Export Prices Confusion
12-06-2008
Rarely have we experienced export market prices for bulk recovered paper and board as confusing as it is for June which may not improve for the balance of 2008.
 
No doubt the Chinese market has been overheated for Mixed paper since early 07, with the price differential to No. 8 News below $20 (previously $40).  CCIC stricter environmental inspections, together with slower import licence approvals to small Chinese mills, has seen the mixed pricing differential No. 8 increase to US$80, which is unsustainable.
 
With Mixed and OCC prices nearing correct levels, ONP prices will inevitably fall as soon as inventory levels for ONP improve and imports of Mixed resume to their normal levels in China. 
 


Shipping costs are likely to increase again from most origins by US$12-25 per tonne from July 2008, and a similar amount from September.  The debate will then arise as to who will absorb the costs?  Historically much of these increases were absorbed by the shipper which negatively affects ex factory prices which are already incurring fuel levies of up to 15% from June.  Hopefully, a compromise will occur between the bleeding shipper and the struggling mills.
 
The bottom line is that tendering for more than three months in these volatile conditions is suicidal.  Whilst China sorts itself out during the next two quarters, the balance of Asia is willing to accept Mixed paper at distressed price levels, and put up with contamination of 10% (which is contra to the Basel Convention).  This is as long as the price covers sorting costs and materials are not impounded by government environmental inspections.