The start of the year has seen subdued markets due to uncertainty around the PRN/PERN.
Last year, we saw high prices for these and that helped to drive the price of OCC in particular. But as we enter into the 2023 compliance year, nobody is quite certain how the market will develop and which way the PRN/PERN price will head.
We aren’t really used to having to think about the impact of the PRN/PERN. Some materials such as plastics and glass have been used to considering how it is moving in relation to the physical price.
But for traders of paper and cardboard grades, historically it was something that was typically 50p to £1 and we didn’t think about it too much.
Now though it is a strong element of the trading price, and this has changed the dynamics in the market. Will this high PRN/PERN be a long-term trend? It is hard to say and I’m not sure anybody really knows the answer.
Globally, we are starting to see some optimism return. In China, the loosening of Covid restrictions seems to be leading to greater economic activity after the initial spate of infections.
This may lead to more demand from the South East Asian and Indian mills that serve China, but it will depend on how much the domestic Chinese markets wants. I’m also interested to see if China gets the supply chain bottle necks that occurred after UK, Europe and US opened up again.
US prices have risen a bit but still seem low so it could be that this market seems more attractive to Asian buyers. But again, it will depend on the PRN/PERN and how much that makes the UK a destination they want to buy from.
There is also likely to be some stocking up from Indonesia and Malaysia ahead of Ramadan, when it will go quieter again.
Traditionally, February is a low generation month, and the question that needs an answer will be whether there is even lower supply than normal or whether demand will be low too.
Shipping rates are also competitive, but Chinese New Year can often lead to shipping lines introducing blank sailings, containers being stuck in port and resulting increases in shipping rates.
However, markets closer to home are more challenging and we’ve yet to see Europe open up yet this year.
So far, 2023 has been quite a stable year. But having been in this market long enough, I expect something will happen to change the direction of the market at some point.
Colin Clarke is managing director of Winfibre UK