On March 13, wholesale gas prices increased by 400% during the day and spiked at £2.55 per therm. Towards the end of March, UK gas prices came more into line with rates prevailing in other European countries, but the CPI is continuing to lobby the Government on this issue in a bid to avoid further wild fluctuations.
“High volatility creates chaos in production planning,” observed one producer spokesman. Of course, energy costs are one of the main reasons behind St Regis Paper Company’s decision to shut its Sudbrook semi-chemical fluting mill in south Wales. While this closure seals off another domestic outlet for recovered paper, UK merchant processors at least have the consolation of ever-burgeoning export markets for their products.
Figures from the CPI confirm that the UK exported 3.286 million tonnes of recovered paper in 2005 – almost exactly 700,000 tonnes more than in the previous year. Asia effectively absorbed over three-quarters of UK export volumes in purchasing 2.494 million tonnes, 768,000 tonnes more than that recorded in 2004. Shipments to Europe slipped back from 825,000 tonnes in 2004 to 761,000 in 2005, while the rest of the world consumed around 31,000 tonnes of UK recovered paper last year compared with 36,000 tonnes in 2004.
A country-by-country analysis of the CPI statistics reveals that China imported 1.527 million tonnes of UK recovered paper in 2005 – equivalent to 46% of all the tonnage leaving these shores and more than double the 709,000 tonnes shipped to China in 2004. As recently as 2003, China accounted for less than 20% of the 1.861 million tonnes of UK recovered paper exports.
Volumes dispatched to India dropped from 358,000 tonnes in 2004 to 308,000 tonnes last year, reasons for which are currently being analysed by the CPI. In seeing its imports rise from 320,000 tonnes in 2004 to 343,000 tonnes, Indonesia took over from India last year as the second largest importer of UK recovered paper. The leading mainland European buyers of UK material were the Netherlands (249,000 tonnes), France (190,000 tonnes), Sweden (160,000 tonnes) and Germany (78,000 tonnes).
During the past few weeks, export demand for UK recovered paper has been reasonably strong and prices have been stable to firm; by contrast, there has been virtually no movement in domestic price levels.
Starting with the packaging grades, old KLS has been attracting between £57 and £62 per tonne, while the headline price at home has continued at £45 per tonne. Industry experts believe export prices may improve after Easter on the back of “hungry” overseas demand and reduced availability. Meanwhile, mixed paper exports remain within the £39-£42 price bracket, while the domestic price range is still £25-£30 per tonne.
UK consumers appear to be rather more confident about their own sales prospects for the second quarter as substantial demand from eastern Europe appears to have diverted surpluses that might otherwise have been targeted at the UK market. In addition, developments at SCA and Smurfit/Kappa have taken