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Feature: UK shows price decline while Asian prices are static

The UK price of old KLS was trimmed back in June despite persistently healthy orders from Asia. In line with movements in mainland Europe, two of the leading domestic mills cut the headline price from £50 to £45 per tonne towards the start of last month, and others followed suit during the course of the following week.

The move was greeted with little surprise in the UK recovered paper sector, although several players described this as "a very dangerous strategy" given that Europe could no longer be regarded as the bellwether market. Prices on offer from Asian consumers had barely moved, and so the domestic price decline had merely increased the availability of tonnage to an ever-receptive export market, it was explained.

While the UK was dropping the old KLS price by £5 per tonne, some UK exporters were still able to obtain £60 per tonne - and slightly more in some instances - from Chinese customers for June shipment. Orders from China are continuing to flow, although not with quite the same intensity as in previous months. That said, prices of between £58 to £60 per tonne are expected to be achievable in the south east Asian market for July.

It was suggested this week that the UK mills' decision to drop the old KLS price may have been influenced to some extent by the closure of BPB's mill at Aberdeen, which is thought to have been consuming between 4,500 and 5,000 tonnes of recovered paper and board per month. Some expected this development to have a dampening effect on the market as a whole and on old KLS in particular.

But one merchant processor with strong export connections observed: "This may mean one less domestic consumer of old KLS but the material will find a use elsewhere, there's no doubt about that."

Market movements have also been influenced by the increase in Packaging Recovery Note values and by the sterling/dollar exchange rate.

As has been the case for a number of months, the domestic mixed paper price has held firm at £25 to £30 per tonne. Strong demand from China, India and Indonesia has supported an export price of between £39 and £41 per tonne.

"I don't know anybody who is sitting on large volumes of mixed paper," MRW was told.

Indeed, lack of material coming into merchant processors' yards was a recurrent theme this week in conversations with recovered paper specialists.

"Nobody has got any stock and the mills are going to run out if they are not careful," was a typical comment.

It is widely believed that any significant upturn in domestic demand could quickly lead to shortages.

Tissue grades would appear to offer a case in point: towards the end of May, UK consumers were reportedly considering a price reduction but, ultimately, no major changes were instituted.

According to recovered paper experts, there is insufficient availability to warrant a price reduction, and any mill tempted to lower its price is likely to succeed only in losing volume.

Indeed, there is a belief that some UK tissue mills are running on relatively low stocks and that the underlying pressure favours a price increase, although few expect any such upward move during the heart of the summer period.

Stable domestic prices were reported this week for the likes of multigrade and coloured best pams. Poor demand for unprinted scan and UPW, however, has led to difficulties in moving material and an element of price weakness, it was suggested.

The deinking mark

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