Market conditions – looking ahead (5 March 2018)

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Recycling market week ahead
Recycling market prices may change this week

Now that the weather across the UK is improving, we should expect more of a return towards normal this week.

The heavy snow and strong winds caused major disruption last week, with collections cancelled, yards shut and recyclers struggling to get material if they were still open.

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In OCC, the Chinese buyers may come back into the market this week after the weather disrupted buying patterns last week. However, quotas remain low, so there won’t be a huge appetite. Domestic mills may also have some more demand, restocking inventories that were disrupted by last week’s weather, and they do still seem to be an outlet for mixed paper to their most loyal customers who provide the specified quality.

However, as collections recover this week, it is likely that as the week goes on, and into next week, we will see a lot of material on the market too, which is likely to balance out any extra demand requirements.

Price wise, the forecasts suggest relative stability for paper grades, with the most likely scenario appearing to be a stable to slightly upward market. But with the unusual conditions at the moment, the market is volatile and could as easily fall back again.

Forecast prices          9 March           30 March

OCC                            £64-68             £63-67
ONP                            £85-89             £84-88
Mixed                          £5-9                £5-9
PET                             £163-169         £161-167
HDPE                          £377-383         £373-379
LDPE 98/2                   £173-179         £171-177

For plastics, the situation remains challenging and it is expected that Asian destinations will not be looking to purchase film grades at any great levels this week, although material is moving.

Europe continues to be an outlet for some grades, and there has been a small recovery in HDPE bottles that may continue to a small degree.

Looking ahead at prices this week, there appears to be a bit of upward potential for bottle grades, but the most likely scenario is little change for the remainder of the month. For film, the outlook looks more negative as the month goes on.

One factor that may affect price movement this week is how the pound trades against the dollar. Barclays is expecting the pound to get stronger this week, which will make UK material more expensive on the international market. However, it also sees potential volatility.

In a note, Barclays said: “With GBP having already priced in more adverse outcomes on the back of EU chief negotiator Michel Barnier’s draft agreement, we see room for GBP to appreciate as the market absorbs the underlying conciliation in PM May’s speech. EU officials’ responses over the week likely will provide two-way volatility however.”

One factor that could affect the markets over the coming weeks is US President Donald Trump’s announcement of tariffs on steel and aluminium imports. While this could suppress demand for these metals as more material is on the market that previously would have gone to the US, it will also mean the dollar is going to struggle to rise too much further against other currencies over fears over a trade war breaking out.

For the time being though, if these tariffs are implemented in the US, it could make it difficult for steel and aluminium can prices to rise.

One factor that may help prices in the coming weeks is that manufacturing demand is still strong (see here). Although there has been some weakening of manufacturing demand, with China’s decline in February particularly severe, there is still exceptionally strong demand for raw materials in the global economy.

It also remains to be seen if there is any disruption to shipping as usually occurs after Chinese New Year with containers and ships often in the wrong place. However, with the large decline in exports to China as a result of its import bans, container availability seems fine at the moment.

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