How would I describe the market at the moment? It is a bit of a mess to be honest.
Nobody truly understands what is going on. The Far East is buying OCC like it is going out of fashion, but mixed hasn’t really caught up. To me, this seems more like a temporary spike than a trend.
Ideally, I’d like to see a trend of sensible pricing for a while, but it seems we now live in a world where paper and cardboard prices are volatile.
Each market appears to be a law onto itself – it’s like the wild west and the wild east!
Before Brexit, the European market was bottom of the pile and everyone wanted to trade elsewhere. But since then, Europe seems to have become a key market and now many companies are doing a lot of trade into European markets or doing bits and pieces.
Right now though, the European market is being affected by the energy crisis and the impact of inflation on household budgets and company balance sheets.
Across the UK and Europe, we are seeing people cutting back on spending, and this is especially the case in Germany. Mills there are cutting production, but when they are operating they are running like trains to get finished goods created as they fear energy restrictions in the winter ahead.
The reality is that people are not buying big ticket items such as TVs and furniture, they aren’t eating meals out as much and are picking cheaper options at the supermarket. This has an impact on the availability of fibre, but also the quantity of finished product that is being sold by mills.
Additionally, we’ve also seen haulage costs go through the roof into Europe due to fuel getting more expensive, and mills don’t want to pay this and suppliers don’t either.
At this time of year, we would expect to see a busy market in the run-up to Christmas, but with the exception of the Far East, it hasn’t really happened.
With Christmas falling on a Sunday this year, that is also likely to cause a mess if trying to get material onto lorries to send into Europe. For example, our last collection date is likely to be around 16 December and we might not get new collections until around 10 January. Even with a bit of flexibility around dates, it is still a long time for not much market activity.
Of course, the PRN and PERN price has been going crazy recently and this has helped to support the price. Along with low shipping costs and favourable exchange rates, this has helped Far East buyers.
For European mills, even with the PERN, the underlying price has been too much.
We are getting close to the end of the compliance year, and this will also bring some uncertainty as nobody quite knows what the price of the PRN will be at the start of the 2023 compliance year.
Longer term, we know that cardboard packaging is the future. But the next few months certainly look like they are going to be rocky.
Chris Burton is commercial director at IWPP
