Recycling market conditions: looking ahead (11 June 2018)

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Recycling market week ahead
Recycling market prices may change this week

This week’s market isn’t expected to be one in which prices rise up rapidly.

If anything, we may start to see some price fall, particularly for paper.

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The 100% inspections by CCIC of containers bound for China is bound to affect paper and metal exports.

Chinese paper exports to lead to price fall?

Indeed, the Chinese buyers of OCC are having to deal with the extra logistical challenges involved in buying fibre as well as ensuring it is completely top quality to meet Chinese specification.

While the mills are hungry for fibre, this will cause disruption and lead to them buying a smaller quantity of material. Although they will continue to pay a premium for it, volumes are expected to be smaller than usual.

As a result, the rest of the market will have much more material available. Net exporters such as the US and some European countries will also have the same challenge, with the US exporters also facing 100% inspections at the Chinese dockside.

Therefore, they are likely to flood other markets such as India in particular, as markets such as Vietnam and Indonesia remain challenging.

UK domestic mills, while wanting material, are likely to adjust to this reality with lower offer prices too.

So don’t be surprised if paper grades ease off this week, or at least stay stable like they did last week. A fall looks more likely though.

On the upside, the paper PRN/PERN value may increase again this week after rising last week in response to the challenges faced by the paper market. This may help to support some stronger buying at least.

Will recycled PET benefit from increased cotton price?

Plastic grades look set to remain stable, but much will depend on where the oil price is headed and if it has an impact on virgin polymer prices. With international trade increasingly looking beset by tariffs following the disastrous G7 meeting last week, this could reduce need for oil in future. With US and Russian supplies of oil increasing, the price has already come down.

However, the cotton price has risen substantially in recent weeks and is now at $0.96 per pound, which is in the territory that makes artificial fibres more attractive. In previous years, this has tended to push up the price of recyclable PET. But with China now closed to PET scrap imports, it remains to be seen if this correlation is still valid.

Metals on the way down?

Last week saw big price rises for copper and brass grades in particular. For copper, this was because there were fears of mine strikes in Chile.

The strike fears appear to be over and prices are now responding downwards too.

Which was is sterling headed?

Over the last couple of weeks, sterling has been performing in a range between $1.33 and $1.34 and there doesn’t seem to be anything that will knock it out of that holding pattern.

Poor manufacturing data this morning from the Office of National Statistics lowered the pound closer to $1.33 again.

Capital Economics economist Andrew Wishart said: “The surprise fall in industrial production in April suggests that the sector is still struggling to pick up pace after a weak Q1. Manufacturing output contracted by 1.4% on the month, the third consecutive decline, leaving the quarterly growth rate at minus 0.5%.”

For exporters, a cheaper pound helps them compete on international markets, and there maybe further falls this week, particularly depending on how markets respond to the Brexit votes in Parliament tomorrow.

But for the UK mills, poor manufacturing data will suggest less demand for their materials and may lead to adjusted buying patterns.

Recycling forecast prices

Our algorithm is predicting these prices for key grades this week:*

Forecast prices    One week     Four week

OCC                      £110-114       £109-113
ONP                      £90-94           £89-93
Mixed                    £22-26           £22-26

PET                       £247-253       £247-253
HDPE                    £447-453       £448-454
LDPE                     £257-263       £257-263

*REB Market Intelligence provides forecast prices and market analysis as a guide only, and Hanicke Robins Sanderson cannot be held responsible for any commercial decisions based upon this data or analysis

 

 

 

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