As indicated in our previous recovered paper report, many UK merchant processors had rested their hopes on upward price movements in March. And while the first few weeks of the month brought little change, it was confirmed in the run-up to the Easter weekend that a number of major consumers would be raising old KLS prices from £40-45 per tonne to £50 per tonne.
With other producers appearing set to follow suit, merchant processors are hoping that this significant increase will trigger a chain reaction resulting in higher prices across all recovered paper grades.
The mills’ decision to increase old KLS prices owes much to recent developments in the export market where demand has been strong and prices of around £60 per tonne have been available, particularly from China but also from other parts of South East Asia.
The recovered paper sector welcomed the increase as inevitable, describing the previous price differential between domestic and export prices of up to £20 per tonne as unsustainable.
“You can’t maintain a gap like that in the long term,” said one expert, “because you will first lose the tonnage and eventually the supplier.”
In effect, the UK recovered paper sector is gaining ever more confidence in the long-term stability of its export outlets, especially given the increasing consistency of China’s buying patterns. At the time of writing, the domestic mixed paper price was still at £25 per tonne despite healthy export orders – notably from China, India and Indonesia – at between £36 and £40 per tonne depending on location.
A UK buyer described domestic mill stocks as adequate and perceived “no rush to put up prices”.And several contacts welcomed the widening of the gap between old KLS and mixed, which had recently closed so that the value of sorting the former was being called into question.
Mixed paper has become a focus of negative attention over recent weeks following talk from the Environment Agency of disallowing the inclusion of “card”. Any such move would effectively “fly in the face of existing PRN arrangements”, MRW was told this week by one of many aggrieved merchant processors. “It just shows a lack of understanding and would cause chaos.”
The issue of exporting co-mingled material as mixed paper has also resurfaced recently and the UK recovered paper sector is concerned that isolated transgressions may prompt the authorities to become “over-zealous” in their approach to any load described as containing mixed paper.
India, Indonesia and China have also provided strong export demand for UK de-inking grades and price pressure is perceived as upwards.
There have been no moves to introduce significant price increases into the domestic market despite the lack of stocks sitting in processors’ and local authorities’ facilities. Stocks of middle grades are also moving very smoothly, partly on the back of good export demand from As