Colin Clarke’s fibre report: April 2021

0
145
Colin Clarke Winfibre
Colin Clarke, managing director, Winfibre UK

Since the start of 2021, we have seen rising prices for both OCC and mixed paper.

But in recent weeks, the market has started to catch up with the reality of finished goods prices in China, and the knock-on effect this has on the pulp market in Asia.

Advertisement

We are getting to the point where Chinese mill groups, such as Winfibre, are seeing a tightening between the input price of raw materials and the price that they can sell the finished product for.

This means that they are increasingly not prepared to pay the current high prices.

With China buying pulp from India, and from mills in Malaysia, Vietnam, Thailand and elsewhere, it means these markets are likely to be less active at higher prices too.

True, there is still strong demand from Europe, and to a certain extent India, with mixed in particular benefitting from demand from these regions.

But the European market is small compared to what we send to India and South East Asia and this means it is unlikely that Europe will remain a benchmark price much longer.

May looks set to be a cooling market in my opinion as demand eases.

For the Chinese, the economics just don’t add up at the moment. I’ve even heard that some Chinese mills are considering taking downtime until the input prices match those of output again.

It is also true that the peak season for packers and toy manufacturers is over with this traditionally a quieter time of the year until we get to summer and start the build up to Christmas again.

On top of that, shipping lines are still dealing with the fallout from the Ever Given getting stuck in the Suez canal, and surcharges for shipping are being imposed in late-April and I expect this to last into May. When shipping prices go up, then that puts downward pressure on fibre prices.

Clearly, one big factor that has influenced the markets is Covid and this could still have an impact in coming weeks. While lockdowns are still occurring in Europe, we are gradually easing here and high-quality retail and hospitality tonnage is starting to return. This is enabling more supply to enter into the market too after tight supply so far this year.

We have also seen a situation where the United States has been sending material to Mexico and countries in Central and South America from its southern states in particular as a result of Covid, but that seems to be waning. Therefore, US traders are looking at China again, which is also likely to create downward pressure as the Chinese look to source cheaper US material.

Of course, the last year or so since the start of the Covid pandemic has taught us that anything can happen. But my view is that the downward price pressures are much stronger than those that would push prices up.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.