Now we are in the summer holiday period, this is traditionally a time when the market eases back as everybody heads away.
But will this year be different?
Certainly, there is good demand out there, and mills worldwide are wanting to get material. Prices have remained high for weeks, and there is no sense that they will dive down while this demand remains strong.
It seems like most buyers of material will remain active in the market if they can. An exception is India, which isn’t really back too strongly in the market as it deals with Covid. Some South East Asian destinations, such as Malaysia, have introduced Covid restrictions. While mills remain operational, they are working with reduced staffing levels.
Where there is good demand, the problem will be getting the material there, whether it is a UK, European or Asian mill. Covid has introduced a lot of uncertainty of course, but we are still dealing with the effects of Brexit too.
Driver availability for haulage is at best difficult, and getting containers for shipping is also challenging. With the latter, some shipping lines are finding it more beneficial to send vessels to China with empty containers on direct routes, rather than heading to India, Malaysia, Indonesia etc. Some shipping lines don’t want to go to Port Klang in Malaysia, due to the Covid restrictions I mentioned above.
Clearly, this is affecting buying patterns, and when we can move material, we are happy to buy. This is the same for UK, European and some other Asian mills too, where they will buy if they can get lorry drivers and/or containers. But Brexit means more paperwork and less drivers coming here from Europe, and that is creating haulage challenges even if the demand from Europe remains strong – especially for mixed paper.
Interestingly, we are also seeing retail tonnages hold up as people holiday in the UK this year. More of this high-quality material is therefore available, at a time when traditionally volumes reduce. With greater supply of this, this would typically provide a downward pressure on prices unless demand was higher.
The recent fall in the value of the pound against the dollar from $1.40 a few weeks ago to $1.37 now also makes it a bit cheaper to send material to deep sea destinations and that may help demand.
What does all this mean for the market? Clearly, there is a lot of uncertainty, and Covid has made it harder to rely on traditional buying patterns. It is also the case that things can change rapidly in ways that we also wouldn’t have expected because of the virus. There are a lot of factors influencing supply and demand and it will depend which come out strongest, both in August and further ahead.
Taking all of this into account, and assuming nothing happens that dramatically changes the market in the coming weeks, I would expect prices to remain steady throughout August. Beyond then, it is really hard to say what will happen because of all the uncertainty and volatility we have seen in the market since the pandemic began.
What is clear is that we should make hay while the sun shines, and take advantage of a buoyant market despite the challenges in moving recovered fibre.
Colin Clarke is managing director of Winfibre UK
