Weak US Dollar Erodes Price Increases
03-06-2009
 
With virgin pulp prices showing gradual recovery each quarter, recovered pulp substitutes are also improving in US dollar terms ( + $10 ), however the Australian dollar is being damaged by the weakening US currency. Unfortunately, price gains are not keeping pace with currency losses, which has experienced a negative reversal of seven hundred points or ten percent in just a few weeks.
 
Ex factory prices possibly peaked in mid May, and with the USD expected to continue to weaken as well as ocean freight and bunker rate restoration occurring from all shipping lines the bottom line for most materials processing is not improving. Tendering is also becoming more difficult when cost components are fluctuating by the hour let alone over weekends.
 
The 2009 recession is very similar to the nineties where demand surged before it collapsed again within days. Fortunately, prices although considered poor, were far worse during past recessions, mainly due to the current poor waste paper generation from America.
 
China remains the largest importer from both Australia and New Zealand with their strict environmental inspections. However, with both India and Indonesia now also requiring inspection processing, scrutiny will need to improve for both pulp substitutes and bulk grades which have deteriorated with comingling, together with the lack of education.  This may change when the Emissions Trading Scheme is finally implemented and understood.