Advanced economies are slowing down sharply whilst those of the emerging nations are facing increased risks of inflation due to rising interest rates and/or credit tightening. Financial institutions, once again, have to endure increased stress caused by non-compliance.

Global recovery is continually getting difficult, with some fearing that if we were to have financial/economic crisis, then this perhaps could develop into a worse-case scenario than we saw in 2008/09.

The above factors are affecting both demand for Recovered Fibre, as well as the order books at the Paper Mills. Reduced collections & weakening orders, have greatly affected prices during the 3^rd quarter.

The steady demand that we saw in the second quarter continued into July, but by mid-August we noticed a downturn in demand leading to a price drop, which by mid-September translated into sharply weaker prices all round.

OCC prices for the quarter began at levels of USD240/245 and rose towards USD250/255 in early August before retracting later that month to USD250, with a further fall to USD240+ by the end of the quarter.

Prices for Mixed Paper began the quarter at levels of USD235+ and rose towards USD240+ in August but in September prices weakened to levels of only USD230+, by the end of the quarter

This decline in price was expected to continue into quarter 4.

New paper prices also started to weaken noticeably in the Asian markets, with above average Inventories of both Recovered Fibre & New Paper.

The strengthening US Dollar against various Asian currencies also had a negative effect, increasing import prices for the Mills.

Demand from all the Asian countries was noticeably weaker by the end of the quarter. (China, India, Indonesia, Thailand, Vietnam, Taiwan & Korea).

The final quarter of a very turbulent 2011 is going to be difficult, both in terms of demand as well as supply, with prices expected to weaken sharply.

Mr Baxi will be a guest speaker at the RISI Conference in Amsterdam March 15th – March 17th.

His Presentation will be discussing the following :

“Paper Recycling Trade: The Dangers of a Demand-Supply Crunch”

please visit http://www.risiinfo.com/events/euro_conf/ for further information

Following the October National Holiday in China we noticed some strengthening in demand from Far Eastern Mills, with an equally strong European Domestic demand. This continued to increase over the quarter, with end November – mid December being the strongest export period.

During the quarter the cost of freight remained reasonably stable, with slight upward adjustments seen in October & early November. This became necessary in view of the reduced High Cube container availability, as imports slowed once Christmas inventories were fulfilled.

Prices for OCC strengthened in October from levels of USD210 to USD215+, which moved up to USD220+ by mid-November.

Likewise, prices for Mixed Paper enjoyed similar increases with movement from USD180+ to USD185+ in October and by mid-November had reached USD190+.

Demand from India, and other Asian countries also continued to grow steadily with a gradual increase in prices.

The extreme wintery conditions experienced in December in both Europe and USA started to have an adverse effect on material availability. Collections were unable to meet demand and this forced prices upwards reaching new levels of USD230+ for OCC & USD200+ for Mixed Paper.

Floods in Queensland will also have affected short-term fibre supplies out of Australia for the Asian market.

In the short term, we will see price fluctuations as the imbalance between supply & demand (domestically as well as Global) remains strong. However, once the variation in weather influences settles down, we expect to see a more stable market by the end of the first quarter of 2011.

With reducing Stock levels at Mills in Asia, and with new expansions coming on stream during 2011, we will see a growth in exports both to meet the demand for the restoration of stock levels and to satisfy new capacities across the various Mills.

As we end the year & start the New Year 2011, one senses a general feeling of optimism with somewhat increased confidence that the pace of growth in the emerging economies – China, India, Brazil, & South Africa – should generate stronger confidence for Global Economic growth.

Japan’s second quarter GDP figures were at USD1.2 trillion whilst China was at USD1.33 trillion, with the 2009 GDP for USA at USD14 trillion. China’s growth has exceeded that of Germany, France, Great Britain and now Japan to become the second largest Economy.

The growth story was dampened slightly in the 3rd quarter when slower growth was forecast by all major global economies. Growth in manufacturing output was noticeably slowing down, affecting both demand of recovered fibre and new paper. Exports from China and other leading emerging economies registered a year-on-year decline for the second quarter.

China is forecast to grow by more than 10%, while India has projected growth in excess of 7.5% for 2010.

At the start of this quarter, we saw some strengthening of prices, both due to increased domestic demand and lower levels of collections. The forthcoming Asian Games in China also contributed to this strengthening in demand which unfortunately did not last long enough.

During July, OCC prices increased from USD205+ to USD220+ and for Mixed Waste there was a rise from USD175+ to levels of USD187+. Freight rates continued to remain strong during July, with
ex-works fibre prices firming.

However, by mid August, export orders started registering a decline with the mills expressing an inability to work with the higher prices. This resulted in a reduction in the recovered paper prices as well as the first signs of weakening in freight rates.

By early September the freight rates had fallen by USD200 supported by some weakening in fibre prices, whilst European mills continued to maintain their price levels.

September saw OCC prices reduce to USD210+ and Mixed Waste fell back to USD180+.

Similar trends have been seen in other Asian markets, where the mills have focussed on buying more local fibre, with reduced levels of imports, enabling them to meet the domestic demand for paper at the lower price levels. The markets that continued to import were Indonesia, India Taiwan, Korea, Vietnam & Thailand

Freight rates continued to decline during September with a corresponding fall in export prices. By the end of the quarter, we had a total reduction of USD350+ in freight rates. Export volumes also registered a similar decrease during the quarter.

By mid/end September, the mills in China had slowed down their purchases in view of the imminent week-long National Holiday. We expect the Mill buyers to come back into the market after the holiday is over, and anticipate some market strengthening by the end of October.

The 4th quarter will be a challenging period with winter approaching and the expectation that mills will increase their procurement. Collection levels in this forthcoming quarter will depend on the severity of winter both in Europe and US.

The swing in business trends following the Global emergence from recession became very noticeable at the start of 2010.

Strong demand from Asia, especially China, at the start of the year was accompanied by equally strong European domestic demand

The container Shipping Lines which were projected to post losses of around USD20Billion for 2009, continued their drive not only to increase basic freight rates, but also started imposing new surcharges examples of these being, increased BAF (Bunker Adjustment Factor), and CAF (Currency Adjustment Factor),  STF (Suez Canal Surcharge), ERC (Emergence Risk Surcharge), EBS (Emergence Bunker surcharge), Piracy Surcharge, THC, (Terminal Handling charge), and other surcharges that the Lines considered appropriate to impose. The total Freight cost payable was therefore the freight charge plus all the other surcharges added on, making Export pricing more challenging than ever. In the 1^st quarter, exporters had to absorb total freight increases of between USD400-500, with further increase USD150-200 already announced for April

The tough winter, the worst for 30 years, contributed to greatly reduced collections of Fibre, against an increasing global demand, resulting in a strong increase in Fibre prices in Q1.

During the 1^st quarter Paper mills had to cope with rising fibre prices which in turn reflected in increased Finished Paper prices.

Exports from Europe continued to be affected by the weakness of the Euro  which depreciated by more than 5 % against the US Dollar during the last 3 months, with Sterling depreciating by over  7% against the US Currency in the same period.

The trend in prices for OCC during the current quarter showed a strong upward trend, with January prices of USD195+ moving up to USD235+ pre Chinese New Year. Following this Holiday period, the Mills were reluctant to procure at pre New Year prices. We started experiencing price adjustments in March down to USD230+ which by the end of the month were in the order of USD215+.

Mixed Paper prices began the year at USD175+ and moved up to USD195+ by the beginning of the Chinese New Year celebrations. Once again, in March Mill buyers were seeking lower prices and we saw a dip in the price to USD185+.

Demand for other grades, News & Pams, Magazines Sorted Office Paper & Coated Book Stock also reflected a similar pattern over the last 3 months.

Indonesia, India Taiwan, Korea, Vietnam & Thailand continued their 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 a rise in collection levels, but the challenge for prices to be sustained at the March-end levels will strongly depend on European domestic demand, currency volatility and more importantly how far the Shipping Lines feel they can push the freight rates to.