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Strong demand and high prices for recovered paper

Paper prices have hit a high at £140 a tonne and supply of quality material is still hard to come by in large enough quantities, according to the latest MRW paper report.

It found that domestic collections increased by around 121,000 tonnes in January to May 2011, but this was wiped out by UK exports which were 140,000 tonnes higher.

Recovered paper supply may fair better during the summer as people opt for ‘staycations’ but this impact is still unclear. Merchants and mills had been worried about “how the summer would play out” and have been stocking up.

The £140 a tonne figure is the highest since 2008, when it crashed from £70 to £25 a tonne. Although there was a softening last week, merchants predicted that the price is unlikely to go much higher and may drop off by between £5 and £10 a tonne during the next few weeks.

Prices for linerboard, used in packaging, are high and there is some confusion over why this should be. One merchant said: “Packaging is [all about] consumer spending - who is doing all this consumer spending?”

Another merchant added: “The paper mills will say there is obviously a lack of supply, which is why we can charge what we charge. But maybe it is because paper mills are not running to full capacity. The mills are collecting in excess of what they need and paying top price.”

However, paper mills have long held the view that there was overcapacity in the market.

One mill spokesman said: “There is a reduction in the collection of newspapers and magazines. Less is going into the waste so there is less to come back out again. And what is coming into the waste, most is going via commingled [collections], which tends not to produce the quality for things like pam. So that material is becoming scarce, driving the price up.”

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