced for April.

The tough winter, the worst for 30 years, contributed to greatly reduced collections of fibre at a time of increasing global demand, resulting in a strong increase in recovered paper prices in the first quarter. Paper mills reflected these higher fibre costs in increased prices for their finished paper products.

Exports from Europe continued to be affected by the weakness of the Euro which has depreciated by more than 5% against the US dollar during the last three months; the value of sterling has dropped more than 7% in relation to the US currency over the same period.

Asia/Pacific Rim

In the first quarter, OCC showed a strong upward trend, moving up from US$ 195+ per tonne in January to US$ 235+ prior to Chinese New Year. Following this holiday period, mills were reluctant to procure material at pre-New Year prices, leading to downward price adjustments to US$ 230+ in March. By the end of the month, prices were of the order of US$ 215+.

Mixed paper prices began the year at US$ 175+ per tonne and climbed to US$ 195+ by the beginning of the Chinese New Year celebrations. Once again, mill buyers were seeking lower levels in March and the price dipped to US$ 185+. Demand for other grades of recovered paper such as news & pams, sorted office paper and coated book stock have followed a similar pattern over the last three months.

Indonesia, India, Chinese Taipei, South Korea, Vietnam and Thailand continued with normal levels of imports and we look forward to their business maintaining these levels for the remainder of 2010.

With winter now behind us, we anticipate an increase in recovered paper collection levels but whether prices are sustained at end-March levels will depend greatly on demand within Europe, on currency volatility and, more importantly, on how far the shipping lines feel they can push freight rates.

Ranjit Baxi
J&H Sales International Ltd
President of the BIR Paper Division

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