Paper Industry Stalls Again
24-03-2009
Following a brighter January and February both March and April have seen production stall for most recovered paper grades. With bleached pulp now down to USD360 delivered, pulp substitutes demand and pricing are under pressure as it is now more competitive to utilise virgin fiber. The question always asked is, where will pricing be for pulp substitutes is simple. Just deduct 50% for yield loss and then USD90 for chemicals e.g. Sorted Office Papers (SOP):

USD360 - USD80 (freight and other charges) - USD90 (
chemicals) = USD190 - USD95 (50% yield loss) = USD95 or AUD137 + AUD20 (freight delivered to wharf). Can these prices weaken further? The answer is unfortunately yes.
 
From Australia and New Zealand, both currencies are firming against the USD ( A$0.68) and shipping containers from some ports are scarce due to the reduction of imported goods. Consequently, shipping lines who made their profit from imports recognise that low valued waste cannot absorb higher ocean freight rates. Many shipping lines are expected to park ships in lieu of carrying loss making commodities. This is not new during recession cycles and no doubt we will all face higher costs with less volume for at least the next two quarters.