Is The Next Bubble Sustainable?

 Australia reported paper and board consumption per capita back to 180-200 kilos per annum.  Although the December quarter recovered paper export figures are not yet available, it is also likely that data will show a return to normal if not a record.  

With all global share market indexes on a bull run since late December 2009 and with China growth at 10.4% +, the big question remains, can the pulp and paper industry continue to absorb material and ocean freight increases into 2010?
All reports indicate that the US economy is slowly improving which will soon reflect in their reduced unemployment figures. This will only then see a slow improvement in consumption data and no doubt, more generation of recovered paper. In the interim, Asian mills, whilst comfortable with waste paper inventories, are not in surplus either and need more imported fibre from weakened developed countries who have limited supply.
With the end of the severe northern hemisphere winter, as well as pending withdrawal of global stimulus packages followed inevitably by an increase in interest rates, Q2 is likely to see a levelling off in demand, as well as possible price deflation which some smaller Asian mills have been endeavouring to depress since late November and December with limited success. Some grades such as OCC, are in fact likely to decrease by $5-15 per tonne. ONP cannot sustain price levels at US$200+ and in early January, with a swing back to Mixed demand showing that ONP prices have probably peaked.
The balance between supply and demand is shaping up to be a volatile journey again in the first half of 2010. Accurate forecasts continue to be difficult to find and with pulp prices levelling off, no doubt, so will recovered paper prices.