The cut in price by most major UK mills from 45 per tonne ex works to 40 per tonne for old-kls has prompted strong concerns among UK merchants that the price is now at a level which could make margins unsustainable for the trade.
One merchant said: “This is the best advert ever for encouraging us to export overseas. The mills are going to do a lot of damage to their suppliers.”
An industry expert commented that while the mills might argue that they are following Continental prices, the UK is a world exporter. He said: “They have also lost sight of what it costs to produce material in the UK. Look at the landfill price compared to the Continent. We can’t put in high charges for low grade material whereas in Europe the charges can be higher.”
Sympathy
Mills are thought to have some sympathy with the view of merchants but are also facing price pressures themselves in producing finished product. Energy and other production costs continue to rise and prices for finished product are not keeping pace.
However, there is considerable speculation that while many board-making mills currently have high stocks these will start to dwindle and by March with lower stocks the mills may need to raise their price again.
One expert commented that he expected a “lively year ahead” and that the price-cut is likely to be short-term only.
Deep-sea
For UK merchants the deep-sea markets of India and China, Korea and Taiwan remain strong, although there is still some difficulty in exporting to India because of shipping and container congestion in the main ports. The deep-sea sector has also been boosted by the non-appearance of an expected in freight costs. In contrast to Asia, the European markets and especially France, are seeing a slight downturn in prices and demand.
” the closer the price of mixed gets to used cardboard, the less incentive is there for merchants to bother to segregate the board “
– Mill source
Mixed paper prices have seen some reductions although prices remain relatively firm. This is of some surprise in the industry with some buyers considering that there is not such a price connection today as there was in the past between old-kls and mixed. Traditionally mixed paper was a poorer grade used in board-making and was valued at least 10-20 below old-kls. Nowadays there is a separate and stronger market for the material, particularly overseas, with some buyers happy to carry out a basic level of sorting.
One danger, a mill source pointed out, is that for UK and overseas mill buyers of old-kls, the closer the price of mixed gets to used cardboard, the less incentive is there for merchants to bother to segregate the board.
Newspapers
The used newspaper sector has seen a slight fall in spot market prices for used newspapers, a material which is largely sourced from local authority collections. Prices have moved down 1-2 in line with falls on the continent of about 2.5 Euros.
There are several factors behind the fall, notably the closure of Stora Enso's number four paper machine at its Langerbrugge mill in Belgium for engineering works. And, Holmen is also understood to be seeking less material while it carries out some construction work at its UK base to provide for more storage.
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As a consequence, other mills are able to buy any surplus material at a reduced price and so build up their stocks. With demand by the newspaper publishers for material usually reduced in January it seems unlikely that prices will rise in the short-term although experts suggest that the price will edge back up in the course of the year.
Tissue
On the mid-grades – primarily used for tissue making – there has been little or no change in prices with the tissue mills that run through this Christmas coming out with lower stock. but able to find sufficient material in the marketplace. Last year the general view was that printers were not very busy but so far this month the suggestion is that the sector is stable.
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