Despite the difficulties & challenges caused by the Global meltdown and recession, continuing to exercise their influence during the second quarter of 2009, export volumes continued their steady growth with prices slowly firming up.

During this quarter, we saw statements being made that the global recession was likely to continue, including one saying that the decline in the global economy will continue, but at a slower rate, and another pointing towards the appearance of “Green Shoots” of economic recovery. What is not really clear is whether or not these green shoots flourish into large sustainable plants, or will they only provide stunted growth – or even whither away.

Stricter quality standards was one of the key issues of the quarter, affecting India & Indonesia, where new controls were introduced, requiring inspection and certification.

Surveyor Indonesia were planning to introduce 100% inspection controls for all shipments that arrived at their ports after June 24th. Inspection was to be limited to two agencies only.

A joint representation was made to the Indonesian Government by BIR and local trade associations, followed by local follow-up. As a result of these approaches, the Government agreed not only to defer implementation until September 24th of this year, but were also willing to expand the list of registered surveyors who could undertake the inspections.

Broad guidelines on this requirement are expected sometime before September.

Simultaneously, the Indian Government also required inspection certificates for all exports that were shipped after April 5th (later extended to April 25th), including a certificate stating that the material is “free from any hazardous waste including municipal waste, bio-medical waste etc” and also a chemical certificate. The inspections had to be carried out by DGFT approved surveyors.

Again, following a joint representation by BIR and ISRI, as well as various local trade bodies, the requirement for a chemical certificate was not enforced – subject to further advice from DGFT.

In the meantime, shipments started to arrive at Indian ports, leading to severe congestion as many did not carry the correct certification. The result was that exporting to India became more difficult, with many Shipping Lines reducing the availability of space on India-bound vessels.

The steady growth of export volumes since January, coupled with reduced vessel capacity (because many Lines have taken the opportunity to send up to 25% of their fleet to dry dock) led to greater volumes of business chasing lower capacities, putting pressure on freight rates with rises of up to USD400 per FEU in the last 2 quarters.

During the second quarter, demand from the major market of China firmed up and we also saw prices moving up due to a combination of increasing sea freight rates, higher fibre prices and the weakening USD/strengthening Euro.

Prices paid for European OCC moved forward from around the USD110 level to about USD130, with prices for good quality Mixed Paper rising from USD100 to about USD120 during the same period.

Similarly demand from other Asian countries was steady to firm, whilst in India, the demand for Recovered Fibre continued to be maintained at levels similar to the first quarter, with the increase in sea freight again positively influencing the price upwards.

As we enter the second half of 2009, and expectations rise that the worst is over, we must maintain our vigilance on all fronts as economies globally will not all return to levels previously seen, nor will they emerge from the gloom of this recession all at the same pace.