Waste Paper Market Correction
30-03-2010

 

As we enter Q2 2010, the inflationary pressures on old corrugated containers (OCC), which have included ocean freight increases, unfortunately will remain until Q3. The recent spate of natural disasters such as the earthquake in Chile, severe weather conditions in North America as well as lower waste generation are now showing signs of easing.
 
China has made OCC the benchmark price for other recovered bulk grades, such that when OCC prices fall, so too does Mixed followed by publication grades such as ONP and OIMG.
 
The reality is that for bulk grades, the material cost increases have just been too rapid with mills unable to pass on. With pulp substitutes, price increases have followed those of bleached pulp increases now up to USD800. Such increases will level off by mid year, which may also see a correction in Q3, should there be any economic double dip in major developed countries.
 
As we experienced in 2008 when China stopped buying , so does the rest of Asia and price reductions can be rapid and brutal.
 
Corrections are often necessary. A reality check to where hype and market price manipulation ends and true market supply and demand becomes transparent. April and June will see more balanced price levels.