Second Quarter Report 2010

Demand for Recovered Fibre continued strengthening at the beginning of the quarter with both strong export orders and an 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 USA Dollar, and a growing cost of Fibre.

At the start of April we saw prices for Recovered Fibre continue to stabilise at the March levels, with OCC trading at USD$230+ and Mixed Waste at USD$185+.

With further Freight rate increases announced during April, prices for Recovered Fibre increased to  levels of USD$235 + for OCC and USD$190+ for Mixed Waste by the end of April.

Following the week-long Holiday in China at the start of May, the Asian Mills were finding it difficult to continue working at the unsustainable price levels that had been reached.  This forced the Asian mills to reduce buying.

During May & June, we were once again facing Economic uncertainty with the now-familiar economists’ forecasts, talking of double dip recession, over heating of the Asian economies and the European economic and Sovereign debt crises faced by some of the EU members, namely Greece, Spain, Portugal, Italy & Ireland.

All this had a spiralling effect both on prices and Fibre demand during May & June.

During this volatile period, prices of OCC crashed from levels USD235+ to USD165+, with Mixed Waste trading at only USD140+ (against USD190+ previously).

With reduced export volumes, for the first time in 18 months, we saw signs of decreasing Freight rates.

No Freight increases were applied in May, but instead we have seen a reduction in rates in the region of USD150 per FEU.

We see this decreasing Freight rate to continue over the summer period due to a reduction in exports, which has resulted from low availability of material due to poor collection volumes and reduction in export orders.

The last fortnight of June saw a slight revival of the export market, greatly helped by reduced Freight rates.

However, the low collection volumes have tended to increase the price of the Fibre, which resulted in OCC export prices reach levels of USD$205+ and Mixed Waste USD$175+, by the end of June.

Other grades, News & Pams, Magazines Sorted Office Paper & Coated Book Stock continued to hold their demand with rising prices due to low arisings.

Demand in other markets, Indonesia, India Taiwan, Korea, Vietnam & Thailand also continued to grow during the quarter, albeit at slightly reduced levels by the quarter’s end.

The 3rd quarter will be a challenging and a difficult period compounded by continued poor collection levels, the holiday period, and the ongoing effects of the recession dampening consumption of packaged goods.