As we head towards spring, the momentum in terms of prices seems to be towards steady as she goes rather than anything dramatic.
At the moment, it looks unlikely that there will be any major price falls, or major swings upwards in the near-term, but the last year or so has been volatile and that could easily happen again.
If anything, we appear to have hit a current floor for prices at the moment, and the next few weeks look set to be bouncing along the bottom.
Forecast prices 16 March 2018 13 April 2018
OCC £67-71 £64-68
ONP £86-90 £83-87
Mixed £5-9 £5-9
PET £165-171 £163-170
HDPE £379-385 £385-381
LDPE 98/2 £175-181 £173-179
For paper grades, a lot will depend on whether Chinese buyers get more import quotas before they come back into the market for OCC. In the last couple of weeks there has been some small rises in the price of OCC, but there doesn’t seem to be a great deal of momentum behind this. If more import quotas are released by the Chinese Government, then this might change. However, as the month goes on, it seems more likely that the tiny recovery in price of the last couple of weeks may be reversed.
With mixed paper, its cheapness at present is helping to keep it moving into Europe, India and some South East Asian countries. But there is a sense that any storage capacity for this material is filling up and even they may meet their tolerance for effectively free material this week.
Looking at plastics grades, the pattern seems to be stability at the moment, with the potential for some downward pressure as we head into April.
Film grades look most likely to fall as demand remains weak, but people are starting to find outlets again that may help to keep prices stable for higher quality grades at least.
Bottles have seen some more demand in recent weeks, and if the PRN price increases, then this could support some more increases too.
For PET bottles, one factor that could increase the price of these is the cotton price. In the past, a high cotton price would switch attention to recycled PET as an alternative clothing fibre source. The price of cotton has risen by about 10 cents per pound over the past month, but would still need to increase by a similar amount to start having an effect on the PET price.
However, this correlation used to exist when China bought plastics, and its impact may be more muted in future as Chinese clothing manufacturers may have to rely on cotton or virgin sources for artificial fibres in future.
In terms of the economic factors, the Chancellor’s Spring Statement will be watched eagerly by the FX market for signs of splits on Brexit within Government, and the overall trajectory of Government economic policy. If anything, positive news is unlikely to put a boost behind the pound, but anything negative could see it drop, which would be of benefit to exporters.
The same is true of the Office for Budget Responsibility’s economic forecasts, which will be published at the same time. The market expects these to be raised up slightly on previous forecasts, but again, this seems unlikely to move the pound against the dollar. Not unless the news is excessively and surprisingly pessimistic.
So all in all, the most likely scenario in the market this week is for not too much change.