Volatile Times Ahead
30-06-2010

June has been a month of both price corrections for pulp and recovered paper. There has also been mixed messages regarding the price levels for finished paper products in Asia as Chinese mills dump papers into many Asian markets which have consequently slowed their demand and imports of raw materials.

China is also dumping surplus softwood bleached Kraft at US$670 into India, down 20% from mid May. This is very unusual and we also hear that China is cancelling pulp shipments to them in transit which can only mean more downward pricing pressure.

The 3rd quarter is historically uncertain. This year will include Ramadan which makes export planning difficult, with demand bearish at best, especially for pulp substitutes with prices even more difficult to forecast with pulp prices now in a free fall. Many mills are still holding off ordering until August for September delivery at the earliest, or after Ramadan late September.

By late June there were signs that OCC price erosion had stabilised, however the same cannot be said for News, which has not yet found its bottom price level, reflecting both demand and the quality of recovered newspapers.

As true ONP declines, Mixed grades need to be resorted at destination and assuming newsprint mills have the time and labour to hand sort such vast amounts, this additional expense will inevitably be paid by the supplier with price reduction.

To summarise, the 3rd quarter will be one of the recovered paper industry’s worst since late 2008 and we can only hope that there is a jay curve in October.