BIR World Mirror Paper 07/2010

PRESIDENT’S REPORT featuring Asia

Demand for recovered fibre continued to strengthen at the beginning of the second quarter, with both healthy export orders and equally strong European domestic demand.  Export prices have been continually increasing since January due to rising freight charges, a weakening Euro allied to a strengthening US dollar, and the growing cost of fibre.

At the start of April, recovered fibre prices stabilised at March levels, with OCC trading at US$ 230+ per tonne and mixed papers at US$ 185+. With further freight rate increases announced during April, recovered fibre prices climbed to levels of US$ 235+ per tonne for OCC and US$ 190+ for mixed papers by the end of the month.

Following the week-long holiday in China at the start of May, the Asian mills struggled to work with the unsustainable price levels that had been reached, forcing them to reduce their buying activity.

During May and June, economic uncertainty re-emerged with now-familiar economists’ forecasts talking of a double-dip recession, of an overheating of the Asian economies, and of the economic and sovereign debt crises faced by some EU member states, namely Greece, Spain, Portugal, Italy and Ireland. All of these factors impacted on fibre demand and prices during this volatile period: prices of OCC crashed from levels US$ 235+ per tonne to US$ 165+ while mixed papers traded at only US$ 140+ versus US$ 190+ previously.

With reduced export volumes, signs of a decrease in freight rates were seen for the first time in 18 months. No freight increases were applied in May; but instead, there has been a reduction in rates of around US$ 150 per FEU. This decline in freight rates is expected to continue over the summer period owing to a reduction in exports resulting from low availability of material due to poor collection volumes and also from a drop-off in export orders.

The second half of June saw a slight revival in the export market, greatly helped by reduced freight rates. However, the aforementioned low collection volumes have tended to increase the price of the fibre, with OCC export prices reaching levels of US$ 205+ per tonne and mixed papers US$ 175+ by the end of June. Other grades such as news & pams, magazines, sorted office paper and coated book stock continued to hold their demand at rising prices owing to low arisings.

Demand in other markets - including Indonesia, India, Chinese Taipei, South Korea, Vietnam and Thailand - also continued to grow during the second quarter, albeit at slightly reduced levels by the quarter’s end.
The third quarter will be a challenging and difficult period, compounded by continued poor collection levels, the holiday period and the on-going dampening effect of the recession on consumption of packaged goods.

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

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