Sentiment on the British recovered paper market has deteriorated sharply. Buyers from Europe have retreated again and demand from Asia is limited. After soaring in recent months, prices of some grades fell again in June.
The biggest price drops were reported for OCC (1.05) and SOW (2.05), grades that saw the steepest increase before.
Further prices cuts are expected in July, and most experts are not optimistic about the future. "We will soon be back to the same situation we had at the beginning of the year, but with a much weaker economic environment,” commented one market insider.
The development of the Asian export market is a particular cause of concern to the industry. Market players were not surprised by the fact that China reiterated its commitment to phasing out recovered paper imports. But they do fear that once exports to China cease as of September/October, the market could fall into an "even deeper” slump.
Players are not rattled by the introduction of stricter quality criteria in Indonesia, especially since the threshold for impurities will initially be set at 2 per cent. However, the announcement of a quota system and successive restrictions on import volumes is definitely setting off alarm bells for many market experts. "It seems almost inevitable that Indonesia wants to follow in China’s footsteps,” said one expert.
Still, some players are more optimistic. "If China disappears as a recovered paper buyer, there will be – at least in the coming years – several smaller Chinas,” said one insider. "It also remains to be seen whether Indonesia can implement a policy like this as dramatically as China did,” said another respondent.
If you are interested in the development of the British pulp and paper markets in June read out next issue, which will be available as epaper from Wednesday 24 June.
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