Colin Clarke’s fibre report: November 2020

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Colin Clarke Winfibre
Colin Clarke, managing director, Winfibre UK

Winfibre UK managing director Colin Clarke shares his insights on the current market

If I was to sum up the recovered fibre market at the moment, it would be: there are deals to be done if you can get the shipping and volume.

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Paper and cardboard grades are thin on the ground at the moment, and the lockdown in England for the next month isn’t going to help that. Clearly, there will be tonnage available from essential retail sources, but commercial and industrial tonnage is likely to be down a lot.

Also, we are likely to see much more fibre coming from domestic sources, especially as the public will likely do a lot of online Christmas shopping because they won’t be able to visit high streets and shopping malls.

Of course, more domestic tonnage means there are more challenges in terms of quality.

Those who can access good quality material will have an advantage in the market and will be able to attract the best prices, especially as many countries are introducing or considering introducing pre-inspection regimes.

Shipping is difficult with containers to Asia hard to come by. This is because boxes are in strong demand on the east/west route from China and are reportedly being sent back empty in order to ensure there are enough available at Chinese ports.

Even though there is good demand from Malaysia, Vietnam and Indonesia, you have to be able to get the material there and need the containers to do it. I could see prices for non-inspection destinations rising, and inspection destinations such as Indonesia going even higher. It will depend on whether there is availability to get the material there though.

If it is difficult to get fibre to Asia, Europe for the time being remains an option. Some have said that we will see more demand from there like we did during the lockdowns in Spring, but at the time of writing we hadn’t seen too much of that as yet, if indeed we will.

Of course, just on the horizon is the end of the Brexit transition period, and sending material to Europe in the New Year could become a lot more challenging due to extra customs checks and port queues.

We also need to consider that the US has now stopped sending material to China and has tonnage that will need to find a home.

Good US domestic demand ahead of Christmas is helping to take up some of the slack.

At the moment, Indian buyers are also taking US East Coast fibre and turning it into pulp in India before sending it to China. This has meant that after dropping by $10-15 in recent weeks, the OCC price there has gone back up by the same amount. Chinese buyers want this to be an OCC-based pulp, and if they find that there are increasing volumes of mixed in it, then this could switch off.

If US domestic demand falls, and this India route becomes less appealing, then the 6 million tonnes of fibre that American exporters used to send to China will need to find a home. If this happens, US material will look at other Asian markets, and potentially Turkey too. Don’t forget, Turkey is reducing its import quota also and has been a vital market for UK OCC.

Mixed paper continues to see good demand from South East Asian and European mills and has been in a better place for most of this year than when we saw single figure and even negative prices in the early months of 2020.

As we get to December and the compliance transition period, hopefully we will also see more PRN/PERN support following the fall in price we have seen in recent weeks after it looked like we made compliance.

Despite the challenges ahead, including Covid, Brexit and the closure of China, we shouldn’t forget that in terms of prices, we look set to end this year in a better place than we started it. Considering everything we have gone through in 2020, that has to be a positive.

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