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Price correction expected for paper in Q4

Recovered paper industry figures are expecting a potentially “massive” price correction in paper prices towards the back end of 2011, as demand for material drops in the traditionally busy period from August to October.

According to paper market experts, the current lack of consumer spending is impacting on waste paper arisings, ensuring demand and supply of material has dipped.

The recovered paper market has slowed in recent weeks. According to MRW/WRAP prices OCC prices dropped to £120 per tonne at the beginning of June then recovered to £135 per tonne at the end of July but have recently dropped again to £130 per tonne. (See MRW prices)

One leading expert who did not wish to be named told MRW: “We’re predicting that Q4 will see a bit of a downturn in paper prices.

“If the consumer doesn’t spend there will be a drop in demand for paper and with a decrease in finished products, paper arisings will diminish too but there will be surplus material if demand is low. I don’t think there will be a crash in the market like we saw in 2008, but there will be a big price correction.”

The source added that plastic prices could see a similar drop, while other recovered materials will be impacted too.

The three months from August are traditionally the busiest period for European linerboard mills, but instead of filling up order books, experts report they are thinning out. According to Mark Lyndon Paper Enterprises (UK) managing director Paul Briggs, the price correction is expected in October when European mills should be at their peak operating period. He said: “The stars a lining up for a drop in price. We’ve been expecting it for a while because the liner market has been experiencing full order books and very strong prices, while going through a recession, so the boom has got to come to an end at some point.”

Indeed, some mills are already taking steps to ease the amount of paper they are holding, so as not to be caught out by any sudden price drops.

President of the paper division at the Bureau of International Recycling Ranjit Baxi said: “If the mills do not see stronger order books and are not as hungry for fibre, this will see the paper value corrected downwards.”

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