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Feature: Low level stocks cause concern

The new year has jogged rather than sprinted into life for the UK’s recovered paper sector.

Domestic prices have remained largely unchanged while export levels have softened in some instances.

The domestic KLS price often comes under downward pressure at the start of a new year but, on this occasion, the headline level has remained at £45 per tonne thanks in part to mill stocks being below the norm for this time of year. Having stood at £61-£63 per tonne in the run-up to Christmas, the export price range has slipped to nearer £58-£62, although some experts are anticipating a firming trend for the near term.

Recent weeks have produced a marginal softening in the price secured by UK exporters for mixed paper — from a top end of £45 to nearer £41-£43 per tonne. Once again, the UK price has remained at £25-£30 per tonne.

Stable pricing has also been the main feature of the domestic deinking market, with January levels expected to remain in force for February. Export prices too have remained stable in a market which continues to witness a close balance between supply and demand.

Last October’s price increases for some of the
tissue-making grades of recovered paper had the desired effect of increasing availability.

Indeed, some mills are now claiming stocks have recovered to such an extent that the coming weeks may bring a £3-£5 per tonne reduction on the likes of multigrade and coloured
best pams. But according to recovered paper industry experts, any such move would be “brave” in light of
the following factors: exports are moving well;
merchants have generally low stocks; and forthcoming public holidays will serve to reduce supply from
printers, among others. Indeed, several contacts in the recovered paper sector suggested mills should be concerned about “worryingly low” stock levels across a number of grades.

As indicated by latest statistics from the Confed-eration of Paper Industries, UK mill inventories ended November last year 32% lower than they had been
12 months earlier. Mill stocks of corrugated and
kraft, for example, were almost 60% below their level of end-November 2004.

In terms of the high grades of recovered paper, export prices of best whites Nos 1 and 2 have fallen by between £5 and £10 per tonne over recent weeks. There is increased availability on the domestic market which, according to the trade, is still in the process of assimilating the closure of Sunderland Paper.

UK paper and board manufacturers are continuing to have concerns about energy supplies and prices, and these are likely to intensify if February brings severe weather. Domestic packaging producers report an encouraging start to the new year but suggest that fortunes in 2006 will be guided by structural developments within the European supplier sector.

The domestic tissue-making industry has made a promising start to 2006 and is predicting year-on-year consumption growth of around 3%. There are no signs of a drop-off in demand from the away-from-home sector, which includes the health service. However, in common with packaging producers, tissue manufacturers are concerned about energy and also the increasing cost of chemicals.

The UK newsprint sector is generally making less opti

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