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Paper price stabilises as China announces economic investments

Price falls in the UKs paper export industry appear to have been arrested by the announcement of huge internal investments in China.

The news that Chinas State Council would pump four trillion Yuan (£375 billion) into its economy has created optimism in many markets.

However, one senior paper industry source said he did not expect this to cause an overnight turnaround for the UK paper market.

He also said it was unlikely to halt other issues such as attempts by Chinese buyers to renegotiate deals once material had been shipped.

He also warned against traders storing material rather than selling it at reduced prices. He said: Materials need to keep moving at any price. Putting material in storage will only depress the market for longer.

People seem to forget that by selling this material they are avoiding higher landfill costs and are complying with pre-treatment regulations.

He added that a possible turnaround could be expected in late March or April 2009. But said: Any real turnaround will be driven by a recovery of Chinese consumer confidence.

CPI recovered paper sector manager Peter Seggie echoed this sentiment saying: Greater wealth in China should increase internal demand for paper which will increase demand for paper imports.

However, sudden change in the markets is not likely and when prices do come back, they are unlikely to return to anywhere near what they were before.

While Seggie quoted figures showing Chinese demand has dropped dramatically over the past three years he said he was confident that paper recycling targets would still be met. He said:

We will be ok to meet targets for 2008, and for 2009 I believe China will come back into the market with reasonable demand.

But he also said: The economics of the system might have to change, with producers taking more cost responsibility because there are targets there that have to be achieved.


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