Recycling market conditions: looking ahead (30 April 2018)

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Recycling market week ahead
Recycling market prices may change this week

This week could prove to be a good one for exporters, with the pound falling against the dollar compared to last week.

Two weeks ago, the pound was trading at $1.43, then fell to $1.39 last week, and at the time of writing was at $1.37.

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This gives a big price advantage to exporters if it stays like this compared to a couple of weeks ago, and could add a few quid onto the price they are prepared to pay, particularly in the paper market.

Against the euro, the pound had eased back to €1.13 at the time of writing, after being above €1.14 a week ago.

However, there is a lot happening that could drastically change where the FX market is headed.

First up, tomorrow brings the publication of purchasing managers’ indices for manufacturing in major economies. In particular, this is likely to influence whether the Bank of England is likely to raise interest rates in May, which would make the pound stronger.

However, the recent fall in the value of the pound following publication of last week’s wretched 0.1% Q1 GDP growth for the UK, was pricing in the fact that the market feels an interest rate rise is increasingly unlikely.

The publication of the US PCE inflation data today showed that the country was on target to meet 2% inflation, and had no real effect on the currency markets.

Later in the week, the pound could be affected by results of the local elections on Thursday (results on Friday morning). If the Conservatives perform strongly, this could spook the market if it gives the Government confidence to go for a hard Brexit. While if Labour performs strongly, this could also frighten the market if it suggested the party would win a landslide at a general election with what are seen as left wing economic policies. Ideally, the market would like a balanced election result on this occasion.

Shipping rates look largely stable for high-volumes buyers, but some smaller exporters are being given higher spot prices, but it isn’t clear if these rises will stick.

Forecast prices    One week     Four week

OCC                      £89-93           £89-93
ONP                      £91-95           £90-94
Mixed                    £23-27           £23-27

PET                       £236-242       £234-240
HDPE                    £402-408       £401-407
LDPE                     £195-201       £194-200

OCC looks likely to be the main price riser again this week, as Chinese buyers look set to continue dominating the market. While other buyers in UK, Europe and other Asian destinations have been reluctant to follow the Chinese buyers, they don’t want to fall so far behind that they end up having to buy at higher prices when they do need to stock up. So some tactical purchasing is taking place.

News & pam looks set to stay stable, while any momentum behind mixed paper appears to be easing and stable looks the most likely bet this week too.

For plastics, industrial grades still look hot, while packaging grades are set to be stable. LDPE gained a little last week, and there might be some more potential for a small increase this week. But bottle grades look like there is no momentum behind them.

In the can market, there appears to be downward pressure on steel cans as the ferrous price on the LME falls and demand falters. Buyers may start to come back in for aluminium cans this week, but it seems unlikely this will lead to any great leap in price as they have a lot of material to choose from.

 

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