When we have equilibrium in the recovered fibre market, there is balance between supply and demand.
But if this equilibrium gets out of balance, then that tends to have an effect on the market and prices either rise or fall depending on the circumstances.
At the moment, the balance is at an extreme, like old fashioned scales with all the weight on one side.
This is because there is a lack of supply in the market, but also strong demand for material. There have been reports about shortage of finished product, with some finding plastic eggboxes in the supermarket for example, rather than the traditional cardboard.
But on a larger scale, mills are finding there is very good demand for packaging grades from many sectors, but especially e-commerce.
With lockdowns occurring in many parts of the world, but especially Europe and North America, people are ordering more goods online and this is creating demand for the finished products.
Supermarkets are also competing for increased cardboard packaging.
This has meant that markets are hot again. Where people were buying or selling monthly at the end of last year and beginning of this year, they are now trading weekly, as long as they have fibre to sell.
Prices have rocketed up and at the time of writing, with OCC starting to surge to similar or even above the levels we saw last May.
Even mixed paper has had a renaissance and is now achieving the sort of prices we last saw prior to China banning the import of this grade at the beginning of 2018. This time though it is European mills driving the demand for mixed.
Will these high prices continue? There are some who think it won’t last and are holding back on buying in the hope that prices will fall, but there is risk in that if they keep going up and stocks get lower.
My view is that prices will remain high throughout this month and possibly into next month until the equilibrium returns to normal.
The e-commerce factor isn’t going to change and even as we come out of lockdown, people will have got into the habit of buying much more online.
We are also seeing the effect of the China ban. Now that China can’t buy brown board and mills there have emptied their stock bought prior to the import ban, they are looking to source pulp from India, but also their own mills in South East Asia.
Indeed, as reported by REB Market Intelligence, we supply fibre to Lee & Man Paper and it has announced plans to increase pulp capacity at its mills in Vietnam, Indonesia and Malaysia.
Winfibre are now active in the market buying for these new projects in South East Asia.
In the UK, I expect that we will start to see some changes from April onwards as non-essential retail is allowed to open, and once some sort of opening of the hospitality industry resumes.
That will then mean there are more options for sourcing high-quality tonnage, with most of the focus on the domestic waste stream or essential retailers such as supermarkets for supply.
This should mean a return towards the equilibrium with more supply available, even if demand remains strong.
For those that can source material, there are opportunities in the current market, and we can look forward to good prices for a few weeks yet in my opinion.
But as the last few years have shown, this is an increasingly volatile market, and beyond April, it is difficult to see how the next few months will pan out as we start to return to normal.
Colin Clarke is managing director of Winfibre UK
